Intraday trading is all about wrapping up of buying and selling of stocks of a particular firm within the same day. It is a mandatory rule that ‘all traders have to square-off their trading, which also refers to buying and selling, on the same day.’ In layman terms, this trading is also referred as ‘Day Trading.’
Explanation of ‘Intraday Trading’
To understand Intraday Trading, in brief, let’s just assume buying of 200 stocks of a firm, say XYZ, during NSE open market hours. As the trader has bought 200 stocks of XYZ firm during Intraday Trading, he or she has to sell the same 200 stocks of XYZ firm on the same day.
Also, before making the transactions, the trader will have to specifically mention that he or she is performing Intraday Trading before making any of the transactions.
Reasons why is Intraday Trading quite popular among traders
- Less Brokerage: As compared to regular day trading, the brokerage during the Intraday Trading is quite less.
- High margin of trading: While performing Intraday Trading, a trader is free to perform multiple transactions on the same day. However, the ratio of a number of allowed chances differs according to Brokerage Firms.
- Safety toward overnight impacts: With regular trading on the NSE, there is an issue of carrying the stocks overnight. This leads to chances of stocks getting affected by a sudden change of the economy or any other factor. Whereas with Intraday Trading, the person is bound to buy and sell during the same day; hence, there is no chance of taking stocks overnight.
Tips for Intraday Trading
Although investing in Intraday Trading is quite riskier than the regular investment in stocks, yet it has many advantages and positive sides. Therefore, once in a trading life, all traders should try this ‘Day Trading.’ However, for the financial security, here are some tips to follow.
- All the Intraday Traders should choose highly liquid large-cap shares. Choosing large-cap shares with high-liquidity will prevent the issues of low-trading volumes.
- Before starting the trading, traders should be clear about their target price. There are chances where they could change their mind about the purchase volume. Therefore, they should be sure enough to have an ample amount of rightly priced stocks to have better gain during the day.
- Traders should stay handy with Stop Loss functionally. It enables them to quickly sell their stocks if the price goes below the threshold set by them. Also, for traders who choose short-selling, this functionality helps them reduce the further loss when the price rises above the expectation.
- Most of the times, what affects most of the traders are fear and greed. So, to avoid any loss, traders should book their profits when the target is touched. Also, if they feel like leveraging more benefit from the price rise, they could even use the ‘Stop Loss’ functionality.
- Traders should be well-prepared in advance with their wish list. They should research about the stock in which they can make successful investments. Internet will help them research the best out of the present market.
With this sneak peek of Intraday Trading, traders should be able to get a better knowledge of how stock markets operate.