Unlike other guides that ramble out stock trading before they even start on the subject of Intraday Trading, this one’s going to give you what you need to know straight up: when you buy and sell shares of a particular company on the same day (that means you buy the shares at one point and sell them before the close of business), that trade becomes an Intraday Trade.
It’s not rocket science, right?
Intraday Trading is the most commonly seen way of trading shares, as only a few investors want to hold their shares to cash in the profits in the long run. Below, we’re going to talk more about Intraday Trading and its salient features, along with how you can calculate
Exploring Intraday Trading in Detail
An Introduction to Intraday Trading
To put it simply, it’s called an Intraday Trade when both legs of the process, buying and selling shares, happen on the same day, before the close of business.
Also known as Day Trading, this type of trading focuses on making a quick profit, which is what makes it so popular among investment houses the world over. If your shares aren’t sold by the end of the day, they are automatically sold under some predetermined conditions and brokerage plans.
How Does Intraday Trading Happen?
While investment strategies differ the world over, most day trading follows the simple pattern outlined below:
- First, a Stock Broker sets a target price for shares of a particular company or IPO. This target price represents the value under which they want to purchase shares, and over which they want to sell the shares.
- If the share value falls below the target price, the trader buys a certain amount (depending on how much they have to invest) and waits for the price to rise.
- If and when the share value rises above the target price, the trader sells all of their shares to make a neat profit. The trader will also sell their shares if they feel the stock value won’t reach higher than the target price by the close of business.
- Traders who are open to taking risks might also wait for the price to rise even higher if they feel they can predict market patterns. However, this approach is usually very risky, and thus not popular among professional investment houses.
What Are the Benefits of Intraday Trading?
Now that you have a working understanding of how Intraday Trading works, it’s time to take a look at the advantages it offers:
- Low Capital: Day trading usually happens using margin funds (that means funds from people who have invested with the brokerage). The trader himself only has to pay a small amount, with the rest supplied by the brokerage itself, allowing traders to commit to larger trades with only a small capital base.
- Low Brokerage: Intraday trades generally see lower commissions from brokerage houses than delivery trades (delivery trades are those where the buying and selling happens on different days).
- High Liquidity: Day trading positions have to be closed out inside a single business day. That means your capital is only tied up for a couple of hours, allowing easy entry and exit from the positions.
- No Overnight Risk: Day trading positions are protected from market shifts that happen overnight, protecting investments from market fluctuations caused by sudden occurrences.
How Can You Calculate Intraday Trading Charges Online?
The good news is that it’s not hard to calculate the Intraday Trading charges. You can ask your brokerage house what the charges are upfront, before you invest any money with them, or use an online Intraday Trading brokerage calculator to get the job done. Both are viable ways, but the second will need you to select a calculator that knows the charges applicable in your specific region.
At the end of the day, you need to remember that just like any other form of investment, Intraday Trading carries an element of risk with it. That means you should Open demat account, start out with a small sum of capital, and keep reinvesting some of your profits to ensure a big loss doesn’t wipe you out entirely.
With that said, Intraday Trading is usually safer than other types of investment (like Delivery Trading), and also comes with the benefit of only 0.5% of your investment amount being charged as brokerage fees.