What is Intraday Trading / Day Trading – Buying and selling securities listed on a stock exchange within the same day is called Intraday Trading / Day Trading. The main goal of this approach is to generate capital gains from the purchased securities while also reducing the risks associated with keeping money invested over a longer period.
For Example: if you purchase 100 shares of Tata Motors for INR 10,000 and sell them when their value rises to INR 11,000, you make a daily profit of INR 1,000. Intraday trading is a high-risk, high-reward strategy. However, if your predictions don’t pan out, the losses you face can be much greater than those of a regular trader. This is an example of Intraday Trading.
Intraday Trading / Intraday Trading Kya hai?
शेयर बाजार में सूचीबद्ध सिक्योरिटीज़ को एक ही दिन के भीतर खरीदना और बेचना इंट्राडे ट्रेडिंग कहलाता है। इस विधि का मुख्य उद्देश्य खरीदी गई सिक्योरिटीज़ से पूंजीगत लाभ प्राप्त करना और लंबे समय तक पैसे को निवेशित रखने के जोखिम को कम करना होता है।
Also here is the link of Wikipedia of What is Intraday Trading?
https://en.wikipedia.org/wiki/Day_trading
How to Learn Intraday Trading ( Intraday Trading kaise Seekhe )
In this part, we will explore how to learn intraday trading in the stock market. How to learn intraday trading? What needs to be done to learn intraday trading? And do you need to take a course to learn intraday trading, or can you learn it by watching online videos or reading books?
If you are a beginner and want to know how to start learning intraday trading, then this post is for you.
Today, I will guide you on how to learn intraday trading in the stock market.
How to Learn Intraday Trading?
To effectively learn intraday trading in the stock market, you can follow these key points:
Understand the Fundamentals of Intraday Trading
The first step in learning intraday trading is to grasp the basics. You cannot consistently profit from intraday trading unless you have a clear understanding of the fundamental principles.
It’s important to note that 90% of people in intraday trading lose 90% of their money within the first 90 days.
The reason behind this is that people often skip the learning process and jump directly into intraday trading without proper knowledge. You should be aware that trading is a zero-sum game, where if one person loses, it means someone else has gained.
If we talk about the basics of intraday trading, here are some key points you should be aware of:
- Never invest all your capital in intraday trading.
- People engage in intraday trading because it offers the potential for high profits in a short period. However, you should always consider the associated risks.
- Avoid trading in illiquid stocks during intraday trading.
- This means staying away from stocks that frequently hit the daily circuit limit, have very few buyers and sellers, or are manipulated by operators to move up and down.
- In intraday trading, you can buy more shares with less money because your broker provides some margin, i.e., leverage.
- You can think about it as of discount. However, be aware that higher leverage also comes with higher risk, so avoid trading with high margins unless you are confident.
- Intraday trading carries more risk because you must buy and sell shares within the same day.
- If the share price does not rise, you may face a loss.
- In intraday trading, you can profit not only when the share price rises but also when it falls.
- To do this, you must first sell the share short. When the share price drops, you can make a profit.
- When doing intraday trading, analysis should be done on a 15-minute time frame chart, which is the best time frame for intraday trading.
- Square off all your positions before the market closes.
- Otherwise, you may have to pay a square-off fee.
If you are just starting with intraday trading, keep the above points in mind. Once you have a good understanding of all these aspects, you should move on to the next stage of learning intraday trading.
How to Perform Intraday Trading ( Intraday Trading / Day Trading Kaise Kare )
When engaging in intraday trading, it’s crucial to identify the best stocks, as this type of investment carries higher risks.
Select Highly Liquid Stocks
Liquidity is a key characteristic of intraday stocks, as it ensures smooth trading. Stocks of small and mid-cap companies often exhibit high liquidity, making them easy to buy and sell. These stocks also tend to experience significant volatility due to market fluctuations.
To make informed trading decisions, it’s important to monitor cyclical variations by analyzing the 52-week high and low values. This analysis helps determine whether to take long or short positions.
Volatility
The best intraday stocks typically show medium to high price volatility. It’s advisable to avoid stocks with price fluctuations exceeding 3% during intraday trading, as this could lead to substantial losses in the event of an unfavorable market downturn.
Strong Correlation
It’s wise to choose intraday stocks that have a strong correlation with a benchmark index of a reputable stock exchange. Such stocks often exhibit significant price movements in response to index fluctuations.
Since benchmark indices include top-performing companies on the exchange, it’s generally expected that stock prices will trend upwards, except in cases of economic anomalies. Following this strategy can lead to substantial capital gains through intraday trading.
Higher Trade Volume
Intraday traders should monitor the trade volume index of a particular stock to gauge price movements. A higher trade volume index typically indicates strong demand or supply, driven by the underlying company’s performance. In such scenarios, traders can earn capital gains from both buying and selling transactions.
Benefits of Intraday Trading
Engaging in intraday trading offers several advantages:
Reduced Risk
Since intraday trading involves buying and selling securities within the same day, the risk of significant losses is minimized. Unlike traditional trading, where investments are held for longer periods, intraday trading helps avoid the substantial price fluctuations that can occur over time, particularly during market downturns.
Lower Commission Fees
Intraday trading typically incurs lower brokerage fees compared to standard trading, as there are no delivery costs associated with transferring securities to an investor’s name. The brokerage fees in intraday trading often include stock transaction tax, trade fees, service tax, etc., leading to lower overall costs. Generally, the fees for intraday trading are about one-tenth of those for regular trading.
Potential for Higher Profits
Intraday trading can lead to significant wealth creation when effective investment strategies are applied. Investors can capitalize on rising markets through quick trades, and in downturns, they can profit by short-selling. This flexibility allows for potential gains in various market conditions.
Liquidity
A major advantage of intraday trading is the ability to quickly recover invested capital. Since funds are not tied up in long-term assets, traders can maintain liquidity and meet any immediate financial needs without delay.
Capital Gains from Market Fluctuations
Intraday traders can profit in both bullish and bearish markets, depending on their strategy. In a bullish market, capital gains can be realized through the purchase and sale of securities. Conversely, in a bearish market, traders can generate profits through short-selling.
Associated Risks
Intraday trading requires a deep understanding of the stock market’s intricacies to achieve substantial profits. For beginners, navigating this complex environment may be challenging. It is crucial to carefully select securities from well-analyzed companies. Market volatility plays a significant role in intraday trading, and unexpected fluctuations can lead to losses. While technical analysis based on past market data can be helpful, it is not always foolproof, and there is still a risk of inaccuracies.
Learn Intraday Chart Patterns and Technical Analysis
The second step in mastering intraday trading is to study technical analysis and chart patterns. Technical research plays a crucial role in all types of trading.
When engaging in intraday trading, there is no need for fundamental analysis. For the stocks you purchase, details like:
- What the company does
- How much profit it makes
- Its business model
- The shareholding pattern
- Or the company’s future plans
These aspects are not relevant to intraday trading. Fundamental research is more suited for long-term investments, whereas intraday trading is a strategy to earn money in the short term. Therefore, understanding technical analysis is essential for profitability in intraday trading.
Technical analysis involves examining the stock’s chart patterns. You should be able to interpret these patterns and determine the direction in which the stock price is likely to move. This involves conducting chart analysis to gauge the potential price movement of a stock.
You should familiarize yourself with various chart patterns, understand where support and resistance levels are, and learn how to set targets and stop-losses. Additionally, it’s important to understand how to profit from breakouts in stock prices.
Learn to Choose the Right Stocks for Intraday Trading
The next step in mastering intraday trading is learning how to select the right stocks. Choosing the wrong stock can lead to significant losses in intraday trading.
Some stocks have very low liquidity, meaning their trading volume is minimal. As a result, if an investor buys a large quantity of such shares, the price may suddenly rise, and if sold in large quantities, the price may drop sharply. If you invest in such stocks, you might find yourself stuck, unsure of why this happened, and potentially incur heavy losses.
Therefore, it’s advisable to choose stocks that have sufficient buying and selling activity.
Now, the question arises, how do you identify which stocks are liquid and suitable for intraday trading to maximize profits?
For beginners, it’s recommended to trade intraday in Nifty Next 100 or Nifty Next 200 shares. These shares offer good liquidity and momentum, making it possible to find profitable trades on a daily basis.
Practice Paper Trading
One of the best ways to learn intraday trading without any risk is to start with paper trading. In paper trading or virtual trading, you engage in intraday trading in a live market scenario and analyze your profits and losses.
Once you start making more profits than losses in paper trading, meaning your profitable trades outnumber your losing trades, you can begin intraday trading in the live market.
For virtual trading, you can use the Moneybhai website, launched by the highly trusted stock market site ‘Moneycontrol.’ Thousands of new traders practice virtual trading here every day and share their experiences with each other.
If you don’t want to take any risks in intraday trading, I always recommend starting with paper trading. It allows you to learn a lot about market movements without any financial risk.
Learn About Intraday Trading Strategies
Several intraday strategies are employed by individuals who earn daily from intraday trading. You can’t learn these strategies in one day; it requires continuous practice.
Additionally, you should learn about the psychology of trading:
- How does traders’ psychology work while buying and selling in the market?
- How do you cope with losses in trading?
- Are you prone to emotional trading?
- Or do you strictly follow a single technique?
You should focus on these aspects because some people view intraday trading as a quick way to make money, and these individuals often fall into the category of 90% of traders who lose 90% of their money in the first 90 days of intraday trading.
To avoid this, first learn and understand all intraday trading strategies in detail, then apply them in the live market with a very small amount.
Initially, you might find that your profits are small and losses are high. But over time, your losses will decrease, and your profits will begin to grow.
Understand Risk Management in Intraday Trading
Another important aspect of learning intraday trading is to focus on risk management. If you don’t learn how to manage risk and reward in intraday trading, your losses could be substantial.
Some people start making a little money through intraday trading and then assume they can continue to do so. This situation is dangerous because people become overconfident, leading them to invest more money, and some even start trading on borrowed funds.
Those who do this are at great risk of losing everything in intraday trading. That’s why I always say that if you want to master any skill, you must first learn it, whether it’s trading or anything else.
Risk management means knowing the maximum loss you can afford and executing your trades accordingly.
For example, if you trade 10 times a day, your goal should be to make a profit seven times and incur a loss three times. I understand that this doesn’t happen quickly; it requires experience and consistent practice.
But to reach this level, you need to learn from your mistakes and manage them effectively.
Follow the Rules of Intraday Trading
To successfully learn intraday trading, you must follow certain rules; otherwise, you could quickly be out of the game.
We all know that trading is riskier than investing, yet we still trade because it allows us to make money quickly in a short period.
It’s true that most people who engage in intraday trading incur losses rather than profits, but that doesn’t mean you should avoid intraday trading.
On the other hand, successful intraday traders earn lakhs of rupees in a single day. What sets these people apart? It’s because they follow specific rules of intraday trading that you should also be aware of.
You can also read this articles –
- What is Option Trading ? Understanding Option Trading A Beginner’s Guide to Success in 2024.
- What is Future Trading / Future Contract ?Understanding Future Contracts: A Comprehensive Guide for Beginners in 2024
- What is Demat Account? And how to open Demat Account ?
Conclusion: What is Intraday Day / Day Trading
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