What is intraday trading?
Intraday trading – also known as day trading – refers to the purchasing and selling of stocks on the same day. The stock market is subject to fluctuations that leads to variation in stock prices throughout the day. If you wish to participate in intraday trading, you need to take advantage of changing prices and complete an entire transaction before the market closes.
Earlier, the perception surrounding intraday trading was of a ‘financial realm’ for professional traders and financial firms. However, with the digitisation of the stock market and the easy access to the internet, everyone can try intraday trading. Intraday trading can be beneficial for newcomers as well as seasoned traders. However, it is essential to get a grasp of the basics before you begin.
How is intraday trading different from regular trading?
The significant difference between regular trading and intraday trading stems from the taking of delivery of the stocks. Essentially, in intraday trading, you square-off positions on the same day, whereas a regular trade takes a longer span to get settled. Since intraday trading involves buying and selling shares on the same day, there is no transfer of ownership of shares.
Regular or delivery trading allows you to keep the stocks bought for a more extended duration. The shares bought are credited to your Demat Account, and you can sell them after weeks, months, or years. Unlike intraday trading, you have ownership of these shares till you sell them. While delivery trading can be an excellent long-term investment option, intraday trading can fetch you returns within a single day.
Who should practice intraday trading?
Intraday trading depends mainly on the changes within the market conditions and the prices of stocks within a single day. Thus, it would help if you were an individual with the time and bandwidth to focus on stock market trends.
To successfully execute an intraday trading transaction, you must keep a close eye on the market and refer to technical analysis. These activities require time and attention. Juggling your work and intraday trading might be difficult if you have a full-time job during trading hours.
Intraday trading has the potential to offer high returns and is an attractive option for the same reason. However, the high returns call for higher risks. Thus, if you want to succeed at intraday trading, you must accept the associated risks.
What are the right stocks for intraday trading?
As mentioned, intraday trading involves squaring-off positions of stocks before the market closes. For this purpose, a stock that offers a lot of liquidity is considered most suitable.
Liquid stocks sell out easily because their trading takes place daily and in large volumes. With a liquid stock, you can easily move out of your position even if you possess many shares. Since so many people are trading using these stocks, selling a large number is not very difficult.
Stocks from large-cap companies are generally highly liquid and are a good choice for intraday trading.
What are the intraday indicators?
The following indicators can help you execute intraday trading transactions:
- Moving average: This indicator connects the average closing rates over a while and can help you determine the underlying movement of the price of a stock.
- Bollinger bands: A bit more complex than moving averages, this indicator displays three lines; the moving average, an upper limit, and a lower limit. These three lines can indicate the underlying price movement of a stock better than the moving average.
- Momentum oscillators: This indicator helps measure how a security’s price has changed over time.
- Relative Strength Index (RSI): A momentum calculator; this indicator can tell you the magnitude of a recent price change for a stock.
What are the advantages of intraday trading?
With the rising popularity of intraday trading, it is crucial to understand how this practice can benefit you. The advantages of intraday trading are as follows:
- The margins offered to traders are comparatively higher than those offered to investors.
- Intraday trading has the potential to fetch higher returns than traditional investment options.
- The brokerage charges levied for intraday trading are lower.
- The horizon for strategies to pay off is short to medium.
How to Begin Intraday Trading?
To begin intraday trading, you need to choose the correct brokering partner and open a Trading Account and a Demat Account. You can select HDFC Bank DigiDemat Account that offers you a safe, online, and seamless mode to keep track of your investments.
HDFC Bank Demat Services offers you a Safe, Online, and Seamless mode to keep track of your investments. Equity, Mutual Funds, Initial Public Offer (IPO), Exchange Traded Funds (ETF) - Index & Gold, Bonds, Non-Convertible Debentures (NCD)
It would help if you also looked for the right tools to assist you in your intraday trading activities. The tools chosen could pertain to tracking stocks, technical analysis, or taxation purposes.
Lastly, you will need to keep an eye on the stock market and monitor trends in price movement. Reading and keeping up with the stock market can benefit you as you begin intraday trading.
Intraday Trading at HDFC Securities
HDFC Securities provides opportunities for traders of all kinds to participate in intraday trading. You can use the multi-trading platform offered by HDFC Securities and execute your intraday trading transactions online from the comfort of your home. HDFC Securities is equipped with a robust research team and hires well-qualified analysts. To help you narrow down stock options you can trade, HDFC Securities offers technical analysis and daily tips.
Are you looking to open a Demat Account? Click here to get started.
Explore the intraday trading facilities offered by HDFC Securities by clicking right here.
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*Terms and conditions apply. This is an information communication from HDFC bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing.