Intraday Trading for Beginners
Buying and selling shares of a particular company is known as trading and buying stocks of a company with the sole intention of selling it on the very same day before the market closes at the end of the trading day is known as intraday trading. The traders keep a close watch on the market trend and particular attention is paid to those stocks that are expected to have upward or downward movement in price. The trader then buys stocks that are expected to move upward and sell it for a higher price later on the same day. Similarly, if a stock is expected to go downward, the trader will sell it and opt to buy it again later in the day for a lower price. Intraday trading has the potential to be profitable but at the same time is equally risky and very intense.
How to Start Intraday Trading
The basic requirements for starting intraday trading are summarized below.
Open a demat account and a trading account: Thisfirst step to trading shares is to open a demat account and a trading account. You need to open a trading account from where you do all your buying andselling and you have to open a demat account where you store all the shares in digital format. You can open the accounts only through a depository participant or DP, which can be a brokerage firm or a financial institution of your choice. The DP will guide you through the process of opening the account, complete the KYC procedures, and open the accounts for you.
Signup for intraday trading: Now that you have the demat and trading accounts in place, you are ready to buy and sell stocks. The next thing to do is to login to your trading platform using your PC or your smartphone. The trading platform is the software used for trading and managing your accounts. The trading software provides you all information that you need starting from order entry to advanced features that give the prices in real-time, various charts, news etc.
Shortlist the stocks: Selecting the stocks to trade in is important. It is a good strategy to do thorough research and select the stocks beforehand. Liquidity and volatility are two major factors to consider in the selection of stocks. Higher liquidity of stocks means higher volumes of trade. This means that you can buy and sell larger volumes without significantly affecting stock prices and the buy and sell orders are also executed faster. The other important factor is volatility or the price fluctuations. While certain volatility is needed to trade profitably, high volatility and unpredictable behaviour can be dangerous. It’s better if you stayed away from low liquidity, low volume, and high volatility stocks.
Develop a Strategy: It isimportant to develop a strategy for intraday trading. The time from when the market opens to the time it closes is very short when compared to regular trading. Hence understanding the market, daily trend, shortlisting stocks to buy and sell, fixing entry and exit prices, setting stop loss, timing are all important in day trading. Develop your own day trading strategy and follow the strategy religiously. You can modify and change the strategy as you gain experience in intraday trading.
Read: Best Intraday trading tips you should know
Benefits of Intraday Trading
Day trading in stocks comes with the following benefits.
An Alternate Source of Income: Day trading can be seen as a good supplementary source of income with the potential of becoming even the principal source of income. Day trading comes with the freedom of being able to work from anywhere and might be seen as a rewarding career with generous returns once the trader has gained experience, developed a good trading strategy, and dedication.
High Liquidity: Day trading comes with the benefit of high liquidity. The stocks that are bought in the morning are sold by the end of the day, so the money invested into buying the stocks are liquidated in just a few hours.
Higher Returns: Day traders get a higher return on their investment. Traders can do multiple day trades on the same day thus making good use of their investment. Also, brokerages may offer margin trading in which case the trader invests only a margin of the price of the stocks purchased and thereby magnifying the profits several times.
Nominal Charges: Intraday trading attracts lower transaction taxes and duties and hence costs less to trade compared to delivery trading. Brokerage charges are also lower for day trading when compared to delivery trading.
Risk Management: While the risk associated with day trading is real, it can easily be managed with experience. Day traders also have the advantage of not holding stocks overnight which reduces risk of losses from market falling as soon as it opens resulting from overnight events. Experienced day traders also have the advantage of being among the first to know of any or possible undesirable movements in the market, which coupled with real time news and their own expertise enables them to act immediately in case of a sudden downward trend in the market.
Points of Note:
- Earning from day trading is entirely dependent on the individual trader. Intraday trading requires thorough research, a lot of discipline and patience. Avoid taking hasty, ill thought out and impulsive decisions to buy or sell. Start with small amount and low volumes, then slowly increase the amount and volumes you buy. Create a good plan and strictly adhere to the plan.
- There are no limits to the number of trades that you can make in intraday trading.
- There is no actual transfer of shares happening in intraday trading. Shares will be transferred to the trader only if, for some reason, the stock was not sold off before market closed on the same trading day.
- There are no separate rules for taxation of income from intraday trading, which comes under speculative business income. The income from intraday trading is added to your overall income including salary and taxed as per the applicable income tax slabs.
- Nuuu has depository partnership services and can help you with completing documentation for opening demat and trading accounts, complete KYC procedures, and open the accounts.
- You can open the accounts online at www.nuuu.com
- Nuuu has online trading services that utilize the very latest in technology to provide you with necessary resources to help you with intraday trading as well as regular trading. You can access it on your PC, laptop, tablet, or smartphone. The app can be downloaded on Google Playstore or Apple iStore.
