A Beginner Guide To Day Trading in India 2021

The most popular technique of making a living out of the stock market is day trading or intraday trading. Unlike investing, where you need to wait months or even years to reap the benefits, here you can gain profit within hours. And the best part, with the advancement of the internet and technology, day trading can now be learned and started from the comfort of your couch using your phone.

Here in this article, we’ll walk you through the steps involved to get started with intraday trading in India in 2021. We’ll also go over what intraday trading is, who intraday traders are, day trading thumb rules, and much more. 

Intraday Trading Explained

Intraday trading, as the name suggests, is a kind of trading where the purchasing and selling of a stock (or another asset) takes place on the same day, i.e. within the same trading session. The main objective of intraday trading is to make quick profits and exit your position as quickly as possible. Asset/ Stock holding times might range from a few minutes to several hours.

Intraday trading is typically reserved for high beta equities, i.e., stocks with significant daily price changes. There will be no opportunity for intraday traders to profit from that stock if prices do not change at all throughout the day.

What are Intraday Traders and What Do They Do?

On the market, there is a well-established belief that “the more time you spend in the market, the more lucrative it is.” 

Intraday trading is typically done by traders who are quite active market participants, meaning they keep a close eye on the market fluctuations at all times. One thing to keep in mind is while doing intraday trading, one should not become overly greedy. When we set stringent profit targets and stop-loss levels, it helps us choose the best trades for intraday trading. A stop-loss order is a purchase order that instructs the seller to sell the shares if the price hits a certain level. As a result, it aids in the automation of the selling process in varying market conditions.

Let’s say an Intraday Trader Ram is trading shares of TCS (Tata Consultancy Services) on an intraday basis. The current share price of TCS is Rs. 3200 per share. As a result, if Ram buys one share at CMP (Current Market Price) with a target price of 3325 and a stop-loss of 3185, he should adhere to those levels as the market moves and not increase his profit targets or trail his stop losses.

Some Intraday Trading Tip for beginners’ 

Here are some of the most crucial tips for Intraday traders to follow in order to maximize profits and minimize losses:

  • Choosing liquid stocks that can be entered and exited quickly.
  • Always consider your entry and exit points before you begin trading.
  • Always use a stop loss for trades, as the position may drift away from you and you could lose a lot of money
  • When doing intraday trading, it’s critical to have a trading mindset rather than an investing one.
  • Because the market may present several trading opportunities, one should be willing to conduct multiple transactions in the same firms or indexes.
  • “Trend is your friend,” as the saying goes. Taking trades in the market’s direction at all times is indeed a smart thing to do.

What can be traded in intraday trading?

Almost all stocks traded on stock exchanges are available for intraday trading. Indices can also be traded.

In addition, intraday trading happens not just in the cash market but also in the derivatives market- Futures and Options. The derivatives market is a significant contributor to the intraday trading market. 

How can beginners start intraday trading in India in 2021?

Now that you’ve understood the fundamentals of intraday trading and its basic qualities, the next thing to consider is how to go about doing intraday trading in India in 2021. The following is a step-by-step technique that helps you walk you through the entire process.

STEP 1: If you want to start with Intraday trading in India in 2021, you need to have a trading account with one of the brokers- for example, Zerodha, Angel broking, 5Paisa, etc. The methods for Intraday trading are nearly identical for whatever broker you choose.

STEP 2: Your trading account must have a significant margin balance. The minimum amount of money required to trade is known as margin. From an ordinary trade to an MIS (Margin Intraday Square off) the amount of margin required varies. The key difference between the two is that in regular trade, the position can be carried over to the next day, whereas in an MIS transaction, the position is squared off automatically before the end of the day.

Depending on the nature of the stock and its projected volatility, the margin allowed to trade for MIS trades ranges from 4 times to 2o times. As a result, margin trading allows us to leverage our money.

STEP 3: The next crucial step is to choose the share/asset that you want to intraday trade for that particular day and add those shares to a separate watch list. It is almost impossible to maintain track of all the shares listed on the NSE and BSE- this stage is critical.

Having a watch list of the selected companies allows you to moderate and buy the stocks as needed, taking full advantage of all intra-day trading possibilities.

STEP 4: The final step in this process is to choose the stock in which you want to invest. After choosing the stock, you simply need to enter the trade on the ticket.

You now have two options for executing the trade: a limit order or a market order. We finish up purchasing or selling at the current market price if we place the market order. If we place a limit order, on the other hand, we can specify the price at which we want to place the order. The type of order, which might be either normal or MIS, is the next thing to decide. If we use a limit order, the margin required is exactly the same as the stock’s current value.

STEP 5: When trading options, the next step is to check the order book to see if the order has been placed. This can be done by going to the orders tab and seeing a list of all the orders that have been placed, canceled, or executed.

STEP 6: The last, but most crucial, step in intraday trading is to keep track of your positions. You should always be on the lookout for trading chances and have a stop loss in place for any existing trades. You will have a better chance of having a successful and rewarding trading session if you follow these rules.

Summing it up

Beginners may find intraday trading overwhelming. It has a high rate of return, but it also has a high level of risk. Trading without understanding is, in fact, gambling. As a result, it’s a good idea to educate yourself before getting started.

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