Intraday Trading In Indian Stocks: How To Start The Process?
Trading stocks is much more complicated than it seems. Today, there are many companies that have launched mobile or desktop applications that promise to help with investing in the Indian stock market and other such domains. However, they can’t really do much in aiding you to make the right decisions. All they offer is the ease of trading and investing in various stocks listed on the stock exchanges of India or abroad. However, it is the trader who needs to make the ultimate decision. One of the strategies used by people is intraday trading. Wondering what is intraday trading? Well, we will simplify this seemingly cumbersome concept for you.
What Is Intraday Trading?
Intraday trading refers to the trading strategy that involves the buying and selling of stock within the same day. This can be done in a few seconds, minutes, or even hours. Day traders rely on the possibility of making profits by benefiting from the various price fluctuations that take place during the day. This strategy needs a lot of patience and practice. When you know it well, you would be able to filter the best intraday stocks for today or tomorrow or whatever the day is!
Day trading stocks does not mean that people should look for huge profits that too within a day. The process is gradual and might take days for one to perfect. The stock market regulation is much stricter compared to other volatile or risky investment options. Therefore, it is better to undertake such strategies only if you want to do it lawfully and are patient.
Moreover, intraday trading is very risky as well since if you are someone who wants the stock price to increase, it is not always that the same will happen. A stock that is valued at ₹100 at one point might go down to a value that is close to ₹90 while you wanted it to do up to ₹108. In this case, you would incur losses. On the other hand, people using the bear strategy might be confused when the price of shares starts increasing and they sell in anticipation to buy at a lower price.
Trading Segments In India For Intraday Trading
There are various trading segments that come under intraday trading in India. We have shared all of those here with a brief description.
- Equity Trading: It involves the strategy of buying equity shares without the aim to hold them for more than a day (prior to 3:30 p.m.) and can be performed on NSE or BSE. This is the most common option used in day trading.
- Equity Derivatives Trading: It involves trading in futures and options on liquid stocks. These F&O instruments are available on highly liquid stocks, that is, the top 500 according to market capitalisation.
- Currency Derivatives Trading: You can easily trade in currencies on NSE and BSE in India from 9 a.m. to 5 p.m.. However, this option is not ideal for day trading as currency pairs don’t see much difference in price during the day.
- Commodity Trading: One can perform intraday trading in F&O on commodity options like metals, oil and gas (energy products), and even some agro commodities. The differences in prices are not as high as equity stocks but still are significant enough.
Important Intraday Trading Terms You Should Know
Here are some basic yet important terms that you should know the meaning of before starting day trading stocks in the Indian stock market. Make sure to go through the list carefully before venturing out into the huge gamble. You will be asked for a lot of specific details while making the trade and these will help with that.
1. Margin: It is also known as leverage in the stock market. It means you can do intraday trading just with a small amount of money while the rest of the required amount is availed by your stockbroker.
2. Limit Order: It means that you are willing to buy a stock at a specified price. You can enter the desired price at the time of making the order and the trading platform will send this information to the exchange.
3. Market Order: The market price of any stock is the price it is trading at that particular moment. A market order refers to the one that you place to buy the stock at that price.
4. Stop Loss Order: This type of order deters one from continuing to extend into losses. You set the desired profit in your mind but what if the stock starts losing? So, before it starts declining more than a specified limit, you sell it to avoid further losses.
5. Margin Intraday Square Off (MIS) Order: MIS orders are the ones that should be closed (which means squared off) prior to the end of the trading session that day. Generally, stockbrokers perform this act by 3:15 p.m. unless one decides to convert outstanding orders of this kind to delivery orders.
6. Bracket Orders: This kind of order prevents the risk elements of intraday trading from affecting you. The strategy is based on target profit and stop-loss orders as brackets which coexist with the initial buy or sell order. There will be three orders placed under this, namely (with the share price estimated at ₹100):
- Buy order at ₹100
- Target profit order at ₹106
- Stop Loss order at ₹98
7. Cover Orders: Such orders are meant for reducing the danger of incurring huge losses. In this type of order, one needs to place a stop-loss alongside the initial buy or sell order.
How To Begin Day Trading In The Indian Stock Market?
For intraday trading, you need to first open an account in a legally recognized trading platform such as 5 paisa, Zerodha, Upstox, and many more. You need to follow the simple sign-up process that will guide you through and start trading. By the term stock market, you might have known that we are talking about equity stocks. Therefore, you can select any liquid option from the NSE or BSE.
Thereafter, you choose to place a buy or sell order. In the case of a buy order, you predict that the prices will rise so you can sell the possessions later to earn profits. On the other hand, a sell order is placed in anticipation that the share price will fall, and you will purchase it later at a lower price. The former way is known as the bull trading strategy while the second one is related to stock market bears. In either case, make sure to take the help of various trading charts and analysis that is provided by sights like Intraday Screener.
While day trading stocks, you need to mention whether the order is a buy or sell and then select the order type. It can be one of the types of orders that have been mentioned in the section above. Also, specify if it’s a market or limit order. In addition, you need to mention the nature of your trade, which is ‘intraday’. If it’s a sell trade (which we would be discussing here) then you need to wait for a few minutes for your shares to be sold at the best possible price. When the order status says ‘complete’ then your transaction was carried out successfully.
[Note: Before placing an order do check the technical analysis and trading charts provided by sites like Intraday Screener. In addition, search for queries like ‘intraday stocks for today’ for better assistance.]
You need to wait till the prices go down as much as you want in order to earn desired profits so keep a check on the trading charts often. The moment prices are at the level you will want to place an order to buy those shares. But you need not have to do that as you can just square off the position by clicking on the order made earlier and selecting ‘Exit Order’. This way the trading platform will automatically place an order to buy those shares back. And that’s it! You would have made the first-ever intraday trade in your life!
To aid you in making better decisions with respect to time, let’s mention the Indian stock market timings here.
- The Pre-open market session is from 09:00 a.m. to 9:08 p.m.
- The Regular trading session is from 9:15 a.m. to 3:30 p.m.
- The Closing session is scheduled between 3:30 p.m. to 4:00 p.m.
Another important thing to note before starting intraday trading is that there are price bands set for each and every stock listed on stock exchanges in India. This is to avoid huge and unprecedented price changes to prevent traders from huge risks. Price movements that do not adhere to these bands lead to a trading halt. On the contrary, there are no price bands on shares that come with derivative products.
Exiting Profitable Positions!
Intraday trading seems complicated, and it is so yet it’s no rocket science and can be mastered with patience and practice. However, one needs to know that unlike the stock markets around the world, the Indian stock market does not let huge price fluctuations happen. This is due to the fact that the regulatory body has put price bands. But you can consider day trading stocks with derivative products to practice swing trading along with day trading. Also, it is important to not be greedy and be patient to have your share of profits and earnings.
Ensure that you have a close look at trading charts and analysis provided by sites like Intraday Screener or TradingView. In addition, be extremely cautious and select the type of orders judiciously and try using tools that help mitigate loss. Further, keep a check on timings and prices along with formulating effective strategies so that your trading experience is not hindered. Also, research about the best intraday stocks for today or tomorrow or an upcoming period of time for better profits.