Last updated on April 17, 2023
Profits are based on a variety of goals for traders. One may be a long-term investment that generates significant profits but is a slow process. A short-term trading strategy that focuses on making fast profits is another option, and intraday trading is one.
Buying & selling stocks on the same day are referred to as intraday trading. Utilizing internet trading platforms is how it is done. If someone wants to purchase shares in a firm, they must expressly state “intraday” on the platform’s interface. This makes it possible for the user to purchase and sell the same number of shares of the same firm on the same day, before the market’s closing. Gaining gains through the movement of market indexes is the goal. Many people also refer to it as day trading.
For intraday trading, a trading account online is utilized. When engaging in intraday trading, you must mention that the orders are for intraday trading.
If you invest in stocks for the long term, you may expect to receive excellent profits. However, they might still support your financial goals in the near run. Let’s say a stock start trading the following morning at Rs 500. Within a few hours, it quickly increases to Rs. 550. Within a few hours, if you had acquired 1,000 equities in the morning and sold them for Rs 550, you would have made a tidy profit of Rs 50,000.
How To Do Intraday Trading?
According to experts, intraday trading isn’t suitable for everyone since it requires a realistic mindset. To profit from intraday trading, emotional aspects are also crucial. There are no shortcuts in intraday trading, but one may earn a good deal with knowledge and expertise. This is vital to realize if you’re wondering how to make money in the quickest amount of time. Since intraday trading is a short-term trading method, you must conduct extensive research before you start. It necessitates speedy entry into the markets and quick departures after the same trading day.
One does not suddenly get wealthy through day trading. Many traders begin trading intraday under the impression that they may make significant money by profiting from only one trade. However, this is both practically impossible and untrue. Expert traders will confirm this. As a trader, you must put in the time and effort necessary to research, devote yourself, and gain expertise if you want to make big intraday profits. For months, intraday traders must work hard to learn the markets to create.
Benefits of Intraday Trading-
1.Let Leverage Work for You
Leverage is similar to a bank loan in the stock market. Leverage is a common strategy used by intraday traders to boost profits. The bank assesses your financial situation and then authorizes the loan. Similar to how a broker in the stock market assesses your history and cash flow situation to authorize a margin amount. The margin might range from five to 10 times the amount of cash that is currently in your trading account. Therefore, if your broker offers you a margin of ten times, you can deposit INR 10,000 to buy stocks worth INR 1 lakh.
2.Minimise Overnight Risks
The company’s financial performance, business prospects, competitive landscape, and several macroeconomic factors are just a few of the many variables that affect stock prices. Furthermore, the market can continue in the red the next day if any unfavourable geopolitical or environmental news breaks after the market closes. However, intraday traders don’t often worry about such concerns because they complete their tasks in a single day. They may put their fears to rest and maintain their composure once the market has closed. After the market closes, no bad news may impact their mental health or financial situation.
3.Sell First Buy Later
Positional traders often purchase equities initially and sell them afterwards. However, intraday trading enables you to acquire equities later after first selling them. As a result, you may trade and make money even during a bad market. Although you may make money by short-selling with futures and options as well, the capital requirements are frequently larger than with intraday trading. Therefore, intraday trading may be your best option if you wish to profit from the “sell first, buy later” method.
4.Bigger Bets By Using Margin
Your stock broker is aware that you will close your position at the end of the day and that it is improbable that the price of the stock you acquired would fall to zero when you trade in the intraday markets and issue an intraday order. Stockbrokers thus give intraday traders special margins, under which traders only need to pay a tiny portion of the whole order size as leverage against potential losses. Each brokerage house’s margins are predetermined, and experienced intraday players frequently receive these benefits. Some brokers even give intraday traders 10 to 15 times the leverage.
For instance, some brokers would let you buy stocks worth up to Rs. 1000 or Rs. 1500 if you have Rs. 100 in your trading account, depending on the amount you have available. Typically, this service is offered to clients that bring in many brokerages for the brokers. One of the biggest advantages of intraday trading is using leverage.
5.You can Earn a Regular Income
Since trading profits be taken out daily, intraday trading has proven to be a reliable source of income for many people. Investors in intraday markets run risks, but there are also vast gains to be earned. However, if you plan to invest for the long term, market circumstances might not always be favourable for you to acquire a consistent income.
6.Catching the Pulse of the Markets and the Economy
Among all those who invest their money in the stock markets, intraday traders are the first to know when there are any market movements. The stock market provides indicators of many kinds of economic and social events. Be it a pandemic, an election, a terrorist incident, or any significant statements made by political parties. Each event has an effect on the markets. The first people to notice its effects are the intraday traders. Sometimes the markets respond to what is certain before a significant expected event, such as a big announcement or RBI monetary policy meetings, & when the actual event comes, the chain reaction happens. Intraday traders can take advantage of these quick reflexes and volatility to learn about markets and earn more money.
7.Earn in Falling Markets too
In general, long-term stock market investors make money when stock prices rise, which eventually increases the value of their market holdings. Long-term investors benefit more and can make more money during bull markets or markets that are heading upward. However, one advantage of intraday trading is the ability for investors to earn even while the markets are down. This is made feasible by a method known as “short-selling.” Selling a stock short involves doing it at a higher price and then purchasing it back at a lower price.
If you are short-selling a stock, you are essentially borrowing it from the exchange to sell it at a fixed price, & later, buying the same stock at a lower price and returning it to the lender. All listed instruments are eligible for this practice. However, for the cash segment, the sell and the buy orders have to be placed on the same day. It means that you cannot sell a stock one day & buy it again the next day. This facility of selling first and buying later in the cash segment is only available in Intraday trading.