Intraday Trading for Beginners:
Intraday trading, also known as Day Trading, is the fast-paced world of buying and selling shares within a single day. Unlike traditional investing, where you wait for years on growth, intraday traders aim to pocket profits from the market’s daily “breathing”—those small ups and downs that happen every hour.
If you’re a beginner, it can feel like trying to jump onto a moving train. Here are 15 essential points to help you understand the landscape and trade smarter.
1. The “Same Day” Rule
The defining feature of intraday trading is that all positions must be squared off (closed) before the market shuts. You start with zero stocks in the morning and end with zero at night.
2. Profit from Volatility
Traders don’t look for “stable” stocks; they look for volatility. Volatility is the price movement. Without movement, there is no opportunity for a day trader to make a profit.
3. Liquidity is Your Best Friend
Only trade liquid stocks—those with high trading volumes. If you buy a stock that nobody else is trading, you might get stuck with it and be unable to sell when the price starts dropping.
4. Leverage: The Double-Edged Sword
Brokers often give you margin (leverage), allowing you to trade $5,000 worth of shares with only $1,000 in your account. While this magnifies profits, it also magnifies losses. Use it with extreme caution.
5. Never Skip the Stop-Loss
A Stop-Loss is an automatic order to sell your stock if it hits a certain low price. It is your ultimate safety net, ensuring a bad trade doesn’t wipe out your entire savings.
6. The 2% Risk Rule
Never risk more than 1-2% of your total capital on a single trade. If you have $10,000, your maximum loss on one trade should never exceed $200. This keeps you in the game even after a losing streak.
7. Avoid the “First Hour” Chaos
The first 45–60 minutes of the market are often wildly unpredictable as it reacts to overnight news. Many successful traders wait until 10:00 AM or 10:30 AM when the trend stabilizes before jumping in.
8. Trade with the Trend
“The trend is your friend.” If the overall market is bullish (going up), focus on buying. If it’s bearish (going down), look for short-selling opportunities. Don’t try to be a hero by swimming against the current.
9. Technical Analysis Over Fundamentals
While long-term investors look at company balance sheets, intraday traders look at charts and patterns. You’ll need to learn tools like Moving Averages, RSI (Relative Strength Index), and Support/Resistance levels.
10. Don’t Be a “Tip” Seeker
Following “hot tips” from social media or SMS is the fastest way to lose money. Real trading is a skill; do your own research and understand why you are entering a trade.
11. Master Your Emotions
The biggest enemies of a trader are greed and Fear. Greed makes you hold a winning trade too long until it turns into a loss; fear makes you exit a good trade too early. Stick to your plan, not your feelings.
12. Use a Trading Journal
Keep a log of every trade you make: Why did you buy? Where was your stop-loss? What was the result? Reviewing this weekly helps you identify and fix recurring mistakes.
13. Square Off—No Exceptions
Sometimes, a stock you bought for intraday trading drops, and you might feel tempted to hold it overnight, hoping it recovers. Don’t. This is how “accidental investors” are born, and it often leads to massive capital traps.
14. Factor in Transaction Costs
Every time you buy and sell, you pay brokerage fees, taxes, and STT (Securities Transaction Tax). If you trade too frequently (overtrading), these small costs can eat up all your profits by the end of the month.
15. Start with Paper Trading
Before using real money, use a virtual trading app (Paper Trading). Practice for at least a few weeks to see if your strategy actually works in a live market environment without any financial risk.
Examples of Intraday Trading:
- Action: Buy 100 shares of a limited company at Rs. 500 per share at 10.00 A.M.
- Market Movement: At 2:00 p.m., the price has increased to Rs. 520 due to market volatility.
- Closure: Sell all the shares at Rs. 520 before the market closes.
- Result: A profit of Rs. 2000 (100 shares x 20 profit) is made in a single day. excluding transaction costs.
Key Aspects:
- No Overnight Risk: To avoid risk from overnight news, the markets are closed.
- Leverage/Margin: Brokers often provide a higher margin for intraday trades.
- Short Duration: Traders can sell high in the morning and buy back low in the evening to profit from fluctuating markets.
- Automatic Closure: If not closed voluntarily, brokers will close the position automatically before the market closes.
How to get started with Intraday Trading:
Roadmap for starting Intraday Trading:
- Open a Demat Trading Account. Pick a reliable platform.
- Practice in Demo mode: Learn without risking real money.
- Learn basic patterns: Study support, resistance, and volume moves.
- Set simple rules: enter at support, stop target twice the risk.
- Start small: Use limited funds until you earn a consistent profit.
- Track trades: Keep a journal where you record your decisions and explain the reasons behind them.
- Review regularly: Reflect on wins and losses to improve.
Note: Accept that errors happen. The goal is to learn and refine your approach.
Tips for success in Intraday Trading:
- Pick shares that many people are trading daily.
- Use stop losses to save yourself from big ones.
- Trade when you have a clear plan.
- Stay calm and follow the rules.
- Be sure to review all charges, including taxes and broker fees.
- Follow the market trend and not against it.
- Keep an eye on the news that could impact the rates throughout the day.
Frequently Asked Questions:
- What is Intraday Trading?
- Ans. Intraday trading involves buying and selling financial instruments within the same trading day, closing all positions before the market closes to profit from short-term price movements.
- What are the best apps for trading in India?
- Ans. Zerodha Kite, Upstox Pro, Angel One, Groww, Intraday Screener, and Shoonya are the best trading apps in India.
- What is the Golden Rule of trading?
- Ans. Take risks but be smart.
- Why do day traders lose money?
- Ans. Most day traders fail due to poor risk management, emotional fear, greed, a lack of a trading plan, insufficient capital, high trading costs, and unrealistic expectations.