What Is Intraday Trading in Stocks?
Intraday trading (also called day trading) is the practice of buying and selling stocks within the same trading day, ensuring all positions are closed before the market shuts at 3:30 PM. The goal is to profit from short-term price movements during the trading session. Unlike delivery trading where shares are held overnight, intraday positions do not carry overnight risk, but require active monitoring throughout the day.
How Intraday Trading Works
To mark a trade as intraday, select "MIS" (Margin Intraday Square-off) in your trading terminal rather than "CNC" (Cash and Carry for delivery). Brokers provide leverage for intraday: typically 3-5x for equity intraday, meaning you can buy Rs 50,000 worth of stock with only Rs 10,000-15,000 margin. If you do not square off by 3:20 PM, most brokers will automatically square off positions (often at a disadvantageous price), so monitoring is essential.
Benefits of Intraday Trading
- No overnight risk: positions are closed daily, eliminating exposure to overnight news or global events.
- Leverage: ability to take larger positions with lower capital, amplifying profit potential.
- Daily income potential: skilled intraday traders can generate consistent daily returns.
- Lower STT (Securities Transaction Tax) compared to delivery for the buying leg of intraday trades.
Risks of Intraday Trading
- Leverage amplifies losses equally as profits: a 2% adverse move on 5x leverage results in a 10% loss on capital.
- Requires full market attention from 9:15 AM to 3:30 PM, making it difficult to combine with a regular job.
- High transaction frequency leads to substantial brokerage, STT, and exchange charges over time.
- SEBI and multiple studies show 80%+ of intraday traders lose money consistently.
- Psychological stress from constant price monitoring and quick decision-making.
Who Can Do Intraday Trading?
Successful intraday trading typically requires: mastery of technical analysis (chart patterns, indicators), access to real-time market data, a reliable internet connection, strict risk management discipline, and the ability to detach emotionally from both wins and losses. It is generally more suitable for experienced traders who have already demonstrated consistency in delivery trading.
Key Takeaway
Intraday trading offers the allure of quick profits but carries significant risks that have resulted in losses for the vast majority of retail participants. It is a skill that takes years to develop profitably. Beginners should start with delivery trading to build market knowledge and emotional discipline before attempting intraday trading. Use the Lemonn app to track stocks and market movements to build the analytical skills foundational to any form of stock trading in India.
