10 Things you should know as a beginner in intraday trading

Updated: Nov 13


Photo by Austin Distel on Unsplash

Topics:

1. What is intraday trading?

2. Intraday trading timings

3. Problems faced by the intraday trader

4. When to enter and exit the market?

5. How to choose the right stock for intraday?

6. Best strategies for intraday trading

7. Is intraday trading profitable? How much can you earn daily in intraday trading?

8. Charges on intraday trading

9. Are taxes applicable to your profit?

10. Bonus topic: Intraday trading tips for beginners


A lot of people make money in crores in a single day and go on long holidays, still remaining struggle to make their living through it.


This difference is because they don’t make a good strategy and ignore the basics.


“Reaching any goal in trading requires specific domain knowledge and technical skills. But then, after that, it's all mindset management. Yet most people ignore that —they automatically think they have that last part all figured out, and it's a mistake.”

― Yvan Byeajee, Paradigm Shift: How to cultivate equanimity in the face of market uncertainty


The strategy includes all the important things from rules to avoid losses to what to do with profits earned.


In this article, I’m going to tell you the strategies used by most successful traders and some dos and don’ts.


So let’s start with a great quote by Christopher Pike, Sati

“A true teacher would never tell you what to do. But he would give you the knowledge with which you could decide what would be best for you to do.”


Please like, comment and share the article, this way we’ll be more motivated to post the quality content.


1. What is intraday trading?

You’re reading this article that means you already know the meaning of intraday trading. You can skip this topic if you do.


For readers who don’t exactly what is intraday trading, it is when you square off all your trades on the same day you bought the shares.


Intraday traders buy and sell the shares on the same day and settle all their positions. Ups and downs in share prices are significantly small compared to long time investing, so intraday traders make multiple trades on a single day to meet their goal.

2. Stock Market timings

The stock market opens at 9:30 AM every day (NSE is closed on Saturday, Sunday & other holidays, except for any special trading sessions are announced) and closed at 4:00 PM.


The trading time for commodity (MCX) market is between 10:00 AM to 11:30 PM, Monday to Friday. The normal trading time for Agri-community (NCDEX) market is between 10:00 AM to 05:00 PM, Monday to Friday.


3. Problems faced by traders in the beginning

Finding the right resources to sharpen your knowledge is the first biggest problem faced by most traders but as said by Albert Einstein “Wisdom is not a product of schooling but of the lifelong attempt to acquire it.”


This is a world of the internet if you put enough time and research, you’ll definitely find the answer you are looking for. When I didn’t know the basics I read the book ‘Trading For A Living’ by Dr. Alexander Elder (not an affiliate link). It is one of the best books out there.


You can also read ‘Learn To Earn’ by Peter Lynch. This book includes the history of the stock market to the current trends and this is the best book for a beginner for learning ABC of the stock market.


If you don’t want to invest any money in learning, make the best out of internet. I’ll suggest the site ‘Investopedia’, it is one of the best sites to learn for free.


“I don’t think you can get to be a really good investor over a broad range without doing a massive amount of reading. I don’t think any one book will do it for you.” - Charlie Munger


The second problem is money!! To buy stocks! To trade in the stock market we need capital. So where will you get the money to trade?


Well, I can’t give a solution on this but all I can say is reduce your liabilities and focus on making money & assets. Don’t depend on one money earning source.


Read our blogs on money-making to find more money earning sources.


If you’re trading intraday using savings or borrowed money, then don’t trade! You are on road to get hit by bankruptcy at just the start of your trading career.


Experts say you should use a maximum of 2 percent of trading capital in a single trade and trading capital should be a maximum of 10 percent of your financial capital.


The third problem is which stocks should I buy?


Finding the right stock is always hard. That’s why most of the beginners make mistakes by choosing the stock with other’s suggestions. We’ll discuss more on this point in the fifth topic.


Another big problem is when to buy? Entering the market at the right time is really the outcome of the right strategy and patience.

We will discuss more on ‘when to enter & exit the market?’ in the fourth topic.


A beginner also find difficult to analyze the market trends and end on a suicide mission. As a beginner don’t enter the market at first one hour after starting the market because the market is more volatile at the start.


Wait until market stops taking huge rise, drops, and gets stabilized. That time market is more predictable and you can make small profits easily.


Losing money in the starting trades is also a major problem that leads to demotivation.

Lots of expert traders also lose money so don’t stop trading because of some initial setbacks.


The only main thing to be followed strictly at the beginning is ‘trade small and don’t trade more with the aim to recover losses from previous trades’. This way you’ll not lose a lot of capital.


In a 2011 research paper titled "The Behavior of Individual Investors," Professors Brad M. Barner and Terrance Odean at the University of Calif., Berkeley revealed that individual investors who traded actively and speculatively without diversified portfolios typically lost money over time.


Check out the article on mistakes done by trading beginners


4. When to enter and exit the market?

As I said earlier, never enter the market in the starting 1 hour, that time market is very volatile. Enter the market when it becomes steady because it is more predictable.


You need to understand the different market trends and triggers to get the exact idea about when to enter & exit the market. First, you need to select a proper strategy because each strategy uses different triggers and trends to enter & exit the market.


Also using the right indicator, support and resistance lines is important to follow the trend and find the best entry points.


There are two types of entry points used widely ‘pullback’ and ‘breakout’ but actually there's nothing like best entry & exit points.


Entry & exit points depend on the market condition and recent news. Say the new budget is declared by the government focusing on the banking sector. The banking index (NIFTY) may rise suddenly causing huge sell volumes.


So to find the best entry & exit points, you really need to keep up-to-date with recent news and also know the behavior of the market at different conditions. To do this you’ve to keep learning and apply it in real.


“You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” _Warren Buffet


5. How to choose the best stock for intraday?

Things to consider while choosing the stock


Your trading capital: If you don’t have much money to trade you need to choose the stock with less unit price.


Pick any five good dividend-yielding companies then we’ll study them according to the following factors;


a. Check their quarterly & yearly earning, are they growing?

b. Check their position in the industry; are they one of top 3?

c. Check their balance sheets

d. The company should have low debt-equity ratio

e. A good company will have high price-earnings (P/E) ratio


These factors are very useful to choose a good stock.


Go on NSEIndia site to find these factors.


6. Best strategies for intraday trading


Scalping

This strategy involves making small profits by placing lots of trades from minor changes. Small profit trades are easy than catching a large profit earning trade.


This strategy is the most successful and famous among beginners. Main goal of scalping is to play multiple trades as time involved in one trade is very small.


Daily Pivots

This strategy is very risky for beginners. It involves buying the shares at the low of the day and selling them at the high of the day. This is risky because the low of the day is maybe the high of the day.

So try it if you’ve done your study and understand the market better.


Momentum

This strategy depends on your up-to-date knowledge and reading the daily news. This is more like taking a leap of faith. If you found any latest news that can affect the company’s stock price or market condition. You need to use it to bag the profit.


One type of momentum trader will buy on news releases and ride a trend until it exhibits signs of reversal. The other type will fade the price surge. Here, the price target is when volume begins to decrease.


7. How much you can earn in intraday trading?

It really depends on the amount you invest and how many trades you do in a single day. The person ‘A’ trading $10,000 will definitely make more money than person ‘B’ trading with $1000 in the same trade.


Similarly, if ‘B’ made the same profit-earning trades 10 times he can reach the profits of trader ‘A’.


You can make money a safe way by trading with more units. People usually choose the consistent profit yielding stocks. But because of the high volume of trade their prices grow very fast and still yield 2 to 3 percent profits.


But to make significant money from these stocks you need a lot of trading capital. The other way is to buy the stocks with lesser unit prices and buy more units but these stocks are volatile and bit risky for beginners.


8. Charges on intraday trading

If you’re trading on platforms like Upstox, Zerodha, 5 Paisa, Angel Broking (these are some discount broking platforms in India), they charge like Rs10 to Rs40 per trade on intraday and so not charge on delivery trading.


Full-service brokers like small finance companies, securities, and agents may take 0.50% to 1% of your profits as a charge.


Upstox:

While trading with Upstox, equity delivery trades are free of cost. For intraday trading on BSE, NSE and MCX, and F&O it is 0.05% or up to Rs.20 per order traded. Irrespective of the order size, the brokerage cost is only Rs.20 per order traded.


Zerodha:

For equity intraday & equity futures charge is 0.03% or Rs. 20/executed order whichever is lower.


If you’re not from India and using TradeStation

TradeStation offers two commissions plans for professional traders: Per-Share and Unbundled.


Per-Share pricing: First 500 shares are $.01 per share, $.006 per share all shares thereafter. There is a $1 minimum per order.

Unbundled pricing: Unbundled pricing passes the liquidity charge (or rebate) onto the client. The base rate per share is determined by the number of trades made during the previous month.


For more fees & features on TradeStation read on StockBrokers


Other applicable charges on intraday trading

Other than charges mentioned above there are Security transaction charges (STT), stamp duty, transaction charges, SEBI turnover charges, GST, etc. are applicable in India.


Security transaction charges (STT)

For intraday STT is 0.025% of the total transaction and charged after you sell. For delivery trading, STT is charged 0.1% of the total transaction on both sell & buy.


Stamp duty

Stamp duty is charged by the state government and is different for each state. Stamp duty is charged on both sides sell & buy.


Stamp duty ranges from 0.002% to 0.006% for equity intraday and 0.003% to 0.010% for equity delivery depending on state.


Transaction Charges

In India NSE (National Stock Exchange) charges a fee of 0.00325% of the total trading turnover and BSE (Bombay Stock Exchange) charges 0.003% of the total trading turnover as transaction charges.

Transaction charges are charged on both sides (buy & sell).


SEBI turnover charges

SEBI (Securities and Exchange Board of India) charges Rs10 per crore of turnover.

DP charges


DP charges include Depository charges and Depository Participant (DP) charges. CDSL & NSDL are the depositories that impose DP and are levied any time you sell shares from your Demat account.


For Zerodha:

Zerodha is Depositary Participant of CDSL and therefore DP charges are Rs5.5 (CDSL charges) + Rs8 (charged by Zerodha) = Rs13.5 + 18% GST


For Upstox:

Demat transaction charges are Rs.18.5 + GST (18%) = 21.83 - (CDSL Charges) per scrip, inclusive of taxes.


9. Are taxes applicable to your profit?

All your income sources including shares are taxed depending on your slab.

Short terms capital gain: If equity shares listed on a stock exchange are sold within 12 months of purchase called short term capital gain and taxable at 15%.


Long term capital gain: If equity shares listed on a stock exchange are sold after 12 months of purchase called short term capital gain. Capital gain of more than Rs1 lakh on the sale of equity shares is taxable at 10%.


Read more on ClearTax

Also check the article on TradeBrains


Now the bonus point;

10. Tips for intraday traders

  • Use cover orders (CO & OCO) and always set a stop loss

  • Set goals for profit and number of trades you’ll play

  • Don’t overdo trades trying to compensate losses from previous trades. “The four most dangerous words in investing are This time it's different.”_ Sir John Templeton

  • Diversification: For safe trading, you need to diversify the portfolio. Keep stocks from each sector (banking, oil & gas, coal, IT, etc.) in your watchlist.

  • Start small

  • Use liquid stocks

  • Calculate & prepare for the worst cases

  • Avoid tips & calls from others. “Markets are never wrong, but opinions often are.”

  • Everyone loses money- don’t lose sleep over it

  • Choose the right platform and don’t ignore the underlying charges

  • Always close all positions

Conclusion:

Intraday trading can be your earning source if you develop your own trading style.


Mastering the basics is the most important part of trading journey.


So learn all of the current strategies and create your own.


“The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.” - Jesse Livermore


Happy Earning!!

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