A Definite Guide to starting Intraday Trading for Beginners in India: If you want to make a livelihood from the stock market, the most popular approach is day trading or Intraday trading. Unlike investing, where you have to wait months and years to book the profits, here gains can be made within hours and sometimes even within minutes.
Moreover, with the advancement of the internet and technology, day trading can be learned and started even from your phone and that too comfortably sitting on your sofa at home. In this article, we’ll cover the step-by-step procedure to start Intraday trading for beginners in India.
Here, we’ll also discuss what is intraday trading, who are intraday traders, thumb rules for day trading, and more. Let’s get started.
What is Intraday Trading?
As the name would suggest, Intraday trading is a type of trading where both the buying and selling activity in stock (or an asset) is completed the same day i.e. in the same trading session.
Here, the trading is not done with the objective of holding or carrying a position over the next day or weeks. The main objective while intraday trading is to earn quick profits and exit your position as soon as possible. Further, the holding time for assets can vary between a few minutes to some hours.
In addition, generally, Intraday trading is done for high beta stocks i.e., the stocks that have high fluctuations in their prices on day to day basis. If the prices do not move at all in the entire day, there won’t be any opportunity for the intraday traders to make money from that stock.
— Who are Intraday Traders?
There is a proven theory on the market- “The more time you spend in the market, the more rewarding it is”. Intraday trading is generally done by traders who are very active participants in the market i.e., they have an eye on the market in every passing second.
One thing which one must keep in mind while doing intraday trading is that one should not become too greedy while taking intraday trades. If we have strict profit targets and stop-loss levels, then it goes a long way in selecting the right trades for intraday trading.
Stop-loss is an advance order to sell the shares if the share price reaches a particular price point. Therefore, it helps to automate the selling process in different market scenarios. For example, suppose I am doing intraday trading for shares of Reliance Industries Limited (RIL).
The current price per share is Rs. 2200. Therefore, if I buy one share at CMP and have a target price of 2225 and stop-loss at 2185, then by rule we should stick to those levels and not increase our profit targets or trail our stop losses, as the market starts to move.
— Some Thumb Rules in Intraday Trading for Beginners
Here are some of the best rules that beginners must follow while doing Intraday trading to maximize profits and limit the losses:
- Always chose liquid stocks for intraday trading that can easily be entered or exited.
- Have entry and exit points in mind before entering the trade.
- Always have a stop loss for trades, as the position might drift away and huge losses might be incurred.
- It’s important to have a trading mentality and not the mentality of the investor while doing Intraday trading.
- One should be willing to take multiple trades in the same companies or indices as the market might provide multiple trading opportunities.
- Always take trades in the direction of the market. Remember “Trend is your friend.”
- Mean reversion trades are generally not a good strategy for intraday trading.
— What Products Can be Traded Intraday?
You can do intraday trading in almost all stocks that are trading in the stock exchanges. You can also trade in Indices. Further, Intraday trading is done not only in the cash segment but even in the derivatives segment (Futures and Options).
Derivate segments are big contributors to the intraday trading market. And the margin required to trade an Intraday futures contract is comparatively lesser than that of delivery contracts.
If we look at the images above, then we see that in the window with the order type selected as MIS Intraday, the amount of margin required is 1/5th of the amount of margin required to trade in overnight (NRML) mode.
How to do Intraday Trading for Beginners In India?
Having understood the basic premise of Intraday trading and its elementary characteristics, the next important point of consideration is how does one goes about doing intraday trading in India. Following is a step-by-step procedure that should explain the complete procedure.
For the sake of explanation, we have used Zerodha’s kite trading platform to explain the steps as they are the discount brokers with the highest customer base.
Step 1: You need to have a trading account with one of the brokers (For example, Zerodha, Angel broking, 5Paisa, etc.). If you don’t have one, here’s an article on the best discount brokers in India, so that you can pick the one that suits you the best. Anyways, the steps required for Intraday trading are almost the same for any other broker that you choose.
Step 2: You need to have a sufficient margin balance in your trading account. Margin is the minimum amount of money required to trade. The amount of margin required varies from a regular trade to an MIS (Margin Intraday Square off).
The main difference between these two is that, in the case of regular trade, the position can be carried over to the next day but in the case of an MIS trade, the position will automatically get squared off before the end of the day.
The Margin allowed to trade for MIS trades varies anywhere between 4x to 20x depending on the nature of the stock and its expected volatility. Therefore, Margin trading gives us the power of leveraging.
Step 3: The next important step which we need to consider is to select the share/asset we wish to intraday trade for that particular day and add those shares to one separate watch list. This step is of prime importance because it is practically not possible to keep an eye on all the shares listed on NSE and BSE.
However, having a watch list of the selected stocks gives us an opportunity to moderate and buy the stocks and take maximum advantage of all the intra-day trading opportunities.
Therefore, if we carefully look at the image above, it can be seen that it becomes very easy to keep a watch on the selected shares if we make a separate watch list of all the shares that we wish to intraday trade.
Step 4: The next step in this process is to select the share in which you wish to trade. And after selecting the share, we just need to punch in the trade on the ticket.
Now, we have two ways to take the trade – Limit order & Market order. If we place the market then we end up buying or selling at the existing market price. On the other hand, if we place a limited order then we can choose the price at which we want to place the order.
And the next thing to choose is the kind of order i.e., either normal order or MIS order. If we choose the limit order, then the margin required is exactly the same as the current value of the stock. But if we choose MIS order, then the margin required to trade varies anything between 5% to 20% of the current stock price.
Now, if we carefully look at the image above, we see that in the window we have chosen the MIS Intraday option and hence the margin required to trade 7 shares of Marico is comparatively lesser than the actual trading price of one share.
Step 5: The next step while trading options is to check in the order book if the order has been placed. We can do that by simply clicking on the orders tab and we can see the list of all the orders which have been placed or canceled or executed.
Step 6: The last, but the most important step in Intraday trading is the continuous monitoring of the positions. We should always be on the constant lookout for opportunities to trade and always have a stop loss for the existing trade. If we follow these rules, then we always have a better chance of having a successful and rewarding trading career.
In this article, we discussed the exact steps to start Intraday Trading for Beginners in India. To conclude, here are a few takeaways from this post.
- Intraday trading has been on a rise in India. And with the growing education about trading and investing, this trend is likely to grow at a faster pace in the future.
- While trading Intraday, buying and selling of the stocks should be completed within the same day.
- Intraday trading could be done for both cash stocks and in the derivatives market also.
- It is always advised to have proper risk management (stop loss and target) for all the trades
- And for a long and rewarding career, it is always advised to have a proper trading rules and discipline.
That’s all for this post on how to do Intraday trading for beginners. If you still have any queries related to this article, feel free to comment below. I’ll be happy to help. Take care and happy trading.
Hitesh Singhi is an active derivative trader with over +10 years of experience of trading in Futures and Options in Indian Equity market and International energy products like Brent Crude, WTI Crude, RBOB, Gasoline etc. He has traded on BSE, NSE, ICE Exchange & NYMEX Exchange. By qualification, Hitesh has a graduate degree in Business Management and an MBA in Finance. Connect with Hitesh over Twitter here!