Learn How Does Intraday Trading Work

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Stock trading is gaining momentum in India as more traders enter the stock market. While many opt for buy-and-hold investing, also called long term investing, many are looking to trade in the short term, capitalising on frequent price fluctuations. Intraday trading is one of the most popular trading strategies. In this article, we will explore how intraday trading works, the risks and rewards of this strategy and some tips to follow while intraday trading.

Long Term Trading Vs Intraday Trading

Intraday trading, also known as day trading, is the trading activity in which traders buy and sell securities within the same trading day. This means that all positions must be closed out before the market closes for the day. Let’s look at an example of how intraday trading works.

Assume an intraday trader does their research and purchases 1,000 shares of a company trading at ₹100. They expect the price to reach a daily high of ₹102.5 to ₹103. Hence, the intraday trader may set a target of ₹102.5 and then sell their positions when they meet their target. The trader may hold positions for just a few minutes or several hours. 

Long term investing is on the opposite end of the spectrum. In this case, the investor invests in businesses that are attractively valued or show future potential. They may hold those stocks for one, two, or even several years. Intraday trading also differs from other forms of short term trading like swing trading. In swing trading, traders usually hold their stocks or trades for a few days, weeks, or even months.

Due to the differences in the length of the holding period, intraday trading also requires a different skill set compared to other forms of trading. An intraday trader focuses on evaluating live markets, for which they rely on technical analysis. Moreover, they must always be prepared to respond quickly to market conditions. The temporary nature of the trades also requires them to refer to charts with short time frames. In contrast, long term investing may require more focus on fundamental analysis, such as evaluating a company’s financial health and industry conditions. Long term investors may also focus too much on the price charts and refer to yearly charts.

Intraday traders should close their positions before the end of the trading day, even if the trade is a loss-making one. Intraday traders do not have the luxury of sitting on notional losses like swing traders and long term investors. Some investors and traders may see this as a major con for intraday traders. However, by not carrying their trades to the next day, intraday traders can sleep comfortably at night, not worrying about external events that may negatively affect their trades the next day. Lastly, unlike delivery traders, who can only go long, intraday traders can take both long and short positions in India.

Tips to Follow When Intraday Trading

Successful intraday traders have a robust trading strategy and excellent decision-making skills. However, those two elements are only part of the puzzle that makes a successful trader. Risk-management skills and discipline are the other two skills that determine a trader’s success. So, as an intraday trader, it is better to keep the following tips in mind.

  • Never trade without a plan

Before one starts trading, it is vital to have a plan in place, regardless of one’s trading approach. One’s plan should include trading goals, a strategy for identifying and executing trades, and even a risk management strategy. One can use technical analysis and indicators to construct a strategic trading plan.

  • Always use stop loss orders

Stop loss orders can help protect against significant losses by automatically selling a position if it reaches a certain price level. They are one of the most effective tools one can use for damage control, which, in this case, is minimising loss of capital.

  • Give importance to position sizing

Traders need to carefully consider the size of their positions concerning their account size and risk tolerance. They may risk capital by investing too much or restrict growth by investing too little. However, as a beginner, it is best to set aside a small portion of the money to test the waters.

  • Maintain records

Intraday traders experience both positive and negative outcomes in their trades and also make some errors along the way. Therefore, maintaining a record of trading activities comes in handy for traders. In addition, traders should keep track of the trading plans they follow and those they don’t.

Mechanics Behind Intraday Trading

To perform intraday trading in the stock markets, traders require a Demat account and trading software. One can open these two accounts with a stockbroker like Share India. After registering into the Demat account, traders can select the stock they wish to trade after performing a technical analysis. Then, they can choose whether to buy or sell, place an intraday order, and submit their bid. Once the target is achieved, they must close their positions. However, since traders chose the intraday trading option, the broker will automatically close any open trades before the market completes.


Intraday trading can be a lucrative way to trade in the stock market, but it requires discipline, a well-planned trading strategy, and effective risk management. With the right approach and mindset, intraday trading can be a rewarding experience for traders.

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