In an intraday trade, the buy/ sell sequence doesn’t matter. You are allowed to sell the shares even before buying.
You can sell first if the price of the stock is going down and later buy it at a lower price. The process of selling first and buying later is technically called – shorting or taking a short position.
For example – In the State Bank of India (symbol – SBIN) chart, at around 13:00 hrs we see that the prices are going down.
You can sell SBI shares at Rs. 424.50 at point 1. And later buy at point 2 when the price is at Rs. 423.
Your intraday transaction will be –
- Sold SBI share at Rs. 424.50
- Bought SBI share at Rs. 423.
The trade will earn you a profit of (424.50 – 423) = Rs. 1.50 per share and the intraday transaction will be termed as shorting.
The reverse process of the above intraday trading process is – buying first and then selling later also known as taking a long position.
The long trade is suited when the stock prices are rising.
For example – in the above charts we see that the SBI stock prices start rising at point 3. Here you can enter an intraday buy trade first at Rs. 423.50.
You can sell the shares at Rs. 425 indicated by point 4.
Summary of your long intraday trade in SBI stock will be under –
- Buy SBI shares at Rs. 423.50
- Sold SBI shares at Rs. 425.
And the profit per share following the above strategy will be (425 – 423.50) = Rs. 1.50 per share.
Remember – You need to compulsory close the position before the market ends. That means – if you have bought shares then you need to sell before the close of market hours.
And if you have sold earlier then you have to buy before the closing of market hours.
In intraday trading, you are not allowed to carry your trade to the next day.
In case you forget to close the trade then your stockbroker will close the trade on your behalf and charge you accordingly.
Disclaimer – All the stock and their prices mentioned in the article are only for example purposes. We do not recommend any stock for buy or sell.
To start intraday trading first you will need a trading account. But your stockbroker will advise you to have a demat and trading account.
Demat Account – Helps safely storing all your securities like shares, bonds, and NCDs in an electronic form.
Trading Account – is a platform provided by your stockbroker. The trading account connects you to the trading terminals of NSE and BSE.
Strictly speaking, you will require only a trading account if you only want to do intraday trading.
But having a demat account will be helpful in case you want to invest in shares or if shares are allotted in case of a wrong intraday trade.
Zerodha, 5Paisa, and Upstox are top discount brokers in India that allow intraday trading at a flat fee of Rs. 20 per trade. A brief comparison of the three traders is under –
|Intraday Brokerage charges||Rs. 20 or 0.03%||Rs. 10 / Rs. 20 depending on the plan||Rs 20 or 0.05%|
|Margins||up to 6x||up to 4x||up to 5x|
|AMC charges||Rs. 75 per quarter||Up to Rs. 25 per month depending on holdings||Rs. 25 per month|
|Account opening charges||For equity Rs. 200 and for commodity Rs. 100||Rs. 0||Rs. 199|
All three of them offer an online demat & trading account opening. You can open a demat & trading account with any one of the brokers.
Below are the steps to open a demat & trading account with Zerodha. But the process will be more or less the same if you wish to open an account with any other stockbroker.
Step 1 – Get a Demat & Trading Account
#1. Signup to Start the Application Process
Click on the “Signup” tab located on Zerodha’s home page to start the application process.
Provide your mobile number & email ID to create the account. Next, you will be prompted to provide your PAN number and date of birth. Confirm with OTP sent to your mobile number.
#2. Select Trading Segment and Pay Account Opening Charges
You can do intraday trading in Equity, Derivatives (F&O), Currency, and Commodity.
In this step, you need to select the segment in which you want to trade and pay the account opening charges.
Beginners can start with intraday trading in the equities. As you get the experience you can shift to other segments like F&O, currency, and commodities intraday trading.
#3. E-sign Account Opening Form & Upload KYC Documents
Aadhar authentication is needed to e-sign your online demat and trading account opening application.
You will receive Aadhar OTP on your mobile phone. Use the OTP to verify and e-sign your application.
After which you will be asked to upload your KYC documents such as – Aadhar card, PAN card, canceled cheque, or a bank statement.
Upon completing the process your broker may take up to 24 hours to open your trading account. You will receive an email containing your account ID and password to access your trading account.
Change your password with the first login you do to keep your account safe.
Now that you have the access to your trading account. Let’s explore the account and deposit money into your trading account before you can start intraday trading.
Step 2 – Get Familiar With the Trading Platform
Enter your ID and password to view the trading platform. Initially, the platform will be blank except for the live Sensex and Nifty prices.
On the right-hand top, you will see certain options like –
- Dashboard – the initial trading account screen
- Orders – Where you can see details of all the orders placed
- Holdings – screen shows details of delivery shares bought on cash
- Positions – screen shows details of your open intraday trade status
- Funds – contains details of money in your trading account
- Apps – Helpful Zerodha apps
You also need to do two things –
- Fund the account and
- Create a watchlist to start intraday trading.
Process to Fund Your Trading Account
First – Click on the “Funds” tab on the top. And select the green tab “Add funds”.
Second – In the pop-up screen fill up the amount and select the payment method.
Finally, you need to fill in the OTP received from your bank and confirm the fund transfer. And the money will reflect in your trading account.
Method to Create a Watchlist
#1. Click on the tab “Add instrument” available on the left side of your trading screen. You will get a search bar.
#2. Type the name of the stock that you want to add to the watchlist. For example, if you type “HDFC” you will get the list of all the instruments having the word “HDFC”.
There will be shares, bonds, ETF’s and mutual funds containing the word “HDFC”. Select the instrument you want to pick for intraday trading.
#3. Click on the black Add Button to include a particular stock on the watchlist.
Once the stock is included in the watchlist you will get to see its chart and have access to the buy/ sell button.
Likewise, you can add other stocks to the watchlist.
Next, you need to be familiar with few terms before you jump to actual intraday trading.
Step 3 – Learn Few Basic Terms Used in Intraday Trading
#1. Margins / Leverage
Margin is the small sum of money that you keep with your broker when you trade larger volumes. In Zerodha margin details can be found in the order window as shown above.
For example, If you want to buy 1 HDFC share for intraday trade. Then you will need Rs. 2511.40 in your account.
If you avail margin then the same trade can be done by keeping Rs. 402.02 in the account. That means you can trade (2511.40 / 402.02) = 6.25 times the amount in your trading account.
Suppose you want to make a trade of Rs. 1,00,000 in HDFC shares then you will need to have at least (1,00,000 / 6.25) = Rs. 16,000 in your trading account.
#2. Market Depth
Market depth is the total number of bids (buy orders as shown in the left-hand column) and offers (sell orders seen in the right-hand column) available for a particular share.
Liquid shares have more market depth i.e. have sufficient buyers and sellers at any given price.
#3. Limit Order & Market Order
A Limit order is placing a buy/ sell order at a specific price that you want. The order window allows you to select the order type.
For example, the current price of HDFC shares is Rs. 2511.40 in NSE. If you select the option of limit as shown above and specify the price (like Rs. 2512.65 in the image above) then the order is a limit order.
A limit order allows you to buy/ sell shares at your specified price only. If your specified price is too far from the current market price then it may take some time for the trade to get executed.
If you select the “market” option, then your buy/sell will happen at the current market price. And the order will be called a market order.
A market order allows you to buy/ sell shares immediately.
#4. Stop Loss
A Stop-loss order protects you from the risk of carrying on a losing trade.
Let us understand from the example –
Suppose, you have purchased HDFC shares at Rs. 2513.75 for intraday trading. You need to sell them at a higher price to profit from the trade.
If due to adverse market movements, the HDFC stock starts declining from Rs. 2513.75 and is now trading at Rs. 2512 i.e. you are running a loss of Rs. 1.75 per share.
If there are more downward fluctuations then the price can move down further to Rs. 2510 or lower creating more losses.
The above loss situation can be prevented by placing a stop-loss order at Rs. 2510. When you do that, the Stop loss order gets executed at Rs. 2510 booking a loss of Rs. 3.75 per share.
At the moment you might have booked losses but the stop-loss order protected you from making further losses in case the price moved to Rs. 2505.
#5. Cover Order (CO)
Cover order is an order in which a stop loss is placed simultaneously with the original buy/sell order.
For example, if you want to place an intraday buy CO order for HDFC Bank shares that are currently trading at Rs. 2511.
The trading platform will enter both the buy order (at Rs. 2511) and a stop-loss order (at Rs. 2507) simultaneously to cover your original buy order.
CO gives you the flexibility to set the stop-loss orders within the range allowed by your stockbroker.
Step 4 – Doing Intraday Buy-Sell Trading
Buy-sell intraday trading is appropriate when the stock prices are rising. In such a scenario. You have the opportunity to first buy at a lower price and sell the shares later when the prices are higher.
The strategy is also known as “going long”. It works on the concept of buy-low and sell-high.
Suppose you have a view that HDFC shares will move up during the day. Then you can use the buy-sell intraday strategy to profit from the strategy.
Choose the buy order form and select the “Intraday” option. Fill in the number of shares that you want to buy (suppose 20 shares).
Once you click the “Buy” button the buy order for 20 HDFC shares in intraday trading will be sent to the exchange.
You will get the order details in the “Orders” book. Once the trade gets executed the 20 HDFC shares will also show in the “Position” book.
Now you have an open buy position of 20 HDFC shares. The HDFC stock price can move either up and down.
You need to wait for some time for the price to increase.
Being an intraday trade you need to square off (close) your buy position by selling the 20 HDFC shares that you have bought earlier.
When the price comes to your target levels, select the 20 HDFC shares from the position book and click the “Exit” (i.e. square off) button to sell the shares.
In the above buy-sell intraday trade you bought 20 HDFC shares at Rs. 2493.65 and sold them at Rs. 2498.12 making a profit of Rs. 4.47 per share.
Step 5 – Doing Intraday Sell-Buy Trading
Intraday sell-buy trading is just opposite of the buy-sell trading. The intraday sell-buy trading is appropriate when the stock prices are going down.
Here you first sell at a higher price and then buy it later at a lower price. Since you sell first without owning the stock the sell-buy trade is also known as shorting or going short.
Open the sell order form for the share that you want to short. Click the intraday option and fill in the number of shares that you want to sell.
You will find the sell position details once your order gets executed.
Use the square-off option available in the positions book to buy the shares back and close the trade when the price reaches your target level.
In the above sell-buy intraday trade you sold 20 Reliance shares at Rs. 2078.21 and later bought them at Rs. 2076.25 making a profit of Rs. 1.96 per share.
The order book for two intraday trades is under –
And the positions book showing your profit/ loss for the trades –
5 Tips for Intraday Trading
#1. Choose Liquid Stocks for Intraday Trading
The liquid stock has thousands of buyers and sellers at any given price point. This means – liquid shares allow you to easily buy/ sell at any price that you want.
With an illiquid share, your second leg of intraday day trade may get stuck for the non-availability of buyers/ sellers.
#2. Keep Strict Stop Loss
Without a stop loss, your risk in a position is unlimited in case of a sudden steep adverse price movement. Which will cause you deep losses.
Stop-loss help you avoid such situation.
#3. Keep Discipline and Avoid Being Greedy
Keep your emotions out while intraday trading. Emotions overcome your logical thinking and decision-making ability.
Have a clear target and stop-loss price before you enter an intraday trade. And close your position when the price level is reached. Use stop loss and avoid waiting for prices to recover which may or may not happen.
Likewise, book profits when your target is reached without waiting for a price rise which may or may not happen.
#4. Use 10% of the Capital for a Single Intraday Trade
Using all of your capital in a single trade is highly risky. With any adverse movement, you may lose a high amount of capital that you are not ready to bear.
If you use 10% of your capital for a single trade then even if you lose all the capital you have the option to make the next intraday trade.
#5. Do Not Wait for a Big Move
The stock market movement is hard to predict. So you need to avoid waiting for a big price movement that may happen or not.
Instead, you should try to close your trade with a 2-5 rupees price difference. This way you can do multiple trades as compared to getting stuck in a single trade in anticipation of a large price movement.
There is a certain amount of risk in any kind of trading if done without thinking. But intraday trading can cooly add Rs. 500 to 1000 daily to your monthly income if done in a disciplined manner.
In the end, you need to have more number of winning trades as compared to the loss-making trades.
The additional money can be utilized to supplement your salary or can create a corpus of additional funds.