Friday, July 19, 2024

What is Intraday Trading, and How it works?

Intraday trading, known as day trading, is purchasing and disposing of financial instruments on the same day.

This type of trading comes within the umbrella of investing, specifically, the more general category of active investing. In contrast to traditional investing, which often takes a longer view and concentrates on assembling a portfolio of assets for future growth, intraday trading involves a more active approach. Instead of maintaining positions overnight or for longer durations, traders, through intraday trading, seek to profit from short-term market swings.

Characteristics of Intraday trading:

  •   For Intraday trading, traders must act quickly based on market conditions, technical analysis, and other pertinent information. The quick-moving nature of intraday trading requires quick trade execution.
  •   Intraday trading is frequently conducted in an extensively liquid and volatile market. Higher volatility gives short-term traders more chances to profit from market swings.
  •   Leverage, which enables traders to control more prominent positions with lesser capital, is frequently used in intraday trading. It is because leverage can magnify gains and losses,  requiring careful planning and risk management.

Overview of how intraday trading works:

1- Opening a new account:

Opening a trading account with a brokerage company that offers access to intraday trading is the first step. Investors can transact on several financial markets, including derivatives, currencies, commodities, and stocks. Before making a choice, they could consult the best stock advisor in India.

 2- Analysis and research:

A thorough understanding of the financial markets and the instruments is essential for successful intraday trading. An In-depth study and research by traders can enable prospective trading chances. It may entail technical and fundamental analysis, which includes corporate news, economic data, and market movements. Also, one can look for price charts, indications, and patterns.

 3- Creating a trading plan:

A trading plan should be created before trading. The objectives with risk tolerance, preferred trading approaches, and trading guidelines are all described in this strategy. Maintaining discipline and reducing irrational judgments based on emotions are benefits offered through a clearly defined trading strategy.

 4- Placing trades:

Once the investors have found a deal, they can submit the order using their trading platform. Trades are carried out using limit or market orders during intraday trading. In contrast to a market order, where the broker buys or sells the asset instantly at the current market price, a limit order specifies the intended price for executing a trade.

5- Watching the market:

Traders must watch the market closely during the trading day after placing deals. Monitor changes in the market, breaking news, and other important information that could affect trading decisions. The most popular ways to stay informed are through real-time charts, news feeds, and financial data services. For effective risk management and to prevent capital loss, investors should diversify their portfolios and use the best broking app in India.

 6- Closing out trades:

Typically, intraday traders close their holdings before the trading day is over. Technical and fundamental indicators are essential parameters which determine when to quit a trade, predetermined profit targets, and stop-loss levels (to limit potential losses). Traders are required to be informed about the brokerage requirements for trade settlement.

 7- Risk management:

In intraday trading, effective risk control is essential. For example, stop-loss orders, which cause a deal to close automatically once a predetermined loss level is attained, are a substantial risk management strategy. Position sizing meaning deciding how much cash one must invest in each transaction and distributing the trades across various assets or marketplaces are further crucial risk management techniques.


Thus, It is crucial to highlight that intraday trading necessitates active participation, real-time judgment, and disciplined behaviour. A firm grasp of technical analysis, risk management concepts, and financial market dynamics is also necessary. Traders can benefit from a trading strategy, yet it also carries a significant amount of risk. Thus, do your research well.


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