Stock / Share Market
by 5paisa Research Team Last Updated: 2022-08-10T17:41:07+05:30

All About Intraday Trading and How You Can Create Maximum Returns Off It

What is Intraday Trading?

Intraday trading is the buying and selling of stocks on the same trading day before the market closes. This is a place to buy stocks to make a profit by using the movement of the stock index, not the place to invest. Therefore, it is extremely paramount to monitor stock price fluctuations to generate profits from stock trading.

An online trading account will be opened for Intraday trading. If you are trading during the day, you must specify that the order is unique to the intraday trading. Orders are squared off or converted into delivery before the end of the trading day, so they are also called intraday trading.


How to choose lucrative Stocks to invest in for Intraday Trading?

Intraday Trading involves high risks, so it is important to choose the best share for intraday trading before investing. You must:

  1. Choose highly liquid stocks as equity shares are tremendously volatile because of market fluctuations.
  2. Before you assume the long or short positions before investing, you must focus on the cyclical variations by analyzing 52-week high and low values.
  3. Invest in stocks with medium to high volatility in price fluctuations. Avoid market value fluctuations of more than 3% as the possibility of a loss is huge if there is any downturn in the stock market.
  4. Invest in an Intraday stock that has a high degree of correlation with a benchmark index of a reputed stock exchange. It will help you to study and analyze the substantial movement in share prices in case of a fluctuating index value.
  5. Higher trade volume can help you earn capital appreciation gains as it reflects extreme demand and supply.

Advantages of Intraday Trading

  1. This kind of trading is associated with lower risk as the stocks are bought on the same day and the principal is not locked for any considerable amount of time.
  2. The fee charged by the stockbrokers is quite nominal fees, as delivery expenses are absolved while transferring security for the investor. The brokerage fee that is charged by the middlemen includes service tax, trade fee, stock transaction tax, etc.
  3. Intraday Trading can generate better returns and higher profits. If the market conditions are adverse, you can use the method of short selling to earn returns.
  4. Another benefit of Intraday Trading is liquidity. The amount invested can be recovered, as it is not blocked by asset purchase transactions.
  5. Capital gains in both bull and bear markets can be achieved by buying and selling listed securities. If the stock market falls, short-term sales of financial instruments can generate profits.


Although there are several benefits of Intraday Trading, you must be wary of a few disadvantages it carries. Frequent trades also mean several commission costs. There can be a few assets that are off-limits, like mutual funds. And there may not be enough time for a position to generate a profit before it must be closed out. So, you must consider the pros and cons of Intraday Trading before you start investing. Losses can mount quickly, especially if the margin is used to finance purchases.

Key Indicators of Intraday Trading

Whether a person is a professional or a new investor, he may have difficulty facing multiple simultaneous events in Intraday trading. So, you must pay attention to trends and indicators when trading. Here are some key indicators to consider when indulging in Intraday trading:

1. Moving Average

This is a trend indicator that is shown in a graphical manner, to represent the behaviour of stocks over a specific period. It reveals the opening and closing prices of a stock. The minimum average line on the graph shows the average closing price of the stock at this interval. This will help you to better understand the inventory flow and the price fluctuations in a better manner.

2. Bollinger band 

It helps you with the standard deviation of stocks. All three lines – upper limit, lower limit, and the moving average represent the bands or areas of volatility in which a stock price fluctuates. These fluctuations in stock prices over a period help localize price fluctuations and can be invested in with the help of these observations.

3. Momentum oscillator 

Stock prices are highly variable, mainly depending on market conditions. Momentum oscillators help traders know if a stock price will go up or down in a period. It is displayed in the range of 1 to 100 and indicates whether the stock price keeps rising or falling. This helps traders decide when to buy a stock.

4. Relative strength index (RSI) 

The Relative Strength Index is a measure of momentum useful for technical analysis. It depicts the change in the stock price over a period. It also graphically shows when a stock is most likely to be bought or sold, ranging from 1 to 100. An RSI above 70 is considered overbought and less than 30 is considered oversold.

The formula used for this calculation is: RSI = 100- [100 / (1 + (average profit / average loss))]

Intraday Trading Tips, Strategies & Basic Rules

  • Choose Two or Three Liquid Shares
  • Determine Entry and Target Prices
  • Utilizing Stop Loss for Lower Impact
  • Book Your Profits when Target is reached
  • Avoid being an Investor
  • Research your Wish list thoroughly
  • Don’t Move against the Market



Basic Rules for Intraday Trading

The stock market for Intraday traders is highly volatile, and beginners may tend to lose money if they don’t know enough about it. So, you must follow some basic rules before you get into Intraday Trading.

1. Timing the Market

It is recommended that individuals avoid trading as soon as the markets open especially in the first hour. The time between 12 and 1 pm is ideal for earning profits.

2. Plan a lucrative Investment Strategy and Stick to it

It’s integral to have a clear plan for intraday trading and to determine the entry and exit prices before opening a transaction. One of the most important tips for intraday trading is to use stop-loss triggers to mitigate the potential loss of positions. It is also advised that when the stock price reaches the target price, you must close the position, and expect higher profit.

3. Exiting the Position under Unfavourable Conditions:

If the situation is favourable, then you must book the profits and exit the open position. If the situation is not favourable, you must exit to reduce losses instead of waiting for the stop-loss trigger.

4. Invest Small Amounts:

Since it is difficult to predict the extremely volatile market trends, beginners can fall into the loss trap, one of the biggest intraday tips is to invest smaller sums.

5. Research and Choose the Best Share for Intraday Trading Through Liquid Stocks:

Before you start Intraday Trading, research the fundamentals of the stock market, and conduct technical analysis. Trade only in a few liquid stocks that have high volumes so that it becomes easy for you to exit open positions before the end of the Intraday trading sessions.

6. Always Close All Open Positions:

Even if you must book a loss, don’t take delivery of your positions if the targets are not achieved.

7. Spend Time:

It isn’t advisable for working people to get into intraday trading, especially those who don’t have the time to supervise market movements throughout the market session.

Intraday Trading Strategies

There are several strategies that Intraday Traders can use:

  1. Scalping, that helps in making small profits on small prices changes during the day
  2. Range trading is all about using resistance and support levels to make their buy and sell decisions
  3. News-based trading depends on news events before investing in high volatile shares
  4. High-frequency trading methodologies that research the short-term and small market inconsistencies using AI – in the form of sophisticated algorithms


Trading during the day is done not for the benefit of the investment, but to make a quick return. Some common indicators have proven useful to traders and it is also recommended to avoid stocks with high volatility. Traders need to look out for stocks that correlate with major sectors. It turns out that investigating and tracking trends is very important for traders, whether beginners or professionals.


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