Profile TradersHow To Make Money in Intraday Trading? Stocks, Strategy, Indicators, Tips, Books, & Course
Updated: Jul 27
Intraday Trading is the most debated, yet 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.
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, and 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, and no trouble 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
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.
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How to Lean Intraday Trading?
Below points are helpful for mastering intraday trading:
Read good books on intraday trading.
Take an online course from successful traders.
Pick any good strategy from the book/course and backtest it with historical data.
If the system is profitable, start taking trades with a small risk.
Note down your mistakes, and don't repeat them.
Keep an open mind to learn new things.
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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 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.
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.
How do I Choose Good Stocks for Intraday Trading?
Choice of the right trading stocks/indices is the first and most crucial aspect of 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 are 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.
Which Timeframe is best for Intraday Trading?
In India, the stock market operates between 9.15 am to 3.30 pm (approx 6 hours).
So a 15-min chart is ideal for intraday trading.
Traders with a scalping mindset can use a 5-min chart.
Traders who wish to convert their day trades into BTST trades can use 30-min or 1-hour chart.
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 that 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.
Let us look at some of the popular indicators used in intraday trading:
Moving Averages (MA)
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.
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 tha