Investors in the stock market usually purchase the stocks, with a motive to get the delivery of shares they bought to hold the same into their demat account till they generate a significant profit or keep for long-term investment purposes.
While on the other hand, traders buy the stocks and sell them as soon as they get profits even a minimum percentage. Sometimes traders sell on the same day or the next day to earn profits and make new positions to earn from the stock market.
What is Intraday Trading in Stock Market?
When you buy and sell stocks on the same day it is called - Intraday Trading, also known as Day Trading. This practice helps traders to realize the capital gains on shares they bought in the least time avoiding investing their money for a longer time.
All the positions are closed at the end of the market closes and there is no change in ownership of shares as a result of the trades. You can either make a long or short position for the day or reverse the same to square off your position.
In intraday trading you not only generate profits, when there is high volatility (VIX) in the market there could be a loss too. In fact you have to close your position and if the stock is not moved as per your expectations you can incur the loss.
How Does Intraday Trading Work?
Intraday Trading simply works, when anyone buys and sells the share of the same company on the same day before the market closes. The buying and selling process of shares can be done anytime or any time during a single trading hour.
To understand better let's take an example - suppose in the morning when the market opens, you bought 1000 shares of XYZ company trading at Rs 100, that touched Rs 120 in the next few hours, and now sold the same shares at Rs 120 to close your position.
Here you generated a profit of Rs 20,000 or Rs 20 per share (excluding brokerage or transaction fees) within a few hours which is called intraday trading. And intraday trading is not easy as you are thinking, it is difficult, especially for the new traders.
Why Intraday Trading is Difficult or Not Good?
Understanding intraday trading is not only difficult but not good for new retail customers who are looking to trade intraday and earn money.
You need an expert studied the technical analysis and other strategies of intraday trading. These technical analysts have a better understanding of indicators or tools and techniques to utilize them for analyzing the stock price movement.
Unless you get complete knowledge about intraday trading and how to apply the indicators you should either keep away from day trading. The best way to participate in intraday trading is to watch market heat map and then take advice the experts.
Is Intraday Trading Profitable?
The stock market is a risky place, hence the first thing that comes into your mind is that is intraday trading profitable or not. So let me tell you very frankly, trading in the stock market doesn't mean you always earn a profit every time your trade.
In some cases, traders incur huge losses or go with bare hands without profit or no loss. The key to profitable intraday trading is knowledge and understanding of the market, price movement or stocks, industry trends and other factors affecting the stock market and individual stock prices.
Traders who usually do equity trading, currency trading and commodity trading on regular basis have the practice for the intraday trading using technical indicators and learn from the losses to gain knowledge about the market.
Not only the domestic market but international markets, Government policies, central banks policies, industry regulatory frameworks actions, sector trends, individual company stock fundamentals or financial performance ,corporate actions and there multiple various other factors that affect the price movement of the stocks.
With the time being, when start understanding and correlating everything affecting the stock prices you will also start earning from the stock market and of course with the intraday trading too.
Intraday Trading Advantages & Disadvantages
Trading intraday comes with various pros and cons. Before you start intraday trading you need to also understand the advantages and disadvantages of day trading, so that you can earn a good amount of money and minimize your losses.
Benefits of Intraday Trading:
- High Return Potential
- Low Brokerage Charges
- Automatic Position Square Off
- High Liquidity of Stocks
Disadvantages of Intraday Trading:
- Very High-Risk Trading
- No Ownership of Shares
- Need to Watch Stocks All Day
- No Option to Take Delivery
Trading in the stock market is already a risky bet, and intraday trading is riskier than delivery-based trading. However, it has its advantages and disadvantages, but if you trade wisely you can earn a significant amount of money from day trading.
How to Learn Intraday Trading?
Learning intraday trading is not possible in a single day, or just knowing about the simple trading techniques in the stock market in few days. Multiple factors affect the price of a stock, and in day trading you have only one day to understand the stock's next movement and make the positions accordingly to make your trade profitable.
Intraday trading is quite different from regular trading where you can take delivery of shares and hold your positions till you get the profits. Here you have the chance to either earn or lose some of your money with no other options except closing your trade on the same day. But with the time being keep trading you will start learning about intraday trading.
However, to learn more about intraday trading you can start learning about the chart patterns, how to choose stocks, study the technical indicators that are used for intraday trading and what are the popular strategies applied for intraday trading.
And as soon as you start trading in the market, you will learn many things about your mistakes or losses and the profits you gain while intraday trading. Earning money from the stock market grows when one starts learning about its rules, how the market reacts to various things and correlates all of these things with the stock price movement in various situations.
How to Earn Money in Intraday Trading?
The stock market is a risky place where you can earn as well as lose your money, if you play blindly. And intraday trading is riskier than delivery-based trading but can give the highest returns in a single day but only if you play wisely and strategically.
Yes, if you choose the right stock by applying the right indicators through technical analysis, understanding the market fluctuations, and go to know the right time to enter and exit timely booking the profits, you can earn money from the stock market.
Intraday trading works when you follow the trend of the market on that day. If the market is bullish try to buy shares and book the profits as soon as it rises. While in a bearish market, you can choose to short-sell and buy at lower levels to gain some profits.
With such small trades in multiple stocks, you can earn money from the stock market. Similarly follow other rules while doing intraday trading like keep tracking stock-based news, do some research, understand the market sentiments and always put the stop loss to limit your loss.
And make small positions in multiple stocks to cover your trades, if any stock gives you a loss, you can get profits from others making your entire day trading profitable end of the day. For intraday trading, choose the best broker and start your trading.
Let's wrap this discussion with key takeaways from what we go to know about intraday trading. It is a risky game as it is the game of one day and you don't have the chance to hold your stock position for a big profit or cover your loss on the same day.
If you use the real time chart patterns, apply the technical indicators and choose the right stock fits for intraday trading to earn good profits. And to applystrategies effectivelyfor intraday trading you should take help from the experts called technical analysts.
Moneysukh has a team of such experts who will provide you with tips and tricks for intraday trading with daily stock recommendations that you can choose for day trading.
These technical analysts are well-trained and experienced enough, who will also suggest successful intraday trading strategies with time-to-time updates on where to buy the stock and where you have to book profits or exit from the position.