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All You Need To Know About Intraday Trading - Stocks, Strategy, Indicator, Tips, Books, & Course

Updated: Feb 21

Intraday Trading is the most debated and misunderstood topic in the trading community.


'Is Intraday Trading Profitable?' or 'Intraday Trading doesn't work' are the two common statements in the trading community.


Let us say you have got an opportunity to drive a Formula-1 car.


What do you say?


'Formula-1 car does not work!'' or

'I do not know how to drive a Formula-1 car.'

If you are sensible, you pick the second statement. Isn't it?

The same explanation goes for intraday trading.


There is no point in debating whether intraday trading is profitable or not. It is only a type of trading in which you have to close the trade on the same day. If you are right, you make money, and if you are wrong, you lose money.


Intraday Trading for Beginners in Indian share market 2022

Rakesh Jhunjhunwala (RJ) is a renowned trader/investor who has made billions from an initial small capital of only Rs 5,000. Many people don't know that he also does intraday trading on many trading days.


In an interview, an interviewer asks this question - "How much has leveraged investments/trading contributed to your success?"


He replies….


"Trading is the mother of all my wealth. That is where I get all the money to invest.!"


His answer implies that he relied on day trading to generate the significant capital required to build his empire.


A decade back, intraday trading was an expensive game that belonged to big boys such as large financial firms, FIIs. However, this scenario is completely changed today as anyone can open an account within 10 minutes and place their trades immediately. The credit goes to electronic Trading, margin trading, and a few online trading houses.


Intraday trading is a lucrative career for many youngsters and side-hustlers as it provides many luxuries such as working from any place, no troubles from the boss. Nevertheless, it can be challenging for beginners, and sometimes even experienced intraday traders face losses and go through emotional issues.


So, let us understand what intraday trading is and how it works.


 

Key Points


In intraday trading, one has to buy and sell the stocks (or indices) on the same day. If a trader fails to close his intraday trade, the broker will close the positions just a few minutes before the market closes. Day Trading provides many trading opportunities. However, one has to make the right trading decisions to get success in intraday trading. If a person wants to start with intraday trading, then he needs to learn the in-depth technical analysis aspects.
 

Table of Contents


  1. What is Intraday Trading?

  2. Intraday Trading vs. Swing Trading

  3. How to Start Intraday Trading?

  4. How do I Choose Good Stocks for Intraday Trading?

  5. Which Indicator is Most Effective for Intraday Trading?

  6. Intraday Trading Strategies

  7. What is the best time to take intraday trades?

  8. Intraday Trading Tips

  9. Best Intraday Trading Platforms in India

  10. Intraday Trading for Living?

  11. What are the good books on Intraday Trading?

  12. How to Make Money in Intraday Trading?

  13. Intraday Trading Course

  14. Conclusion


Popular Topics


What is Intraday Trading?


Intraday Trading is also referred to as ‘Day Trading’ by many people. In Intraday Trading, one has to close their trade on the same day.


If the stock has moved in the expected direction, then the traders will make profits. Otherwise, they lose money.


Suppose a stock opens at Rs 200 in the morning, and soon price moves to 225 within 1-2 hours. If a trader had bought 1000 shares in the morning and sold at 225, then he would have made a decent profit of Rs 25,000 within a few hours. This is the advantage of Intraday Trading.


10 Profitable Intraday Trading systems for Nifty and Banknifty

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Intraday Trading vs. Swing Trading


In intraday trading, the trader aims to take a few trades in a day.


The idea is to capture good moves that occur in a smaller timeframe (typically 5-min to 15-min).



What are the Advantages and Disadvantages of Intraday Trading?


Pros:

  • It provides more opportunities.

  • There is no overnight risk.

  • Intraday traders get more margins for their trading


Cons:

  • It demands more screen time.

  • The stress level is high.

  • It also comes with more risk as it provides more trading opportunities in a trading day.

Swing Trading Strategy
Swing Trading Strategy

Swing Trading is a trading technique that seeks to capture a swing when the price goes to a complete sideways zone.


The idea is to get out of the trade before the opposing pressure comes in.


It means a trader looks to book the profits before the market reverses.


What are the Advantages and Disadvantages of Swing Trading?


Pros:

  • It gives outstanding results when the market (index) is also in a sideways zone.

  • There is no need to spend much time in a live market as your trade will last for a few days to a few weeks.

  • Best suitable for people who have other jobs or businesses.

  • Stress level is less as compared to intraday trading


Cons:

  • It gives medium (or average) results when the market (index) is in a trending market. The success depends on how a trader aligns his trade with the market conditions. For example, if the market index is in a deep downtrend, then it does not make sense to opt for long trade using swing trading techniques. In such a case, it is better to look for a “short” trade using the same swing trading approach.

  • A trader will not be able to ride the trends.

  • There is an overnight risk.

  • Return is less compared to intraday trading.

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How to Start Intraday Trading?


If you plan to take intraday trades, then opening an account (trading and Demat) with the right broker is essential.


It is essential to choose a broker who offers low brokerage per transaction, good platforms, and essential tools required for intraday trading.


In India, Zerodha, Upstox, and Kotak Securities are some brokers who provide good retail customer services.


With the knowledge of fundamental information, one cannot take intraday trades.

One has to study many aspects of technical analysis to identify good trade opportunities at the intraday level.




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How do I Choose Good Stocks for Intraday Trading?


Choice of the right trading stocks/indices is the first and most crucial aspect in intraday trading.


Many trading experts use 'Regression Algorithms' and 'Sequence Mining' to pick the stocks for day trading among thousands of stocks according to a 2017 study published about day trading.


However, the below points are helpful for beginners:

  • Prefer to trade in market indices. These indices provide smooth price action, and hence the chances of losing money for noise is less. Nifty and Banknifty are the famous indices in Indian Markets. Similarly, Dow Jones, Nasdaq, and S&P500 are important indices in the US markets.

  • If you need more trading opportunities, then look at the market leaders. Look at the top companies in the indices to find profitable trades.

  • Always avoid volatile stocks.

  • If you miss a good trade opportunity, do not chase it. You can always look for better trade opportunities in other scrips.

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Which Indicator is Most Effective for Intraday Trading?


There are millions of indicators in all the software and online platforms. An indicator will be of great help for beginners and intermediate-level traders as it brings some discipline to their trading.


Please note, price fluctuations drive the changes in indicators and not vice-versa. It is better to pick one indicator, study the behavior in different market conditions, and then deploy it in the trading.


Image 1 – Indicators for Intraday Trading
Image 1 – Indicators for Intraday Trading

Let us look at some of the popular indicators used in intraday trading:


Moving Averages (MA)


Image 2 – Moving Average (MA) Indicator in Day Trading
Image 2 – Moving Average (MA) Indicator in Day Trading

Moving Averages calculate the mean value of a stock’s price movements over a selected period; hence they negate all the short-term spikes or quick moves.


The moving average is a lagging indicator as they are calculated using the past price action. As a lagging indicator, the moving average is the best tool to confirm the trend of a stock, rather than predicting the future direction or momentum.


Stochastics


Stochastics is an oscillator that compares the closing price to the range of its prices over a given period in the selected instrument. Then it plots the values within the range of 0-100.


A reading of 80 and above is considered overbought, and a reading of 20 and below indicates oversold.


Image 3 – Stochastics Indicator in Day Trading
Image 3 – Stochastics Indicator in Day Trading

One should not look for a long trade just because stochastics reached the oversold region. The price can stay in the oversold or overbought zone for more periods in a trending environment.


Hence, one can plan a trade when the price is coming out of that range. For example, a trader can plan a long trade if the price shows rejection at the support line, and the stochastics moved above 20 from the downside.


Similarly, one can plan a short trade when the price showed rejection at the resistance trend line when stochastics moved below 80 from the upside.



Relative Strength Index (RSI)


The Relative Strength Index (RSI) is a momentum oscillator used that measures the magnitude (both speed and change) of recent price changes.

J. Welles Wilder developed it, and it was first time introduced in the book "New Concepts in Technical Trading Systems" in 1978.



Image 4 – RSI Bearish Divergence in Daily chart
Image 4 – RSI Bearish Divergence in Daily chart

The RSI oscillates between zero and 100, and traditionally people consider that the stock is in an overbought situation when the RSI is above 70 and oversold when RSI is below 30. Many systems generate trading ideas by looking for divergences and failure swings.


Below are the two traditional characteristics of RSI which are used by many Traders to take the trades:


  1. Bullish and Bearish Divergences

  2. Overbought and Oversold conditions (30 and 70 rule)

To know more about RSI, read this advanced article on RSI.


However, a trader should know that most of the technical indicators are derived from the price itself. Hence, getting mastery over 'price' gives an edge for traders. This is called 'Price Action Trading.'


Trade Like Crazy - 10 Intraday Trading Systems

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Intraday Trading Strategies Formulae

Intraday Trading Formula #1 ABCD Pattern


It is one of the oldest and simplest intraday trading strategies. New traders and even intermediate level traders can quickly deploy this strategy.


Image 5 – ABCD Intraday Trading Strategy
Image 5 – ABCD Intraday Trading Strategy

Typically ABCD patterns start with a strong upside move.


When the market opened, Reliance stock rallied upside as buyers bought aggressively from point A and making new highs of the day (point B). One should not take trade here as it has already rallied on the upside and wait for some correction due to profit booking.


After B, traders started booking profits, and also some sellers entered the market.


At point C, the price has found some support. Hence, a trader can plan a long trade above the green candle's high, keeping a stop-loss below the green candle's low.


The stock price surged from 2000 (C) to 2025 (D) around 11.20 AM, and you can also see a good volume spike at the same time. It indicates a strong buyers' presence, and hence we can expect a strong close on the upside. Hence, it is better to trail our SL below every swing low.


The chart reveals that the trail SL has been hit at 2028 in the last hour of the trading session.


Intraday Trading Formula #2 Open Range Intraday Breakout Trading System (ORB Strategy)


ORB Strategy is developed by TOBY CRABLE, and it is one of the most famous trading strategies among intraday traders.


It is based on the concept “Amateurs open the market and professionals close the market.”


The first hour after the market open is crucial and sets the base for any further activities for the rest of the day.


The opening range is the range between high and low of a given period after the market opens. Many traders use different variations; some use the first 30 minutes as their opening range; some use the first 60 minutes for their opening range.


To keep it simple, I will consider the first 60 minutes as the opening range.


Image 6 – Opening Range Breakout (ORB) Intraday Trading Strategy
Image 6 – Opening Range Breakout (ORB) Intraday Trading Strategy

Usually, traders chose an index to trade.


They wait for 1-hour range completion.


If the price breaks on the upside, they opt for a long trade above the high of the 1-hour opening range, keeping a stop-loss a little below the breakout candle (or below the high of the 1-hour opening range).


Some traders prefer to trail their stop-loss along with the price using a moving average (MA), or PSAR, or ATR, or Bollinger Band indicators. However, some traders prefer to hold the trade with initial stop-loss till the market completion to avoid closing the trades due to whipsaws.


Image 7 – Example for Opening Range Intraday Breakout Trade in Bank nifty
Image 7 – Example for Opening Range Intraday Breakout Trade in Bank nifty

The above image shows an example of an opening range breakout trade in Bank nifty.


First, it formed a 1-hour range. Then the price consolidated within this range for some time. In the last few sessions, the price broke above the high of the 1-hour range and displayed a good move on the upside.

This strategy has offered a 50% accuracy and a risk-reward of 1:1.8 for Bank nifty in the last 10 years. Hence, this is a pretty good system to deploy in intraday trading.


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What is the Best Time to Take Intraday Trades?