What is Intraday Trading / Meaning?  Beautiful Dream or a Nightmare? Let’s Decide!

What is Intraday Trading / Meaning ?

Intraday Trading is quite a debated topic amongst the experts in the Stock Market. Some argue it to be highly lucrative while most of them call it highly risky. 

Some have even called it a gamble.

Well, after hearing everybody out, I have written this article with a pretty balanced view. 

Explore the article about what is intraday trading and decide for yourself, whether Intraday Trading is meant for you or not.

Let’s get started!

Content:

  1. Intraday Trading Meaning
  2. Intraday Trading Time
  3. Intraday VS Delivery
  4. Intraday Trading Rules
  5. Risks of Intraday Trading
  6. Advantages of Intraday Trading
  7. Intraday Trading Charges
  8. Tax on Intraday Trading
  9. Is Intraday Trading Suitable for You?
  10. Conclusion
  11. FAQ(Frequently Asked Questions)

Intraday Trading Meaning

Intraday Trading or Day Trading is the process of buying and selling financial instruments on the same day. Intraday trading has a fixed timing, if you do not close your positions within that time, the positions will be automatically closed by the broker. Intraday trading time varies slightly with different brokers.

Intraday Trading Time 

In the EQUITY SEGMENT, the auto square off timing for MIS trading is 3.21 pm and for BO is 3.23 pm.

In the COMMODITY SEGMENT, the auto square off timing for MIS trading is 11.20 pm and 11.48 pm whereas for BO & CO is 11.20 pm and 11:50 pm, respectively.

In order to know the timings for the Currency and Derivatives segment, refer to the table below!

Now that you know the basics of intraday trading, you might have got a slight idea of how it is different from Equity Delivery/Delivery Trading. Let’s explore the difference in depth.

Intraday Vs Delivery Trading

 

Delivery Trading

Intraday Trading 

Time

You can Buy Shares today and Sell them today, tomorrow, after a week, month, year, or a decade.

Buy Shares today Sell today itself.

Dividends

You can receive dividends from the stocks you hold.

You cannot receive dividends in intraday trading.

Collateral Margin

You can receive margin for intraday trading by pledging your holdings.

You cannot get the collateral margin.

Leverage

You need to pay the full amount to buy shares.

You need to pay a partial amount to buy shares. You can buy shares worth ₹ 1 lakh with ₹ 10 thousand with leverages.

Risk

Less risk.

High risk.

Constant Monitoring

Not required.

Very much required.

Capital

Need big capital as you need to pay the full amount to buy the shares.

You can trade with small capital by using leverage.

Short Selling

You cannot short sell the shares in Equity Delivery.

You can short sell the shares, that is, you can sell the shares without even buying them. (more on it below)

Now that you know the difference between intraday and delivery, let’s find out if Intraday Trading is suitable for you or not. 

Intraday Trading Rules

Knowledge: You need to know everything about a stock you trade-in. Just a small swing in the stock prices can earn you huge profits or losses.

Strategy: You need to have well-researched and tested strategies that can help you make good profits and also limit your losses when the trades go against you. You should follow your strategy religiously and wait for it to give proper entry and exit signals. If your strategy is not giving any signals, you shouldn’t get impatient and jump into the wrong trades.

Discipline: Intraday trading requires the discipline of a soldier to master it. Let’s say you enter a trade based on your strategy and it hits the target, you should have the discipline to simply take the profits and exit the trade. You shouldn’t get greedy and stay in the trade expecting to get higher profits.

Similarly, when the strategy doesn’t work in your favor and hits the stop loss, you should take the loss and move on to the next trade rather than staying in the trade and expecting the stock to bounce back.

Patience: Stock prices are sometimes in an uptrend, sometimes in a downtrend, or in a no trend zone. For instance, let’s say your strategy works only when the stock is in an uptrend and currently the stock you want to trade is in the no trend zone. In such cases, you need to patiently wait for the trend to change.

Trading Tips: There are thousands of people giving tips on various platforms and they all seem very authentic until you start losing out money by consulting them. Hence, you cannot depend on trading tips, you need to have a proper strategy and thorough understanding of stock markets to be a successful intraday trader. 

Constant Monitoring: You need to monitor the markets every minute to be a successful intraday trader. If you have a profession that keeps you busy throughout the day, you should certainly not choose intraday trading.

 

Why do people call intraday trading risky? Check out below!

Risks of Intraday Trading

High Leverage: With leverage, you can buy stocks worth ₹ 50,000 at just ₹ 10,000. That sounds amazing, but let me show you how it can also be a nightmare. Refer to the example below:

Let’s assume:

  • You have a capital of ₹ 10,000.
  • You buy 50 shares of ACC @ ₹ 1,000 each with 5 times leverage. The total value of shares bought is ₹ 50,000
  • If the stock moves to ₹ 1,050, the total investment value will be 52,500 (₹ 1050 x 50 shares). You will get a profit of ₹ 2,500 (52,500-50,000) That’s 25% profit (Capital 10,000 + Profit 2,500)
  • But if the stock moves to ₹ 950, the value of your investment will be 47,500 (₹ 950 x 50 shares). You will incur a loss of ₹ 2,500 (50,000 – 47,500) and 25% of your capital will be blown away in one shot.

Psychological Risk: 95% of intraday traders lose money because of psychological factors. As I explained above, you need to have the nerves of steel, a lot of patience, and strong discipline. When Intraday Trading is done right, it can be most rewarding. With that being said, let’s explore the advantages of Intraday Trading.

Advantages of Intraday Trading

Short Selling: If you think the price of a particular stock will fall, you can sell the shares without even owning them. Confused? Let me give you an example.

Assume, Reliance is currently trading at ₹ 2,000, and you expect it to fall to ₹ 1,950 today. If you short sell the Reliance Shares at ₹ 2000, and if the prices go below ₹ 2000, you will make  profits. And if the price of Reliance goes above ₹ 2,000, you will incur a loss.

Overnight Positions: As you close the positions within a day in Intraday Trading, you will not be prone to the risks of market events or tragedies that happen during the night which will have a direct effect on the stocks movement the next day.

High Leverage: In intraday trading, you can use leverage to buy stocks worth ₹ 50,000 with just ₹ 10,000 at Aliceblue.

 

As you are buying and selling day in and day out in intraday trading, you might be wondering if you will be charged heavily for doing so. Well, yes and no. Why not? Find out below.  

Intraday Trading Charges

The brokerage charged for Intraday Trading varies with the broker. At Aliceblue we charge a brokerage of a maximum of ₹ 15 or 0.05% on turnover per order (whichever is lower) irrespective of the size of your trade. 

You can buy shares worth 2 lakhs or 1 crore, the maximum brokerage charged will be ₹ 15 per order. Check out the detailed pricing here.

They say, “Fine is a fee for doing something wrong and tax is a fee for doing something right”. Well, as you are doing the right thing by Trading, you will be taxed. Explore the Intraday Taxation below.

Tax on Intraday Trading

Profit from Equity Intraday will be treated as Short Term Capital Gains Tax. These gains are taxed at the rate of 15%. 

Now that everything is said and done, let’s find out the most important thing!

Is Intraday Trading Suitable for You?

To determine if Intraday is suitable for you or not, you need to ask yourself the following questions:

  • Can you monitor the markets regularly? 
  • Do you have the discipline to follow a particular strategy religiously?
  • Do you have the patience to wait for the right opportunities?
  • Are you willing to trade without any Tips?

If your answer to all the above questions is “YES”. Then you can learn intraday trading by reading our Intraday Trading for Beginners Guide. The guide covers:

Quick Summary 

  • Intraday Trading is buying and selling stocks within the same day. If you fail to close your position before the market closes, it will be automatically closed by the broker.
  • Intraday Trading Time differs based on the segment:
    • Equity Segment Intraday Trading Time: MIS Trading – 9:15 am to 3:21 pm. Bracket Order: 9:15 am to 3:23 pm
    • Commodity Segment Intraday Trading Time: MIS Trading – 9:00 am to 11:20 pm. Bracket Order: 9:00 am to 11:20 pm, Cover Order: 9:00 am to 11:50 pm
  • Key difference between Intraday and Delivery Trading is the time period you hold the shares.
  • You need to have proper Intraday Trading Strategies, complete knowledge of stocks, strict discipline, patience and time to constantly monitor the markets to be a good intraday trader.
  • Using high leverage can lead to capital exhaustion.
  • You can short sell if you think the stocks will fall.
  • Intraday Profits are taxed at 15%. 
  • Intraday Trading Charges: Alice blue charges a maximum of ₹ 15 or 0.05% on turnover per order (whichever is lower) irrespective of the size of your trade.

FAQ(Frequently Asked Questions)

  • Can I Buy 10000 Shares In Intraday?

Yes, you may buy 10000 shares for intraday trading, provided you have sufficient capital equivalent to the market value of those shares to square off your position.

  • Is Intraday Trading Safe?

Safety is a subjective topic. If you are worried about the transactions then it is completely safe. If you are concerned about the profit or loss associated with it, then it depends on how good of a trader you are. It is not advisable to jump into intraday trading without proper knowledge. 

  • Can I Convert Intraday To Delivery?

Yes you may convert your intraday trades to delivery, but you have to select proper positions and do this before the market closes.

  • How Much Can I Earn In Intraday Trading?

It depends on your intraday knowledge and research. It requires patience, discipline and quick decision making skills. If you have all those you may earn really good from intraday trading. 

  • How Much Money Is Required For Intraday Trading?

It depends on the available capital with you for intraday trading. It is advised to do trading with the surplus funds available. Also intraday trading is a risky practise, so it is advised to gain complete knowledge required. 

  • Which Is Better Intraday Or Delivery?

Totally subjective. In intraday you have the option to trade with smaller amounts for bigger volumes through margin payment. While in delivery you have to pay for the whole market value. Whatever option you choose, gather as much knowledge and do proper research. 

  • Which Is The Best App For Intraday Trading?

The Best App for intraday trading is ANT Mobi by Alice Blue. It has got 100+ indicators and 10+ Stock Screeners. You can set an unlimited number of price alerts for instant updates with Easy and Fast Transfer of funds with UPI. It comes with additional features such as:

  • Add and Delete scrips in Bulk
  • Enabled full-screen view for 1 min, 2min, 3 min charts
  • Complete info of scrip with a single tap
  • Improved and Comprehensive Market Depth
  • Sort and Align scrips in Marketwatch with a single tap
  • Separate dashboard with Market Movers, Indices, Order Book, and Margin details
  • Complete details of orders history in Order Status Window
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About Author

Vinayak Hagargi

Vinayak is Impressively Enthusiastic about Financial Markets, Research & Curating Layman-Friendly Content. He has been Successfully Contributing to the Financial Markets for over 2 years & has written over 100+ articles. He aims to continue sharing his knowledge to empower newbies with Relatable, & Easy to Understand Content.

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