Intraday trading is becoming quite popular among young investors and traders. One of the main reasons for this is that you get to see the results on the same day as you trade. It is also popular because of the margins that are available for intraday trading. But before getting into much detail, let’s look at what intraday trading is.
Intraday Trading meaning
The word ‘intraday’ is self-explanatory. When you make both buying and selling trades of a particular stock on the same day it is termed intraday trading. If you do intraday trading, it is compulsory to sell your stock on the same day you have bought it. If you fail to do so in the specified time, your broker will square off your position automatically before the market closes.
An intraday trading facility is available with almost every broker. You can open a free trading account online to carry out intraday trading. You also need not pay the Demat account opening charges as there is no requirement of a Demat account for intraday trading.
Intraday Trading Benefits
Intraday trading has some benefits which can help you make good profits over time. Here are some of these benefits:
- Profit in a falling market: Intraday traders can make profits even when the stock price is falling. This can be done using a method called Short-selling. In this method, you first sell your existing shares at a higher price and buy them back when the price falls.
- No overnight risk: Since both buying and selling takes place on the same day before the market closes, you do not have to worry about how the market will open the next day.
- Margins: Most brokers provide huge loans known as margins to us, intraday traders. You can use this money for trading purposes and keep the profits to yourself after paying a small charge for using this money.
- No Fundamental Analysis: For most intraday trading strategies, the fundamentals of the company do not matter. This takes away the burden of doing the time-consuming fundamental analysis.
- Regular income: Since you have to trade every day to make profits, this can be a source for your regular income. as you do not have to depend on static stocks for profits.
- High Liquidity: One more advantage of intraday trading is that absolute monetary assets invested can be recovered almost instantly. It isn’t obstructed through a resource buy exchange. This takes care of the liquidity needs of a trader to meet any instant financial requirement.
Alternative to intraday trading
Swing trading can be a good alternative to intraday trading. We target the volatile stocks in swing trading. When a stock’s price is very low, it is bought and as soon as the price increases, it is sold. This works somewhat similar to intraday trading as a volatile stock’s price changes very rapidly and hence returns are quick.
It is always important to keep in mind that whether it is swing trading or intraday. both require technical analysis to be done. Technical analysis is the detailed study of different types of charts. and then predicting future trends and prices using various indicators. we can use technical analysis while trading with other methods as well.
Thus, intraday trading is when both the buying and selling of the stock takes place on the same day before market close. Intraday trading has a lot of benefits. These benefits include regular income, margins, and no overnight risk. There are other alternatives available to intraday trading as well, such as Swing trading.