A Complete Guide on Intraday Trading Meaning

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A Complete Guide on Intraday Trading Meaning

Intraday Trading Meaning: Intraday trading is buying and selling the stocks on the same day. Many traders do this type of day trading in order to earn quick money. In intraday trading, the trader sets the target to execute the transaction. The transaction executes, once the stock hits that price.

After understanding the intraday trading meaning, let us look at an example of the same.

Example of Intraday Trading

Suppose a trader buys 100 shares of Reliance Industries on 8thAugust 2017. The same trader then sells the shares of the company on the same day before the closure of the markets. Here, the trader squares off his position in the same trading session. This is called as intraday trading.

What is Square off in Trading?

The investors indulging in day trading/intraday trading use square off trading style. In this style of trading, the trader reverses the position taken by him earlier in the day. Square off trading position is for those traders who intend to earn intraday profits.

Intraday Trading Meaning and Delivery?

Intraday trading is buying and selling the shares on the same day. On the other hand, delivery trading is purchasing the shares today and not selling them on the same day. In simple words, delivery trading is taking the position in stocks to next trading sessions.

Benefits of Intraday Trading

  • Brokerage commission in intraday trading is very low. The brokerage in intraday trading is 1/10th in comparison to positional trading.
  • By following a disciplined approach, one can make high returns in intraday trading.
  • Intraday trading prevents overnight risk.
  • Intraday traders have dual opportunity to make profits. One is by purchasing and selling the stocks on the same day. Other is by short selling and covering the position later in the day.
  • The intraday trader has the luxury of cash liquidity right from the start of the trading session. This gives him the opportunity to take new positions in new stocks each day. He gets the advantage of free capital in hand to meet his daily personal needs.
  • Intraday trading is less risky because overnight bad events do not affect the profits of the intraday
  • Intraday trading provides immense learning opportunities to the trader. The trader can learn new techniques and strategies while taking intraday positions.

After looking at the benefits of intraday trading, let us understand few points that intraday traders must keep in mind before indulging in intraday trading.

Points to Keep in Mind for Intraday Traders

  • Determine the entry and exit price before entering into a transaction.
  • Always place stop loss to limit the further potential loss on the trade.
  • Trade in scripts that are liquid in nature. A stock with lower volumes may not have enough buyers or sellers for intraday trading.
  • Always book profits on achieving the targets. In case you expect further positive movement in the stock price and want to wait, use a stop
  • Avoid taking a position against the trend of the markets.
  • Research well about the company you plan to invest in.

The above points suggest the benefits of intraday trading. Along with the pros, there are also some cons. A trader should be very careful with his approach in day trading. He should be able to figure out the best skills and strategy that suits his trading style.

To be successful in intraday trading, the individual should possess the following three traits; diligence, discipline and decisiveness. The combination of these three Ds helps in making higher returns. As intraday trading involves risk, a trader needs to be a brave heart. He must be ready to bear losses at any point in time.

Bottom Line

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