The Complete Guide to Intraday Trading - Stocks, Tips, Books, and Course
Updated: Mar 31
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.
Image - Rakesh Jhunjhunwala with Radhakishan Damani
(Courtesy - https://www.outlookindia.com/ )
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
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.
Is Intraday Trading Profitable?
It is the most debated and misunderstood topic in the trading community.
Every day we hear many scams related to intraday trading, which promises huge returns.
Unfortunately, many beginners who believe in ‘get-rich-quick’ schemes fall for it and lose their hard-earned money.
However, many successful intraday traders make their living just by doing intraday trading.
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 with 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 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.
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 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.
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.
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 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.
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:
Bullish and Bearish Divergences
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.'
Intraday Trading Strategies
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.
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.
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.
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.
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.
What is the Best Time to Take Intraday Trades?
The three essential components in intraday trading are (in the same order):
1. Price—it advertises all the opportunities.
2. Time—it regulates all the opportunities.
3. Volume—it measures the success or failure of all the advertised opportunities.
Hence, after ‘Price,’ ‘Time’ plays a crucial role in intraday trading. For example, long liquidation and short covering rally happen due to time running out for intraday traders, rather than a lack of volume.
Usually, good moves can be seen immediately after the market opens and in the second half of the market (Equity Market). Hence, planning a trade during these time-slots increases the probability of catching good moves. However, it can vary for 24x7 markets such as forex markets and commodity markets.
Intraday Trading Tips
Becoming a trader is a skillful game. If you are playing intending to win in any game, you should know about the game rules upfront. Based on the gathered information, you have to plan accordingly.
Similarly, below are some of the rules which are helpful in intraday trading:
Don't lose more than 10% of your capital on any trading day.
Don't risk more than 5% of your capital in one trade.
It's better to take a break from intraday trading if you are not feeling good emotionally.
Always remember trading is just a probability game and not a prediction game.
It's impossible to catch all the excellent trade opportunities every time.
If you see the profit screenshots of other traders, it will trouble your emotional balance. So follow your trade plan.
It's better to stick one trading system across different market conditions. Your learning curve will not improve if you keep on jumping from one strategy to another.
Avoid trading when you see a significant drawdown or when you get a few successive failed trades.
When you think you know everything in the market, the next day you lose big money.
If you lose money on any trade, then you have made a mistake. There is a lesson to learn (no matter what).
Your aim should be to make money in the market every day, not on other tasks like getting appreciation from others, getting more followers, etc.
There is no need to argue with anyone for any reason. You are right if you are making money in the market.
Profit in trading is inversely proportional to your ego.
Learn how to ride your profits. It is the most challenging task in trading.
Best Intraday Trading Platforms in India
Below are some of the useful references for intraday traders:
Stock Brokers – Zerodha, Upstox, Kotak Securities, Angel Broking, Motilal Oswal, Sharekhan, and IIFL
Online chart providers – TradingView.com, chartink.com, icharts.in , gocharting.com
Intraday Data Providers – Truedata.in accelpix.com
Good Traders on Twitter – San, Harneet Singh, Rajarshita, Rachit Jain, Abhishek Kar, Rohan Shah
Intraday Trading for Living?
It is good to see many enthusiastic and young people from other professions are interested in checking their luck in intraday trading.
However, specific precautionary steps are necessary before considering trading as a full-time profession, even if a trader has decent success as a Trader as the Market situations always change. Besides, it is common to see people attracted to the luxuries available in trading. Sometimes, they plan to jump to Full-time trading to avoid the problems in their current profession.
Below are the checklists one should look at before they consider Intraday Trading as a full-time career:
1) Zero Debts: If a person has a monthly commitment (EMI) towards any loan, this will add extra pressure to his Trading career as he has to generate this commitment amount every month. Sometimes, there will be no opportunities in the market. If he fails to make money in the market, extra pressure will be created in his mind, impacting his trading decisions.
2) Savings: One should save enough money to run the family for at least one year. Suppose if a person needs Rs. 1, 00,000 (or 2000 USD approx) per month to look after all the expenses in your family, he has to save Rs. 12, 00,000 (or 24,000 USD approx) before taking trading as a full-time business. This amount is excluded from the trading capital.
3) Trading Results: Trading looks very simple when a beginner makes some quick money. However, one should realize that the market conditions are always dynamic. It requires enormous skills to make consistent money in the market. So it is better to measure our trading success before we take the extreme step.
It is a good idea to consider yourself as a successful trader only when: (I) you make at least six months of your current salary from trading profits in total and (II) you make profits for three consecutive months in trading.
4) Trading Capital: Only the above parameters are insufficient to quit the current job and jump into trading. One should have sufficient Trading capital to make profits in the market. Suppose a trader can make 10% returns every month, then he needs a minimum of Rs. 10, 00,000 (or 20,000 USD approx) as your trading capital if your monthly expense is around Rs. 1, 00,000 (or 2000 USD approx).
5) Trading Discipline: One of the most significant features in full-time trading is ‘You are the Boss’ to your work, and you do not have to report it to anybody. Usually, we are used to the ‘Reporting’ style of work, and this freedom may work against you if you do not have serious trading plans and goals. Hence, it is better to have some goals before a person commits to full-time trading.
What are the Good Books on Intraday Trading?
When it comes to learning about Intraday Trading, the internet provides plenty of options. Besides, Amazon has millions of books on the topic of ‘Intraday Trading.’ However, it is tough for beginners and intermediate level traders to find good books on Trading and Investment.
Below is a list of good books that are helpful to learn intraday trading:
Mind Markets and Money by Indrazith Shantharaj and Rudramurthy CA
How to Make Money in Intraday Trading by Ashwani Gujral and Rachana
(All are paid links)
How to Make Money in Intraday Trading?
There are 4-wheels (4-steps) that are essential to get success with day trading:
Technical Analysis
Money Management
Trading Psychology
Execution
All these concepts are similar to the 4 wheels of a car, and without one wheel, you will not be able to achieve trading success.
Hence, give equal importance to all the concepts to get success in trading.
Step 1 - Technical Analysis
Technical Analysis is a method used to predict the future price movement of a stock/index by analysis of the old data in different ways.
Technical traders believe current and past price action is the most reliable tool to predict future price movements. They don’t use any fundamental information to make a trading decision.
Technical Analysis is fun if you are on the right track.
But we have a lot of information about technical analysis, and it is difficult to connect all the dots.
For example, there are so many indicators in the technical analysis, and picking one indicator among them is such a challenging task.
Hence, I suggest 'Price Action Trading' for day trading. It solves two problems:
There is no need to study many indicators and their behaviors. It saves a lot of time.
Most of the indicators are derived from the 'Price' itself. Hence, when you study price action, you are far ahead of many traders.
If you need more information on ‘Price Action Trading’, then refer to this article:
Step 2 - Money Management
“Even a poor trading system could make money with good money management” – Jack D. Schwager.
In boxing, you will be in the game until you avoid a knockout.
Similarly, in trading, you will be in the game until avoiding big dents to your portfolio.
Below are the possible outcomes for any trade:
A breakeven (no loss, no profit)
A small loss
A small profit
A big profit
A big loss
If a trader avoids the last option, then automatically he survives in the game and he starts to make money in the long run.
Money Management is a set of rules to allocate the required position size to reduce the risk while aiming for good returns in trading.
So, ensure not to lose more than 2–3% of your portfolio when a trade goes wrong.
Step 3 - Trading Psychology
Psychology means the mental factors or emotions governing a situation or activity. So, when we say trading psychology, it implies cognitive factors governing trading.
Four major emotions revolving around trading are greed, fear, regret, and hope.
Please note, all these factors emerge because of a lack of knowledge.
Backtesting, meditation, and maintaining a trading journal help to achieve a better trading mindset.
Step 4 - Execution
Execution is the real Holy Grail in Trading.
Suppose you have an excellent positive expectancy system and clear money management rules, in that case, you can make money in trading in the long run, if you execute the plan in all market conditions.
Below two significant lessons that are ridiculously important to make your execution smooth and to progress:
When to AVOID TRADES is more important than when to take trade
The power of ONE TRADING PATTERN or trading ONE SCRIPT
When to AVOID TRADES is more important than when to take trade
As most of us know from our experience, many traders make good trades.
But there is a significant difference between a GOOD TRADER and a SUCCESSFUL TRADER!
A successful trader takes good trades similar to other traders, but he will bleed less with his failed trades.
How much money you make when you are right is important, but how little money you lose when you are wrong decides the fate of your trading career!
It highlights the clarity required to avoid unnecessary trades that most traders take due to their compulsive behavior. Hence, it is directly linked to the second point.
The power of ONE TRADING PATTERN or trading ONE SCRIPT
“All you need is one pattern to make a living.” – Linda Raschke
Nobody can conclude the importance of one trading pattern like Linda Raschke with the above quote.
We need to ask ourselves, "what is important to us in trading - making money or trading every pattern?"
Consciously we may pick the 'making money' option, but without much consciousness, our activity doesn't support it because we like to trade all the patterns in all the scrips.
Do you know why Usain Bolt runs only in 100M and 200M sprints? Being the fastest athlete in the world, why will he not choose to run in other categories such as 400M, 800M, 1500M, 5K, 10K, and other marathon events?
If you can understand the lesson from this example, any trader will realize the importance of one pattern or sticking to one script.
Intraday Trading Course
Do you want to learn more about Intraday Trading?
Then you can try this Intraday Trading course.
Conclusion
Based on the trades' holding period, we can recognize different trading types – day trading, swing trading, breakout trading, and investment.
Whenever a trader gets into a lower timeframe, automatically, he gets more trading opportunities. However, these opportunities come at a cost that can be recognized as 'risk.'
Day Trading is one of the robust trading techniques which demands a high level of skills, dedication, and focus. So, instead of wasting time with debates, it is better to spend sometime learning intraday trading. Then a person will be in a better position to take a call.
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