Intraday trading involves buying and selling stocks within the same trading day. The goal is to profit from short-term price movements. This requires quick decision-making and constant market monitoring.
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Intraday Trading Meaning
Intraday trading means purchasing and selling securities on the same day. The main aim is to benefit from price changes within that day. This type of trading requires active management and real-time market tracking.
Intraday trading leverages small price changes throughout the day. Traders do not keep positions overnight, ensuring all trades are closed before the market closes. This approach necessitates a strong grasp of market trends and technical analysis. Traders use various tools and indicators to analyze market movements and make informed decisions quickly.
They monitor stock prices, trading volumes, and other relevant data to identify potential trading opportunities. Successful intraday trading demands discipline, risk management, and the ability to stay updated with market news and events. This method is popular among those looking for quick profits but comes with a higher level of risk due to the rapid nature of trades.
What is Intra Day Trading example?
Intraday trading example is when you buy 100 shares of XYZ company at INR 500 each in the morning. You sell these shares by the end of the day at INR 520 each, making a profit of INR 20 on 100 shares.
To elaborate, consider you start the day by purchasing 100 shares of XYZ company at INR 500 each. Throughout the day, the stock price fluctuates based on market conditions. By the afternoon, the stock price rises to INR 520. Sensing a good profit opportunity, you decide to sell all 100 shares at this price. Your buying cost was INR 50,000 (100 shares x INR 500), and your selling price is INR 52,000 (100 shares x INR 520). Thus, you make a profit of INR 2,000 within a single trading day. This is a typical example of intraday trading, where traders capitalize on short-term price movements to earn profits.
How To Do Intraday Trading?
To do intraday trading, you start by selecting a stock to trade, analyze its market movements, and then buy and sell it within the same day to capitalize on price changes. This involves active monitoring of the stock market.
Here’s a step-by-step guide to intraday trading:
- Choose a Reputable Broker: Open a trading account with a broker that offers intraday trading services.
- Select Stocks: Pick stocks with high liquidity and volatility. These stocks provide better opportunities for intraday trading.
- Set a Target Price: Decide on the price at which you plan to enter and exit the trade.
- Use Technical Analysis: Employ charts, patterns, and technical indicators to analyze stock movements.
- Place Orders: Execute buy or sell orders based on your analysis and target price.
- Monitor the Market: Keep an eye on market trends and news that might affect stock prices.
- Implement Stop-Loss Orders: Set stop-loss orders to minimize potential losses.
- Close Positions: Ensure all positions are closed before the market closes to avoid overnight risk.
- Review Performance: Analyze your trades at the end of the day to understand what worked and what didn’t.
Intraday Trading Strategies
Intraday tradtrading strategies help traders decide when to buy and sell stocks. Here are 10 popular strategies:
- Scalping
- Momentum Trading
- Breakout Trading
- Reversal Trading
- Moving Average Crossover
- Bollinger Bands Strategy
- Relative Strength Index (RSI)
- VWAP Trading
- Gap and Go Strategy
- News-Based Trading
- Scalping
Scalping involves making multiple trades throughout the day to profit from small price changes. Traders hold positions for a few seconds or minutes, aiming for quick gains. This strategy requires a keen eye on market fluctuations and swift execution.
- Momentum Trading
Momentum trading focuses on stocks moving significantly in one direction on high volume. Traders enter positions in the direction of the momentum and exit when it wanes. It relies heavily on identifying and following strong price trends.
- Breakout Trading
Breakout trading identifies stocks breaking above resistance or below support levels. Traders buy after a breakout and sell before the price reverses. This strategy capitalizes on significant price movements beyond established ranges.
- Reversal Trading
Reversal trading looks for stocks that are likely to reverse direction. Traders buy at support levels and sell at resistance levels, anticipating a change in trend. It involves predicting market turning points for profitable entry and exit.
- Moving Average Crossover
Moving average crossover uses moving averages to identify trading signals. A common approach is to buy when a short-term moving average crosses above a long-term moving average and sell when the opposite happens. This method helps in spotting emerging trends.
- Bollinger Bands Strategy
Bollinger Bands strategy involves using Bollinger Bands to identify overbought or oversold conditions. Traders buy when prices touch the lower band and sell when they touch the upper band. This strategy is effective for detecting price volatility.
- Relative Strength Index (RSI)
RSI trading uses the RSI indicator to find overbought or oversold stocks. Traders buy when RSI falls below 30 and sell when it rises above 70. RSI helps in identifying potential reversal points.
- VWAP Trading
VWAP trading relies on the Volume Weighted Average Price to determine entry and exit points. Traders buy below VWAP and sell above it. This approach provides insights into the average price a stock has traded at throughout the day.
- Gap and Go Strategy
Gap and Go strategy focuses on stocks that gap up or down at the market open. Traders enter positions in the direction of the gap and ride the trend. It takes advantage of price gaps resulting from significant news or events.
- News-Based Trading
News-based trading uses news events to make trading decisions. Traders buy on positive news and sell on negative news, reacting quickly to market sentiment. Staying updated with news is crucial for this strategy.
Benefits Of Intraday Trading
The main benefit of intraday trading is the potential for quick profits. Traders can take advantage of short-term price movements without holding positions overnight. Other Benefits of Intraday Trading:
- No Overnight Risk: By closing all positions before the market closes, traders avoid risks associated with overnight market changes. This ensures that their investments are not affected by after-hours events.
- High Liquidity: Intraday trading typically involves highly liquid stocks, ensuring trades can be executed quickly without significant price changes. High liquidity means easier entry and exit from trades.
- Margin Trading: Traders can leverage their positions using margin, potentially increasing their returns. This allows traders to amplify their gains by borrowing funds to trade.
- Frequent Trading Opportunities: With numerous trades throughout the day, traders have multiple chances to capitalize on market movements. This increases the potential for profit generation.
- Discipline and Focus: Intraday trading requires strict discipline and a focused approach, which can improve trading skills over time. Developing a systematic trading routine enhances overall performance.
Intraday Trading Time
Intraday trading time refers to the period within a trading day when intraday trades are executed. In India, the intraday trading time usually spans from 9:15 AM to 3:30 PM, which is the duration of the regular trading session.
Intraday trading time is crucial because all trades must be completed within this period. The market opens at 9:15 AM, and traders can start placing their buy and sell orders. The session closes at 3:30 PM, by which all positions must be squared off. It is essential for intraday traders to be aware of this time frame to avoid carrying positions overnight, which intraday trading rules do not permit. Additionally, certain time periods within the trading day, such as the first hour and the last hour, often see higher volatility and trading activity, providing more opportunities for traders.
Intraday Trading Rules
The main intraday trading rule is that all positions must be closed by the end of the trading day. Traders cannot carry forward any positions to the next trading day. Other Intraday Trading Rules:
- Use Stop-Loss Orders: Always set a stop-loss to limit potential losses.
- Maintain Sufficient Margin: Ensure you have enough margin in your account as required by your broker.
- Trade High Liquidity Stocks: Focus on stocks with high trading volumes to ensure quick entry and exit.
- Avoid Overtrading: Stick to your trading plan and avoid making excessive trades in a single day.
- Monitor Market Trends: Stay updated with market news and trends that might impact your trades.
- Follow Trading Discipline: Adhere to your trading strategy and avoid emotional trading.
- Set Realistic Targets: Have clear profit targets and exit points for each trade.
- Keep Records: Maintain a trading journal to record your trades and analyze performance.
- Use Technical Analysis: Rely on technical indicators and chart patterns to make informed trading decisions.
- Be Aware of Brokerage Charges: Understand the brokerage fees and charges applicable to your trades.
Intraday Trading Charges
Intraday trading involves various charges that traders need to be aware of. Below is a table outlining the typical charges associated with intraday trading based on information from Alice Blue, a popular brokerage in India:
| Charge Type | Details |
| Brokerage | 0.01% or INR 20 per executed order (whichever is lower) |
| STT (Securities Transaction Tax) | 0.025% on the sell side |
| Exchange Transaction Charges | 0.00325% of the total turnover |
| GST (Goods and Services Tax) | 18% on the brokerage and transaction charges |
| SEBI Charges | INR 10 per crore of turnover |
| Stamp Duty | 0.003% of the total turnover on the buy side (varies by state) |
Now that you know the basics of intraday trading, you might have got a slight idea of how it is different from Equity Delivery/Delivery Trading. Let’s explore the difference in depth.
Intraday Trading Tax
Intraday trading is subject to specific tax rules in India. The profits from intraday trading are considered speculative income and are taxed accordingly. Here’s how the tax calculation works:
Intraday trading income is taxed at the slab rates applicable to your total income. The tax rates differ under the old and new tax regimes:
Tax Rates for Individual Traders
| Income Range | Old Tax Regime Rate | New Tax Regime Rate (Post Budget 2023) |
| Up to ₹2,50,000 | Nil | Nil |
| ₹2,50,001 – ₹3,00,000 | 5% | Nil |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% |
| ₹5,00,001 – ₹6,00,000 | 20% | 5% |
| ₹6,00,001 – ₹9,00,000 | 20% | 10% |
| ₹9,00,001 – ₹10,00,000 | 20% | 15% |
| ₹10,00,001 – ₹12,00,000 | 30% | 15% |
| ₹12,00,001 – ₹15,00,000 | 30% | 20% |
| Above ₹15,00,000 | 30% | 30% |
Tax Rates for Firms
| Tax Category | Rate |
| Flat Rate | 30% |
| Surcharge (Income > ₹1 Cr) | 12% |
| Health & Education Cess | 4% on tax + surcharge |
Tax Rates for Companies
| Income Range | Tax Rate | Surcharge | Health & Education Cess |
| Up to ₹400 crore turnover | 25% | – | 4% on tax |
| Above ₹400 crore turnover | 30% | 7% (Income > ₹1 Cr) | 4% on tax + surcharge |
| 12% (Income > ₹10 Cr) |
Advance Tax for Intraday Traders
If your estimated tax payable for the year exceeds ₹10,000, you must pay advance tax. The schedule for advance tax payments for intraday traders not opting for presumptive taxation under Section 44AD is as follows:
- By 15th June: 15% of total tax liability
- By 15th September: 45% of total tax liability
- By 15th December: 75% of total tax liability
- By 15th March: 100% of total tax liability
For traders opting for presumptive taxation, advance tax is payable in one installment by 15th March.
Carry Forward Loss for Intraday Traders
Losses from intraday trading, termed speculative business losses, can be carried forward for four years. These losses can be offset only against speculative income and require filing tax returns by the due dates (31st July if no audit is required, 31st October if audit is required). Under the new tax regime, however, these losses cannot be carried forward or adjusted against business incomes.
We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, and hence we bring you the important topics and areas that you should know:
| Best Intraday Trading Strategies |
| Best Indicator for Intraday |
| What Is Currency Market in India |
| Best IT Sector Stocks |
What Is Intra Day Trading – Quick Summary
- Intraday trading involves buying and selling stocks within the same day to profit from short-term price movements, requiring quick decisions and market monitoring.
- Intraday trading entails buying and selling securities on the same day, aiming to benefit from daily price changes, demanding active management and real-time market tracking.
- Traders close all positions by the end of the trading day, using market trends and technical analysis tools for quick, informed decisions.
- An intraday trading example is buying 100 shares at INR 500 each and selling them at INR 520 each within the same day for a profit.
- Intraday trading starts with selecting a stock, analyzing its movements, and buying and selling within the same day, requiring active market monitoring.
- There are 10 popular intraday tradtrading strategies: Scalping, Momentum Trading, Breakout Trading, Reversal Trading, Moving Average Crossover, Bollinger Bands Strategy, Relative Strength Index (RSI), VWAP Trading, Gap and Go Strategy, and News-Based Trading.
- Intraday trading offers the benefit of quick profits by leveraging short-term price movements without holding positions overnight.
- Intraday trading time in India is from 9:15 AM to 3:30 PM, during which all intraday trades must be executed and closed.
- All intraday trading positions must be closed by the end of the day, and traders cannot carry forward any positions to the next day.
- Intraday trading involves charges such as brokerage fees (0.01% or INR 20 per executed order, whichever is lower), STT (0.025% on the sell side), exchange transaction charges (0.00325% of the total turnover), GST (18% on brokerage and transaction charges), SEBI charges (INR 10 per crore of turnover), and stamp duty (0.003% of the total turnover on the buy side, varying by state).
- Intraday trading income is taxed as speculative income under applicable income tax slab rates: Old regime: up to ₹2.5 lakh – nil, ₹2.5-5 lakh – 5%, ₹5-10 lakh – 20%, above ₹10 lakh – 30%; New regime: up to ₹3 lakh – nil, ₹3-6 lakh – 5%, ₹6-9 lakh – 10%, ₹9-12 lakh – 15%, ₹12-15 lakh – 20%, above ₹15 lakh – 30%.
- Start your trading at no cost with Alice Blue.
Intraday Trading Meaning – FAQs
Intraday trading involves buying and selling stocks within the same trading day. The goal is to profit from short-term price movements without holding positions overnight, requiring quick decision-making and constant market monitoring.
An example of intraday trading is buying 100 shares of a company at INR 500 each and selling them at INR 520 each within the same day, resulting in a profit of INR 20 per share, or INR 2000 total.
Intraday trading works by buying and selling securities within the same trading day to profit from price movements. Traders close all positions before the market closes, utilizing technical analysis and market trends for decision-making.
Yes, you can convert intraday positions to delivery if you have sufficient funds or margin in your account. This allows you to hold the stock beyond the trading day as a regular investment, and avoid day-trading restrictions.
Yes, intraday trading is legal in India. It involves buying and selling stocks within the same trading day to profit from short-term price movements, following the regulations set by the stock exchanges and SEBI.
Regular trading involves buying stocks to hold for longer periods, while intraday trading focuses on buying and selling within the same day. Intraday traders capitalize on short-term price movements, whereas regular traders aim for long-term gains.
