What is Intraday Trading and How Does it Work?
Intraday trading means buying and selling a stock within a single trading day, before the market closes. The goal is to profit from small price movements. You don't hold the stock overnight, which means you avoid the risk of news or events affecting the price the next day.
Example:
Let's say you buy 100 shares of Company A at ₹50 in the morning. By the afternoon, the price goes up to ₹52. You sell all your shares, making a profit of ₹2 per share, or ₹200 in total. This entire process happens between 9:15 AM and 3:30 PM (the normal market hours).
Getting Started: The First Steps for a Beginner
Before you can start intraday trading, you need to set up the right accounts.
How to Start Trading
- Open a Demat and Trading Account: This is your first and most important step. A demat account is like a digital locker for your shares, and a trading account is what you use to place your buy and sell orders. You get both of these from a brokerage firm.
- Choose the Right Broker: Many brokerage firms offer great trading apps. Some popular ones are Zerodha, Upstox, and Angel One. They have low charges and user-friendly platforms that are great for beginners. While banks also offer demat accounts, dedicated brokers are often a better choice for active traders due to their specialized services and lower fees.
- Fund Your Account: Once your account is open, you need to transfer money from your bank account to your trading account.
Intraday Trading Strategies and Tips
Success in intraday trading doesn't come from luck; it comes from having a plan.
Intraday Trading Tips for Beginners
- Create a Strategy: Decide on a strategy before you start. This could be based on price movements, charts, or specific news.
- Start with a Small Amount: Don't use a lot of money when you are learning. You can even start with as little as ₹100, though this will limit your profit potential. The goal is to learn and practice without a big risk.
- Use a Stop-Loss: This is a crucial tool. A stop-loss is an order to automatically sell a stock if its price falls below a certain point. It helps you limit your losses and protect your capital.
- Book Your Profits: Just as you plan for losses, you should also plan for profits. Decide at what price you will exit your position. Don't get greedy.
- Trade in Liquid Stocks: For intraday trading, it's best to trade stocks that are bought and sold in high volume. This ensures you can easily enter and exit your trades without any problems. You can find a list of these stocks by searching for "intraday stocks list" on financial websites.
Intraday Trading Time and Tools
The best time for intraday trading is often in the first hour of the market (9:15 AM to 10:15 AM) and the last hour (2:30 PM to 3:30 PM) because there is a lot of market movement.
To analyze these movements, you need intraday trading charts. These charts show you real-time price changes. You can find these charts on your broker's app or on platforms like TradingView, which is a great tool for understanding stock trends.
Important Questions Answered
1. Is Intraday Trading Good for Trading?
Intraday trading can be very rewarding, but it is also very risky. It requires a lot of discipline, time, and quick decision-making. It is not for everyone, but for those who are willing to learn and manage risk, it can be a great way to trade.
2. How Can I Earn a Fixed Amount (e.g., ₹500) Per Day?
It's very important to understand that the stock market does not guarantee a fixed daily income. Some days you might make a profit, and other days you might have a loss. Chasing a fixed number can lead to emotional and risky decisions. Instead, focus on learning, improving your skills, and being consistent. Over time, your profits will hopefully outweigh your losses.
Frequently Asked Questions
- What are the 4 types of Demat accounts?
The main types are: Regular Demat Account (for Indian residents), Repatriable and Non-Repatriable Demat Accounts (for NRIs), and the Basic Services Demat Account (BSDA) for small investors.
- What is Intraday trading charges.
Intraday trading charges, or brokerage fees, are the small commissions your broker charges for each trade. They can vary from broker to broker. Some brokers offer very low or even fixed-rate brokerage plans.
- What is the 3-5-7 rule in trading?
This is a simple rule of thumb for beginners. It suggests that a stock should show a 3% price rise on a 5-minute chart over a 7-day period. It's a basic guide to help identify stocks with some momentum, but it should not be used as a standalone strategy.
- What are some good books for intraday trading?
Some popular books for beginners include A Beginner's Guide to the Stock Market by Matthew Kratter and How to Day Trade for a Living by Andrew Aziz.
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