Intraday Trading

Everyone demands instant results these days. Whether you are learning some art or learning to make money in the stock market, the desire for quick outcomes is common. But, it should be remembered nothing comes easy in life. You have to dedicate a required amount of time to whatever you want to achieve.

The same applies to the stock market. You can’t be a billionaire overnight. Achieving financial success requires patience, education, and a strategic approach. If you keep these factors in mind and implement them well, you could probably earn a significant profit in a single day.

Wondering how to secure significant returns in a single day? Intraday trading offers the potential to achieve just that. Unlike long-term investments that require a prolonged waiting period, intraday trading involves buying and selling financial instruments within the same trading day. Let’s understand through this article, what intraday trading is and how you can earn profits by doing it.

What is intraday trading?

The term intraday means within the day. In simple words, intraday trading refers to the trading that is done within the day, for instance, you buy and sell financial stocks on the same day. Intraday traders aim to make profits from short-term price movements and fluctuations in the market. They only focus on a trading session that starts at 9:15 Am and ends by 3:30 p.m. daily.

Intraday traders mostly rely on technical analysis. Technical analysis mainly includes chart patterns, and trading indicators which help to make quick decisions about entry and exit in a particular trade. Traders need to monitor and keep track of the market movements and prices constantly in intraday trading. Therefore it is considered more risky than long-term investments.

However, it can also be very beneficial as it allows to reap large returns quickly. For intraday trading traders and investors can also use leverage which can maximize the potential returns. But, leverage should be used wisely as it can also maximize the losses. Therefore intraday trading demands a solid understanding of the market, technical analysis, risk management, and quick decision-making ability.

How to do intraday trading?

To do intraday, you first need to have a demat account. Through this account, you can make trades. Apart from this, you need to follow certain crucial steps such as:

1. Choose liquid stocks

Liquidity is the most important factor to consider when choosing stocks for intraday trading. There are abundant buyers and sellers for liquid stocks, hence it becomes easy to sell the liquid stock when you want. Further, liquid stocks often belong to well-known companies that many people are interested in. Therefore, liquid stocks are less risky and you also have the flexibility to enter or exit a trade whenever you want. Hence, it becomes important to choose highly liquid stocks to make good returns and avoid risks.

2. Utilize stop loss and stick to it

Stop loss is of utmost importance in intraday trading. You are more vulnerable to your emotions like greed while doing intraday trading. But, stopping loss can save you from letting your emotions step in. Stop loss is a tool that sells shares automatically if their price drops below your specified limit. It controls the potential losses resulting from a decline in stock prices.

3. Analyze trends

When you are doing intraday trading it becomes very important to make decisions by closely monitoring cyclical variations. As said history repeats itself, it happens most of the time in trading also. Certain chart patterns occur after a certain period. Therefore you should focus on analyzing these trends and focusing on 52-week high and low values.

4. Focus on higher trade volumes

You should assess a security’s trade volume index to identify potential price fluctuations. A higher trade volume index indicates increased demand or supply based on the underlying company’s performance. In such scenarios, higher returns can be achieved through both buying and selling transactions. Therefore, trade volume is an essential consideration in your intraday trading strategy.

5. Make a strategy and follow it

Creating a well-researched strategy is a fundamental decision one can make for successful decision-making in trading. To make a successful strategy, you should consider factors such as market analysis, technical indicators, and risk management principles. Developing and sticking to a well-defined trading strategy helps traders stay disciplined, minimize emotional decision-making, and enhance their overall effectiveness in intraday trading.

How to choose the best stocks for intraday trading?

• Technical analysis: Use technical analysis to study past prices and volumes, predict future movements, and determine optimal entry and exit points for intraday trading.
• Consider the volatility of a stock: Choose stocks with medium to high volatility for intraday trading, as low-volatility stocks may yield minimal profits, while high-volatility stocks carry the risk of sudden and significant price fluctuations.
• Keep up with the market trends: Align stock choices with broader market trends—opt for well-performing stocks in uptrends and identify declining stocks in downtrends.
• Consider the momentum of the stock: Select stocks with strong momentum, identified through price charts, moving averages, and relative strength indicators, for steady upward or downward movements.

Top stocks for intraday trading in 2024

1. IndusInd Bank:

IndusInd Bank is one of the top intraday stocks for 2024. It has a market capitalization of 114,157 crores with the promoter group holding 16.51% of shares and 83.51% held collectively by FIIs, the public, and other entities. It is a prominent Indian private-sector bank that offers numerous banking services.

2. Tata consumer product:

Tata Consumer Products operates two primary segments: Beverages and Foods. In the Beverages category, the company engages in the manufacturing and distribution of a broad range of hot and cold beverages. With a market capitalization of Rs. 83,513 Crore, the promoter group holds approximately 34.44% of the total shares, while the remaining 65.56% is distributed among mutual funds, other institutions, and the public. You can consider this stock for intraday trading but proper research is required along with ensuring this stock aligns with your stock choosing criteria.

3. State Bank of India

As a comprehensive financial institution, the State Bank of India provides an extensive array of financial products and services, encompassing personal and corporate banking, loans, deposits, credit cards, wealth management, insurance, and investment services. The bank has a market capitalization of Rs. 502,544 crores and the promoter group commands 57.52% of the total shares, while mutual funds, FIIs, and others hold the remaining 42.48%.

4. Divis Laboratories

Divi’s Lab has positioned itself as a prominent figure in the global pharmaceutical sector, recognized for its proficiency in manufacturing intricate APIs and intermediates. With a market capitalization of Rs. 94,355 crores, the promoter group retains 51.94% of the total shares, while mutual funds, FIIs, and others account for the remaining 48.06%.

Benefits of intraday trading

• Intraday trading minimizes the risk of significant losses by executing buy and sell transactions on the same day.
• Accurate strategies in intraday trading can lead to substantial wealth creation. You can benefit from both – rising markets and adverse conditions as you can do short selling in economic uncertainties.
• There are nominal commission charges in intraday trading. This is because there are no delivery expenses.
• Intraday trading allows quick recovery of invested funds at any time. This gives you liquidity to utilize your funds for personal needs as you are not tied up in a particular trade for a longer time.
• Intraday trading offers the advantage of leverage. It allows you to trade with small amounts as many brokers offer margin on your funds. Hence, even if you have less funds you can buy more quantities of stocks with the help of leverage.

5 Tips for intraday trading

1. Make a well-researched strategy and practice it well.
2. Always choose liquid shares.
3. Always apply stop loss and follow it regularly.
4. Stay informed about current happenings as they majorly affect the stock market.
5. Find news-sensitive stocks, can be a very good intraday stock selection option.

Conclusion

In conclusion, to succeed as an intraday trader you should master how you can choose intraday stocks effectively. Many traders find it struggling to find stocks for intraday trading as there are multiple criteria and strategies for it. However, you should identify and choose the one that gives you good returns. Strategic planning is very important in intraday trading, you have to plan everything before carrying out a trade as there is not much time while trading. Making decisions in a hurry could make huge losses in intraday trading. Therefore, research well, follow your strategy, and plan everything to avoid negative outcomes.

FAQs – Intraday Trading