Intraday Trading

Intraday trading means buying and selling stocks on the same day. You do not carry any position overnight. The aim is to profit from small price moves during market hours, which run from 9:15 AM to 3:30 PM on NSE and BSE.

In this guide, you will learn what intraday trading is, how it works, simple strategies, rules, charges, and how profits are taxed in India. We will also look at common mistakes and whether intraday trading is suitable for beginners.

Note: Intraday trading is risky. SEBI studies show that around 9 out of 10 individual traders in equity derivatives make a loss. While this data is for F&O, the risk in equity intraday is also high. Only trade with capital you can afford to lose.

Quick Answer

Intraday trading is when you open and close a trade on the same trading day. You buy a stock when you expect its price to rise during the session, or sell first when you expect it to fall, and then square off before 3:30 PM. All intraday positions must be closed within market hours, and profits are taxed as speculative business income.

Table of Contents

• What Is Intraday Trading?
• How Intraday Trading Works
• Simple Example With Numbers
• 6 Intraday Trading Strategies for Beginners
• Benefits and Risks
• Market Hours and Square-Off
• Important Intraday Trading Rules
• Intraday Trading Charges
• How Intraday Profits and Losses Are Taxed
• Common Mistakes to Avoid
• Is Intraday Trading Suitable for Beginners?
• FAQs

What Is Intraday Trading?

Intraday trading, also called day trading, is the practice of buying and selling securities within the same trading session. Positions are not carried forward to the next day.

Traders aim to capture small or medium price moves that occur during the day. They rely on charts, price patterns, volume and news to time their entries and exits.

In India, intraday trading is available in:

• Equity cash (stocks)
• Futures and options
• Currency
• Commodities

All of these are subject to exchange rules and broker facilities.

How Intraday Trading Works

1. Open a trading account
   You need a broker that supports intraday (MIS) orders and provides the required margin.
2. Select liquid stocks or instruments
   Choose securities with good volume and tight spreads so you can enter and exit easily.
3. Plan the trade
   Decide the entry price, target and stop-loss before placing the order.
4. Place the order
   Use a market or limit order in the intraday product type as per your broker.
5. Monitor the position
   Track price, volume and news during the session.
6. Square off before the cutoff
   Close the position before the broker’s intraday square-off time or before market close.
7. Review the trade
   Note what worked, what did not and how you can improve.

NSE’s regular equity trading session runs from 9:15 AM to 3:30 PM, and all intraday trades must be completed within this window.

Simple Example With Numbers

Assume you buy 100 shares of XYZ at ₹500 in the morning as an intraday trade.

Buy value = 100 × ₹500 = ₹50,000

By afternoon, the price rises to ₹520 and you sell all 100 shares.

Sell value = 100 × ₹520 = ₹52,000

Gross profit = ₹52,000 − ₹50,000 = ₹2,000

From this ₹2,000, you must deduct brokerage, STT, exchange charges, GST, SEBI fees and stamp duty. The net profit will be lower than the gross profit.

If the price falls to ₹490 and you exit at that level, your gross loss would be ₹1,000 before charges.

6 Intraday Trading Strategies for Beginners

You do not need to use all strategies. Pick 1 or 2, practise them well and then consider adding more.

1. Scalping

Scalping aims to capture very small price moves. Traders enter and exit within seconds or minutes and take many trades in a day. This approach needs fast execution and strict discipline.

Best for: Very active traders who can watch the screen continuously.

2. Momentum Trading

Momentum traders follow stocks that are moving strongly in one direction on high volume. They enter in the direction of the move and exit when momentum slows.

Best for: Traders who can identify strong trending stocks early in the day.

3. Breakout Trading

Breakout traders look for price moving above a resistance level or below a support level with volume. They enter on the breakout and exit when the move loses strength or reverses.

Best for: Traders who can spot key levels on the chart and act quickly.

4. Reversal Trading

Reversal traders try to catch turning points. They buy near support when they expect a bounce and sell near resistance when they expect a fall. This requires good timing and risk control.

Best for: Traders comfortable with counter-trend trades and strict stop-losses.

5. VWAP and RSI Based Trading

VWAP is the Volume Weighted Average Price for the day. Some traders buy when price is above VWAP and momentum is strong, or sell when price is below VWAP and weakness is evident.

RSI helps identify overbought and oversold conditions. Traders may look for reversals when RSI moves out of extreme zones, along with price confirmation.

Best for: Traders who like using simple indicators with price action.

6. Gap and Go

This strategy focuses on stocks that open with a gap up or gap down compared to the previous close. Traders enter in the direction of the gap if momentum supports it and exit when the move slows.

Best for: Traders who can act fast in the first 30–60 minutes of the market.

No single strategy works in all market conditions. Most traders test and adapt a few strategies that suit their style.

Benefits and Risks

Benefits:

• No overnight risk: Positions are closed before the end of the day, so you are not exposed to after-hours news or global moves.
• Frequent opportunities: Multiple setups can appear during a single session, offering several chances to trade.
• Capital efficiency: Intraday margins are generally lower than delivery margins, so you can take larger positions with less capital, subject to broker and SEBI rules.
• Fast feedback: You know your profit or loss on the same day, which helps in reviewing and improving your process.
• Focus on liquid stocks: Intraday trading usually involves highly liquid stocks, which makes entry and exit easier.

Risks:

• High loss potential: Leverage can amplify both gains and losses. A small adverse move can wipe out a large part of your capital.
• Transaction costs: Frequent trading increases brokerage, taxes, and other charges, which can erode profits.
• Emotional pressure: Fast price moves can lead to impulsive decisions, overtrading and revenge trading.
• Execution risk: Slippage, delayed order execution or wide spreads can affect your entry and exit prices.
• Square-off risk: If you do not close your position in time, the broker may square it off at an unfavourable price and may charge a penalty

Market Hours and Square-Off

In India, the regular equity market session runs from 9:15 AM to 3:30 PM.

Most brokers have an intraday square-off time before 3:30 PM, for example between 3:10 PM and 3:25 PM. If you do not close your MIS position by that time, the broker may auto-square off your trade.

Square-off charges and exact cutoff times vary by broker. Check your broker’s tariff and risk management policy before trading.

Important Intraday Trading Rules

Key rules and practices for intraday trading in India include:

Compliance: Follow exchange and broker rules, including peak margin norms and risk management guidelines.

Same-day square-off: All intraday positions must be closed on the same day. They cannot be carried forward as intraday positions.

Margin requirements: You must maintain the required margin for intraday trades as per your broker and SEBI norms.

Product type: Intraday equity trades are usually placed using the MIS product. Delivery trades use CNC or similar product types.

Stop-loss: Use a stop-loss for every trade to limit downside.

Liquidity: Prefer stocks with good volume and tight spreads to reduce execution risk.

Overtrading: Avoid taking too many trades without a clear edge. Quality of setups matters more than quantity.

Record keeping: Maintain a trading journal with entry, exit, rationale and outcome for each trade.

Intraday Trading Charges

Intraday trading involves several charges. The exact amounts depend on your broker, exchange, and state.

Typical charges include:

• Brokerage: A percentage of turnover or a fixed fee per order, whichever is lower, as per your broker’s plan.
• Securities Transaction Tax (STT): Applicable on the sell side for equity intraday trades (commonly around 0.025% on the sell value).
• Exchange transaction charges: Levied by NSE or BSE as a percentage of turnover.
• GST: 18% on brokerage and transaction charges.
• SEBI charges: A small fee per crore of turnover.
• Stamp duty: Applicable on the buy side for equity trades, with rates varying by state (commonly around 0.003% on the buy value).

Check your broker’s latest tariff sheet for exact rates and examples. You can also use an online brokerage calculator to estimate your net profit after all charges.

How Are Intraday Profits and Losses Taxed?

Intraday trading profits are treated as speculative business income under the Income-tax Act.

• Tax rate: Profits are added to your total income and taxed at your applicable slab rate.
• Set-off rules: Intraday losses can be set off only against speculative business income in the same year. They cannot be set off against salary, capital gains or non-speculative business income such as F&O.
• Carry forward: Unadjusted speculative losses can be carried forward for up to four assessment years, provided the income-tax return is filed by the due date. These carried forward losses can be set off only against future speculative income.
• Advance tax: If your estimated tax liability for the year exceeds ₹10,000, you may need to pay advance tax in instalments as per the applicable schedule.
• Tax audit: Depending on your turnover, profit margin and whether you opt for presumptive taxation, a tax audit may be required. Consult a tax professional for your specific case.

Common Mistakes to Avoid

• Trading without a plan: Entering trades without a clear entry, target and stop-loss increases risk.
• Ignoring charges: Frequent small profits can be wiped out by brokerage, taxes and slippage.
• Using too much leverage: Large positions relative to your capital can lead to big losses on small moves.
• Chasing every move: Trading every small fluctuation often leads to overtrading and poor risk-reward.
• Not using stop-loss: Holding a losing trade in hope of a reversal can turn a small loss into a large one.
• Holding till auto square-off: Waiting until the broker’s square-off time can result in unfavourable exit prices and penalties.
• Mixing intraday and delivery mentally: Treating an intraday loss as a long-term investment without a proper plan can increase risk.
• Not reviewing trades: Skipping trade review prevents you from learning and improving your process.

Is Intraday Trading Suitable for Beginners?

Intraday trading may suit:

• Traders who can dedicate time during market hours.
• People who can follow a disciplined process and risk management rules.
• Those who understand basic technical analysis and order execution.
• Investors who want to separate short-term trading from long-term investing.

It may not suit:

• People who cannot monitor markets during the day.
• Those who are uncomfortable with fast price moves and leverage.
• Beginners who have not yet learned risk management and basic technical analysis.
• Investors who prefer a long-term, low-frequency approach.

If you are new, consider starting with:

• Paper trading or a very small size.
• One simple strategy and one or two liquid stocks.
• A clear rule for maximum loss per day and per trade.

Conclusion

Intraday trading can offer quick opportunities, but it is not a shortcut to easy money. It works only when you understand the basics, follow clear rules, manage risk and keep your costs under control. For most beginners, it makes sense to start small, practise one or two simple strategies and treat intraday trading as a skill to learn over time, not a way to get rich fast.

Frequently Asked Questions