What is intraday trading? (https://steptradesolutions.blogspot.com/)
Intraday trading as the name suggests refers to the squaring-off your trade on the same day.
Squaring off the trade means that you have to sell the stocks you have bought and buy the stocks you have done short sell on the same day before the market closes. Else, the exchange will forcefully exit your position with the current profit or loss you are holding.
Intraday Trading is also referred to as Day trading by many.
Why is Intraday so lucrative?
Short sell
This is a unique feature which is applicable to intraday trading only (in cash market) and thus makes it the most lucrative form of trading.
This actually allows you to sell a stock when the market is trending downwards and buyback the stock later. E.g. if the price of a stock at the opening of a day is Rs. 100 and the stock is falling, then as an investor your heart beat goes high!! But the beauty of intraday trading allows you to capitalize even in the falling market.
You can place a sell order @9.45 a.m. at Rs. 100 anticipating the price to fall and then buy the share from the exchange @11.30 a.m. at Rs. 98. Now let's imagine that the number of shares you have traded is 1000. So, thinking the other way "you have bought the share at 98 and sold it at 100, thus making a profit of (1000 *(100-98)=2) Rs. 2000!!"
"YOU CAN MAKE PROFIT EVEN IN FALLING MARKET IN INTRADAY". Sounds crazy!! But that's the reality.
Margin trading
Another unique feature, which allows a trader to make high profits by investing less amount.
Let's take an example where you are buying 1000 shares at Rs. 100 and you are placing a stop loss (the price at which your order will be cancelled by the exchange to minimize your risk and manage your money) at Rs. 97.
So effectively the amount of money you are putting into risk is (100-97)=3*1000 = Rs. 3000. So now just by risking Rs. 3000 you are trading shares worth 100*1000= 1,00,000 !!! The margin that the broker will leverage you is something between 3-20 times. Minimum Margin (MM) is the security money that will be locked by the broker from your demat during a trade as a safeguard against any unforeseen scenario in the market, which is a percentage of the total traded value as decided by the broker.
In the above example say the MM is 8%, that means the margin that will be locked is Rs. 8000 (i.e. 8% of Rs 1,00,000. Then rest 92,000 will be provided to you as a loan during the trading session by the broker against your stocks acting as collateral.
Now, if your demat account is of Rs. 20,000, then you will have Rs. 12,000 to trade with other stocks till the above trade is on. Once you close the above trade, the MM is released after adding/deducting profit/loss of the above trade to your account.
So, now if the price moves to Rs. 103 and you cut off the trade then you are earning 3000 by just risking 3000. Return On Investment (ROI) is 100%!!
If you were to trade without the margin, then you would have made a profit of Rs. 3000 by risking Rs,1,00,000 which is only yielding a ROI of 3%.
Advantages
Squaring off the trade means that you have to sell the stocks you have bought and buy the stocks you have done short sell on the same day before the market closes. Else, the exchange will forcefully exit your position with the current profit or loss you are holding.
Intraday Trading is also referred to as Day trading by many.
Why is Intraday so lucrative?
Short sell
This is a unique feature which is applicable to intraday trading only (in cash market) and thus makes it the most lucrative form of trading.
This actually allows you to sell a stock when the market is trending downwards and buyback the stock later. E.g. if the price of a stock at the opening of a day is Rs. 100 and the stock is falling, then as an investor your heart beat goes high!! But the beauty of intraday trading allows you to capitalize even in the falling market.
You can place a sell order @9.45 a.m. at Rs. 100 anticipating the price to fall and then buy the share from the exchange @11.30 a.m. at Rs. 98. Now let's imagine that the number of shares you have traded is 1000. So, thinking the other way "you have bought the share at 98 and sold it at 100, thus making a profit of (1000 *(100-98)=2) Rs. 2000!!"
"YOU CAN MAKE PROFIT EVEN IN FALLING MARKET IN INTRADAY". Sounds crazy!! But that's the reality.
Margin trading
Another unique feature, which allows a trader to make high profits by investing less amount.
Let's take an example where you are buying 1000 shares at Rs. 100 and you are placing a stop loss (the price at which your order will be cancelled by the exchange to minimize your risk and manage your money) at Rs. 97.
So effectively the amount of money you are putting into risk is (100-97)=3*1000 = Rs. 3000. So now just by risking Rs. 3000 you are trading shares worth 100*1000= 1,00,000 !!! The margin that the broker will leverage you is something between 3-20 times. Minimum Margin (MM) is the security money that will be locked by the broker from your demat during a trade as a safeguard against any unforeseen scenario in the market, which is a percentage of the total traded value as decided by the broker.
In the above example say the MM is 8%, that means the margin that will be locked is Rs. 8000 (i.e. 8% of Rs 1,00,000. Then rest 92,000 will be provided to you as a loan during the trading session by the broker against your stocks acting as collateral.
Now, if your demat account is of Rs. 20,000, then you will have Rs. 12,000 to trade with other stocks till the above trade is on. Once you close the above trade, the MM is released after adding/deducting profit/loss of the above trade to your account.
So, now if the price moves to Rs. 103 and you cut off the trade then you are earning 3000 by just risking 3000. Return On Investment (ROI) is 100%!!
If you were to trade without the margin, then you would have made a profit of Rs. 3000 by risking Rs,1,00,000 which is only yielding a ROI of 3%.
Advantages
- Higher profits with lower money
- Profit booking in same day, hence no worry of market fluctuation the next day.
- Trade higher quantity of shares with lower account value.
- Make profits in falling markets.
Disadvantages
- Risky, as you need to master the art of trading at its best.
- In unfavorable conditions (when you are making loss) you have to close your positions.
- Need to stay away from extreme volatility and stale market. Cannot (should not) trade in these days.
More details on : https://steptradesolutions.blogspot.com/
7 FEB 2024
Today we have bought lot of ITC future LONG = 1600 one lot @ 406 , and we will keep it for till it generates profit when the market will rise again.
The timing for buying and selling a trade is an important aspect of trading.
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