Intraday trading is a one-day market investment that requires various strategies for smooth investing. Traders can use the best technical indicators for profiting.
What is Intraday Trading?
Intraday trading is a trading strategy or style of market investment where investors trade in the market before it closes. In simple terms, a day’s investment takes accurate decisions and makes money. Investors purchase or sell the assets in the market on the same day before the market closes.
For example, the investor would buy and sell the shares of a company in stock market trading within the time set. The stock market begins in the morning and closes by evening, so a trader has to invest and trade within the opening and closing times. Similar way, it also works for other trading markets; traders invest in the market timing and earn profits.
The traders of intraday trading are called intraday traders, and the trading strategy is famous by the name of day trading. Some refer to it as intraday trading, while others call it day trading.
The purpose of intraday trading is to trade in financial markets to make quick gains by controlling the movements of the instruments. Thus, intraday traders closely monitor the price fluctuations of the instruments for high profits.
An investor who prefers intraday trading has to keep in mind the orders of intraday trading and how these work for making money.
Understanding Intraday Trading in Depth
Intraday trading or day trading is to buy and sell assets within a day. Traders use online trading platforms to invest in the financial markets and have quick profits. When a trader opens a trading account with a broker or a financial exchange, they have to mention that they will day trade.
This is significant for intraday trading as investors have to buy the securities market before it closes. This works with the purpose of earning from the movements of the price of the securities traded within a day. Hence, making money from a single-day investment.
The investment in intraday trading could be for a few seconds, minutes, hours, or a whole day. This depends on the market conditions and trading goal of the investor.
The stock market is considered the best example for intraday trading, as the market has its opening and closing time in a day. Although the stock market is good for long-term investment, if a trader wants to invest in the short term, they can day trade. It is a good source for earning short-term investments and making high profits.
Suppose an investor has purchased the shares of a company at $300, and within an hour, the share/stock prices reach $400, then the trader has a benefit of $100. When a trader has purchased more than one share, say 500 shares of the company, then when it is sold in the market at a price of $400 trader will have a profit of $50,000.
As a result, the trader had a profit of $50,000 within a few hours. This is what is called intraday trading.
Features of Intraday Trading
Intraday trading is traded through online trading platforms within specific orders. Traders take their market position when it opens and closes within the same day. Even when a trader has selected intraday trading in order and forgets to close the position, the trading position closes automatically, as the broker squared off the market at the closing price.
Intraday trading, moreover, does not provide ownership of the traded instrument and works with the goal of earning money. The features are the basics of intraday trading that traders can use and have beneficial investments:
Leverage
Leverage is the facility that is offered by online platforms or financial service providers to open at a high market position with borrowed funds. The leverage is borrowed money from brokers or other service providers in ratio form. Traders can use it as per their requirements and make double profits.
However, the risk involved with leverage trading is also high. Traders need to be confident and sure of their investment while using it.
Intraday Trading Indicators
The online service providers have various indicators, analysis tools, and advanced softwares to help investors predict market movements. By studying the charts, getting signals from indicators, and analyzing, traders can forecast the market price movements and accordingly invest in the market.
There are many indicators for intraday trading that could be used, such as:
- Stochastic oscillator
- Bollinger Bands
- Relative Strength Index
- Moving average
- Technical analysis
Market Positions
Traders of intraday trading can take market positions and invest within a day to make high profits. A short-term trade that helps investors earn quickly and be successful traders.
How to Select Stocks for Intraday Trading?
Trading in the market and specifically the stock market requires traders to select the stocks which will be profitable for intraday trading. Traders should know which intraday stocks will be beneficial or trade with penny stocks or others for a short-term investment. The stock prices keep fluctuating, indicating high market risks; therefore, traders should choose stocks for intraday trading using the following points:
Highly Liquid Stocks
Liquidity is the necessity of stock trading as volatile stocks make it difficult for traders to make money. Traders can buy and sell the equity stocks of high and middle capitalization companies. This is so because the shares of such companies have high liquidity making it easy for traders to buy and sell the stocks.
In addition, traders can experience high volatility as the prices keep fluctuating. Traders should carefully analyse the market while buying and selling stocks in the market.
Volatility
The stocks are best for intraday trading, but it is believed that stocks with medium to high volatility are best to trade. These have high market fluctuations and help traders earn profits. However, volatility of more than 3% is avoided in intraday trading due to the chances of incurring huge losses in adverse situations.
Correlation
The stocks having a strong correlation are good for investment in intraday. These have a high benchmark index of the reputed stock exchanges; hence, substantial movement of the share price is observed by the traders when the index value fluctuates.
The index has shares of topmost companies listed with stock exchanges; traders assume these to have upward direction movements that act as barriers to economic abnormalities.
Trader Volume
The traders of intraday trading can track the performance of the stock and their trade volume through the index. Thus, the price fluctuations are known, and investors can trade in high-volume stocks for intraday trading. This reflects the demand and supply of the stocks in the market and the company’s market position.
So, with these points, traders can choose stocks for intraday trading and invest in the market.
Delivery Trading vs Intraday Trading
When an investor buys and sells the shares of a company within a day or the same day, it is called intraday trading. While traders buy the shares and do not sell them on the same day, the trade is called delivery trading. Traders have to be careful of these two terms of the financial market.
They are different from one another one performs buying and selling securities in the market within a day. The other trading style only buys and does not sell the security on the day.
In intraday trading, the holding position of the trader is zero by the end of the day, and in delivery trade, investors only perform one of the two; that is, they either buy or sell the trading instrument.
Even the trading strategies for intraday and delivery differ for the trade.
Alternative Trading Methods
The alternative trading methods to intraday trading are discussed in the paragraph. These are the trading styles that investors can use to trade in the market and have short term market profits:
Swing Trading
Swing trading is the trading method that is suitable for short-term and medium-term trading. Investors can study the swings formed on the advanced charts and analyze the price movements of the securities traded. The trading hours of the swing trading strategy are from a few minutes, hours, and weeks to months. A trader can analyze the security and accordingly invest in the market.
Momentum Trading
Momentum trading’s main purpose is to appreciate capital; traders buy securities with high market potential. However, the prices of the securities are low due to market fluctuations. With the trading style, investors can use relative or absolute relative momentum trading strategies.
Standard Trading
Standard trading is the trading style where investors can trade in different companies’ stocks or securities. The strategy allows traders to have an extended period of investment, and traders can earn from periodic dividends or capital appreciations of the stocks.
How to Trade with Intraday Trading?
Investors can trade with intraday trading by opening a trading account with brokers or financial institutions. Here, we have to begin with intraday trading strategies and make high profits.
To begin with, traders can select their broker which they find suitable for them to trade with. The broker should be regulated trading tools, trading platforms, and the best trading services for a favorable investment. Let’s take the example of Investby, which is regulated and offers the best financial services for providing opportunities.
The next action is to open a trading account with the broker; for this, they register by providing their name, address, contact number, and email address and set a password for the account.
The third step is to provide information that is asked by the broker relating to trading, income source, tax payments, license, bank account number, etc.
The following step is to answer the questionnaires and upload the documents for verification.
At last, investors can select their trading account or go for a demo account if they want to practice intraday trading. Finally, traders can deposit funds and begin investing in the market.
Investors can even use the facility of trading and demat accounts offered by the online service providers and invest in the market.
Other than this, intraday traders can go to the stock exchange for trading shares following the same procedure to begin investing and have a trade account. They can invest with opening and closing rates of the market and earn high profits.
Conclusion
Trading in the market is not an easy task if done without checking the market scenarios. The broker selected for investment should be reputed and authorized; other than this, intraday trading is for an experienced trader and requires practice to make fast trade decisions. Investors have to open their accounts following the same process and invest in the market.
Traders should consider the market hours, price falls, short sales, stock chart, picking stocks correctly for intraday trading, market indices, price movement, current market trend, trading day, market closes, and all the factors relating to intraday trading for benefiting from the investment.
The trade is risky as it requires quick actions for earning a profit which is not everyone’s cup of tea. Therefore, traders should invest carefully and make money.
FAQ’s
What is Intraday trading?
Intraday trading is a trading technique that invests in the market for a day and helps earn high profits.
Can traders use intraday for investing in markets other than stocks?
Yes, investors can trade with several markets and their securities for having short-term investments and making high profits.
