Intraday trading refers to the act of buying and selling financial instruments—typically stocks—within the same trading day. All positions are squared off before the market closes, and hence, no actual delivery of shares takes place into the demat account. The net position at the end of the day is always zero.

Basics of Intraday Trading

Let’s consider an example:
If a trader buys 1,000 shares of Reliance Industries in the morning and sells them the same day, the profit or loss is directly adjusted in the trading account. Because the trade is closed within the same day, there is no effect on the demat account.

Intraday trading offers high leverage, allowing traders to transact in larger volumes with a smaller margin. It can involve:

  • Buying first and selling later, or

  • Selling first and buying back later (short selling)

In India’s T+1 rolling settlement system, short selling without holding delivery is only permitted for intraday trades.

5 Things You Must Know About Intraday Trading

1. No Impact on Your Demat Account

  • Intraday trades are non-delivery based; shares do not move into or out of your demat account.

  • For example, buying 1,000 SBI shares at ₹272 and selling them at ₹275 yields a profit of ₹3,000, credited to your trading account, not your demat.

2. Significant Volume Share in Markets

  • Intraday trades contribute a large portion of daily volumes on NSE and BSE.

  • Lower margins, no demat charges, and same-day settlement make it attractive.

3. Stop Loss is Critical

  • Volatility is high during the day. Hence, stop losses act like insurance by capping your downside risk.

4. High Leverage and Cover Orders

  • Margins required are much lower than for delivery-based trading.

  • Cover Orders (where a stop loss is placed at the time of the trade) reduce margin requirements further, offering more trading power.

5. Driven by Technicals, Not Fundamentals

  • Intraday decisions are based on technical analysis, price charts, patterns, volume trends, and news events—not long-term fundamentals.

  • Traders react to short-term triggers and momentum.

3 Things to Remember While Day Trading

Intraday trading is inherently risky due to leverage and the need to close trades within the same day. However, applying discipline and strategy can mitigate this risk.

1. Create a Trading Rulebook

  • Define:

    • Entry and exit strategies

    • Capital allocation rules

    • Risk per trade

    • Loss thresholds

    • Acceptable risk-reward ratios

2. Always Use Stop Loss and Target

  • Set stop losses and profit targets in advance.

  • Avoid trades with poor risk-return ratios (e.g., risking ₹1 to make ₹1).

  • Aim for risk-reward ratios of 2.5:1 or higher.

3. Maintain a Trading Diary

  • Keep a daily log of:

    • Trades taken

    • Reasons for entry and exit

    • Outcome (profit/loss)

  • Review every evening to learn and refine your strategy over time.

Conclusion

Intraday trading offers speed, flexibility, and potential for quick gains, but it also comes with increased risk due to leverage and volatility. Success in intraday trading demands discipline, preparation, technical knowledge, and continuous learning.

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