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Intraday Trading

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Intraday trading involves buying and selling of securities on the same day. Intraday trader doesn’t carry any overnight positions and he will square off all his positions on the same day whether at profit or at loss. Ex: Indian Stock markets are open from 9.15am to 3.30pm. An intraday trader takes his position anytime during the trading hours and he also squares out or gets out of his position on the same day.

Suitability of Intraday Trading:

  1. High leveraged traders who don’t want to carry positional risk.
  2. Active traders who seek to trade the opportunities.
  3. Disciplined traders who follow strict day trading strategies.
  4. Traders who want to benefit from Volatility.
  5. Event Based Trading.

Advantages of Intraday Trading:

  1. Leverage Benefit.
  2. No Overnight risk.
  3. Profit in either direction of markets.
  4. Lower size of capital.
  5. Quick returns.

Why People lose in Intraday trading?

  1. Random style of trading without any technical analysis systems.
  2. Screen based and emotional trading.
  3. No stock training and experience.
  4. Looking for cheapest brokerage and lacking quality service.
  5. Lack of flexibility.
  6. Lack of Discipline.

Timeframes in Trading:

Generally timeframes in trading can be broadly classified into the following 4 Categories:

  1. Intraday Trading: Spanning from seconds to hours.
  2. Swing Trading: 3-5 Days or few days.
  3. Short term Trading: Few weeks.
  4. Long term Trading: Few months.

Successful day trading requires Trading Edge, Good risk-reward, Suitable trading system, Trading Discipline and Patience to strike only when the opportunity is right.

It is advisable for new entrants in day trading to start with only liquid and frontline stocks. Even trading the index is advisable for day traders as it has high liquidity.

Day trading in Futures and Options Market:

Derivatives markets already come with high leverage and exposure. So day trading in derivative instruments like futures and option markets, call for high leverage. Unless someone is extremely sure on the trades initiated with proper discipline, Day trading in futures and options market is not advisable. Do remember leverage is a two edged sword which will either maximise profits or even losses. When it comes to trading futures, knowledge on discount and premium to spot prices, time left for expiry and general rates of interest in markets has to be kept in mind. For option trading, use of Option Greeks like Delta, theta, Gama, Vega and Rho will make the trader better than a novice intraday trader in futures and options market.

Conclusion:

Success in Intraday trading is directly related to the Expertise and Experience what an intraday trader holds. Over 95% of Day traders lose money which is a bad statistic to a day trader. But the good news is, the rest 5% of winning Intraday traders make the money of the losing 95%.

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