Top Intraday Trading Strategy and Tips

Table of Contents

Traders make financial gains from the stock market in different ways. Some hold their investments for the long-term to generate wealth over time, while others engage in short-term trading for some quick gains. Intraday trading is a trading option with the shortest investment period.

With the advent of digital trading, many individuals have turned to intraday trading for an additional source of income. However, it is not the easiest trading method, and you need to understand its rules, mechanisms, and risks to be successful.

Read along to learn the meaning of intraday trading, its basic requirements, intraday trading strategy and more.

What is Intraday Trading?

Also known as day trading, intraday trading involves buying and selling stocks on the same trading day. Stock prices fluctuate throughout the day, and traders use this to their advantage. To make a profit, you have to buy shares and sell them at a higher price before the market closes on the same trading day.

Another way you can make money from intraday trading is via short-selling shares. Short selling involves selling shares that you do not own when trading. In this, you buy shares with the help of the brokerage and sell them at current market prices with the expectation of a price decline.

When the share prices decrease, you buy back the shares you need to return and make a profit. With intraday trading, you can sell a stock at the beginning of the day and cover your position at the end of the day. As a result, you do not need to take delivery of the shares for short selling them.

If you fail to do so before the market closes, you have to square off all your positions or convert it into a delivery trade. Besides stocks, intraday trading is also applicable for commodities, derivatives, and ETFs (exchange-traded funds).

In this trading method, you have to study and evaluate market movements to predict stock prices. Based on such information, you need to purchase stocks during the day when the market closes and sell them before the market closes.

You should look at relevant trends and indicators for intraday trading irrespective of whether you are a beginner or an experienced trader. As a trader, you also need to make quick decisions due to the fast nature of intraday trading. Otherwise, you can miss chances to make profits or prevent further losses.

Best Intraday Stocks For 2022:

The Most Active Stocks are the one that are used of intraday trading. Here is the list of best performing intraday stocks in 2022:

Company	NSE Code	Industry	Market Cap (Cr)	P/E Ratio
Tata Motors	NSE:TATAMOTORS	Four Wheelers	1,41,781.77	-12.39
SBI	NSE:SBIN	Public Banks	4,02,276.86	11.37
CIPLA	NSE:CIPLA	Healthcare	75,695. 29	29.93
Axis Bank	NSE:AXISBANK	Private Bank	1,95,492.53	13.89
JSW Steel	NSE:JSWSTEEL	Iron and Steel	1,38,847.84	19.28
Adani Green	NSE:ADANIGREEN	Renewable Energy	2,86,567.32	587.23
Wipro	NSE:WIPRO	IT Services & Consulting	2,32,339.50	19.0
Oil and Natural Gas Corporation Ltd.	NSE:ONGC	Oil and Gas	1,74,991.68	3.84
Bharti Airtel	NSE:BHARTIARTL	Telecommunication	3,70,339.89	87.04
Infosys	NSE:INFY	IT Services	6,08,072.84	27.50

*(Data as of June 21, 2022)

Basics of Intraday Trading

The following points list all the basic facts of intraday trading:

Where to place intraday trades?

You can engage in day trading on online intraday trading apps. Choosing a broker and trading platform that charges the least fees is important as you will trade frequently.

Who should choose intraday trading?

You need to be prepared to lose money for intraday trading. You will need to track the market and time the trades efficiently. Furthermore, you should have adequate time and skills for carrying out technical analysis to make the correct decisions.

How does intraday trading work?

To execute an intraday trade when buying shares, you will have to choose the ‘intraday’ option on the platform. It allows users to buy/sell shares of the same company on the same day and get profits.

When to carry out intraday trading?

Timing is crucial for intraday traders as share prices can move unpredictably. Taking a position at the wrong time can be the difference between profits and losses. Experts say that the best intraday trading strategy is to avoid taking a position within the first hour of trading due to high market volatility.

What type of stocks should one choose?

It is essential to choose stocks with high trading volumes so that you can execute such trades. Some experts recommend choosing highly liquid stocks such as large cap stocks for this reason.

Benefits of Intraday Trading:

Here are some of the reasons why some traders participate in intraday/day trading:

Chance to earn an additional income: With long term investments, you cannot rely on your profits for additional income as it stays locked. Intraday trading allows you to earn profits within the same day, which serves as an extra income.

Higher potential profits: If you implement the correct investment strategy, intraday trading can offer massive profits for you. In a rising stock market, you can easily benefit from capital appreciation, while in adverse markets, you can short sell shares to make financial gains from Intraday trading.

Higher liquidity: Owing to the high liquidity of the stocks, you can quickly recover your investment in intraday trading.

Only immediate risk: Compared to regular trading, where you can be exposed to risks for a long time, risks in intraday trading are always immediate. It means that there is no risk of incurring losses from the previous day’s investments as you begin trading.

Indicators for Intraday Trading

Whether you are a beginner in intraday trading or an experienced investor, you will want to keep track of all the relevant trends and indicators. Some of these indicators are discussed below:

Bollinger Bands: The best intraday trading apps provide technical analysis tools such as Bollinger Bands that show a stock’s standard deviation. These bands consist of three lines that show the moving average, upper limit, and lower limit. It helps you in determining a stock’s price variation over time.

Moving Average: The Daily Moving Average (DMA) of a stock is a line on a chart that shows its average opening and closing prices over time. The minimum average line helps you figure out the underlying movement of a stock’s price. Various traders utilize this technical indicator to analyse price trends.

Relative Strength Index: RSI is a momentum indicator that measures the change in stock price over time. This is an index from 1 to 100 that graphically shows the magnitude of the recent changes in stock price to examine oversold/overbought conditions. A share with an RSI of 70-80 is considered overbought, while an RSI of 20-30 indicates an oversold share.

Momentum Oscillators: This is an effective indicator for intraday trading if you’re looking to determine if a stock’s price would increase or decrease over a given period. Represented in the range of 1 to 100, it tells a trader if it is the right time to buy a specific stock.

How to Choose the Right Stocks for Intraday Trading?

Selecting the right stock is an essential part of intraday trading strategy. Given are some of the tips and tricks you can follow to choose the right stock:

Do not pick a high volatile stock for intraday trading as it increases your chance of losing money. It is also a good idea to avoid such trades in an unpredictable market. You will want to choose a stable stock and track its behavior before investing.

Another popular intraday trading strategy is to select stocks that are sensitive (positively or negatively) to media coverage. You will need to learn how to track stock movements triggered by the news. However, you should remember that such stocks can behave unpredictably. For example, an unfavorable news event could trigger a fall in stock price.

You can also pick stocks of major sectors due to their high predictability. For example, currency movements usually affect stocks in the ITES (Information Technology Enabled Services) sector which makes intraday trading easier.

Analysing, calculating and understanding the stock and market factors are essential for trading. Therefore, you may want to spend some time researching before taking part in intraday trading.

Things to Consider before Engaging in Intraday Trading

Basic stock market knowledge

Intraday trading is considered one of the most volatile trading categories. Therefore, you will want to know at least the basics of how the stock market operates to have better chances of earning profits. This includes knowing how to conduct analysis of stocks and understanding stock price trends.

Investment risks

To get returns from intraday trading, you need to expose your investments to higher risks than long-term investments. You will need to be a speculator willing to take high risks to place high-value trades using margin trading. While you can make an extraordinary amount of cash, you also stand a chance of losing money.

Choosing the right stockbroker

Before you start your intraday trading journey, you will first need a best trading app and Demat account. You can get this from any SEBI-registered stockbroker. As you need to trade daily, choosing the right stockbroker is essential. Check which one offers the lowest brokerage fees, the quickest order fulfilment, and high-quality customer support.

Proper intraday trading strategy

To make profits, an intraday trader needs to employ and execute the right trading strategy. First-time traders will likely face difficulties in making the right move at the right time. Thus, they should learn several successful intraday trading strategies and enhance their trading skills.

Technical analysis

Day traders perform technical analysis of a stock to check the volatility in price and volume. This includes analysing historical trends of a stock’s price to predict its price. Brokers offer various analytics, charting tools and support to help you make an informed decision.

Knowing how to choose a winning stock

A trader needs to know all the tips and tricks for choosing the best stocks for intraday trading. Choosing a highly liquid stock is beneficial as it makes trading easier. Traders should also look at all available options across different sectors and consider hedging against unexpected changes in the market.

Final Word

Intraday trading occupies a niche among stock market investors as it allows them to make a quick buck within a day. While it is the quickest way to earn money, it carries considerable financial risk.

You will need to have proper knowledge of the technicalities of intraday trading to be successful. Fortunately, many brokers offer a number of online tools, including intraday trading charts, platforms, and technical indicators, to make things easier for traders.

Frequently Asked Questions

How to start intraday trading at Kuvera?

Follow the given steps to get started on day trading:

Step 1: Open a new trading and Demat account.

Step 2: Use your knowledge and market research to speculate the prices of a stock, for example, stock X.

Step 3: At early trading hours, buy a lot of stock X at price R and wait for a few hours.

Step 4: If your guess is correct, the price of stock X will go up.

Step 5: Place a sell order and pocket your profits.

Why do investors participate in short selling stocks?

. The main principle behind short selling is benefitting from the negative value of stocks. While most traders and investors wait for share prices to increase, those looking for short-selling hope for prices to fall.

In markets with excessive long positions, a market crash becomes more likely. This presents a great opportunity for short-selling shares which may decrease some of the froth from the markets. Besides speculation, investors can also hedge to mitigate the risks of his/her long positions.

What is a stop-loss order in trading?

A stop-loss order tells the broker to buy or sell a particular number of shares on a precondition that the shares reach a certain price. It is designed to limit your losses automatically.

Owing to the high risks of intraday trading, most experts consider this facility to be essential. Without a stop-loss order, you could end up holding positions with unmanageable losses.

How does leveraging in trading work?

Leveraging is a trading facility that allows investors to borrow money from their brokers to get high investment returns. They can use this to increase their exposure to the market while paying less than the full price of their investments.

You can use this facility to take a ‘long’ position in day trading. It is recommended to not overstretch leveraged positions in day trading to safeguard against substantial losses.

How buying stocks in day trading is different to buying them on a delivery basis?

In day trading, you must sell the stocks that you have bought on the same day. If you fail to do so, some online platforms allow you to convert them to delivery trades while others square them off at market prices.

In delivery trading, you can do whatever you want with the stocks once you have bought them. You can sell it the next day or hold it for however long you want.

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