If you buy and sell the security on the same day, this is called Intraday trading or day trading.
For example, if you brought a stock at the 9:15 am and sell before 3:30 pm, this will be Intraday trading. Or you can buy anytime on the market opening hours and sell those stock before closing the market. So that will be Intraday trading.
Day Trading Pros
- If you do same day buy and sell then the stockbroker gives you margin. So that you can buy more stock using Margin money.
The margin amount isn’t fixed it’s depending on the broker. If a broker giving you 10 times the margin that means if you have $10 then you can buy stock worth of $100. But the condition is you have to sell the stock before closing the market or the stockbroker will sell the stock and recover their margin money.
In the trading software, you will find delivery or CNC and Intraday or MIS options. if you place an order Using the Intraday option you will get Margin money from the broker. But you have to sell the stock before closing the Market.
Using the delivery option you can also sell the stock the same day. Which will be called Intraday or day trading. But you will not get margin from the broker.
- Doing day trading you are not carrying stock for the next day. so if anything news came to the market you are tension free. anything happened in the stock after closing the market that will not impact you while day trading because you already sold your share within the market hours.
- DP charge you don’t have to pay FDepository charge for intraday trading.
Day Trading Cons
- Investing share market is risky but doing Day trading is a much higher risk then delivery. because when you doing intraday trading then you have to buy and sell before closing the market. so if you are in a loss still you have to sell the stock with loss.
For Example, if you have brought a share at $200, then that day if the stock price falls to $190 on that day. but you have to sell the stock before 3.30 pm. and your loss will be $10. but for delivery trading, you can hold the stock for the next when and when the share price will rise then you can sell the stock.
this is the main risk factor in intraday. and most of the beginners trying to earn more money and loss money while doing Intraday trading. so that why I always suggest to beginners don’t do this, fast learn the market then properly. as a beginner, you can do positional trading that will be lower risk compared to day trading. After experience in the share market, you will understand you should do day trading of not.
Intraday Trading tips
Before doing intraday trading try to remember below 5 points.
1. Not to take margin money
While doing day trading try not to take leverage from the broker. leverage means the broker will give you margin money which you can use while buying the stock for day trading. For Example, you have $100 and if the broker gives you leverage 10 times leverage, means you can buy the stock worth $1000.
If your trade is correct then you can earn worth of $1000 shares profit which is much higher than $100. Suppose, you brought a share worth of $100. and share price rise to $110. so that you will get a $10 profit. but if you brought share using margin money then you can buy 10 shares of $100. if the share price rise to $110 then you will earn $10*10=$100 profit. in this case this is really good.
but if the share price is falling then you will lose $100 amount of money. for example, if the share price is falling to $90 then you will lose $10 per share. so if you brought share using leverage money then $10*10=$100. means your total money will be zero. that why you should avoid taking leverage for the broker.
2. Buy liquidity stocks
While doing this you have to trade those stock which stocks buyers and seller participant is sufficient or higher, so that you can easily buy and sell the stock.
if the stock buyer and seller participant are not sufficient then you can’t sell stock easily that can give you loss in the day trading.
3. Use stop loss
use stop loss to protect your money in day trading. after hitting you stop loss just exit don’t trade your stop loss.
4. Risk Reward ratio
your risk to reward ratio should be higher. if you set stop loss below 1% then the reward ratio should be 2% or higher. so that if you take one wrong trade and one correct trade then still you will not be in the 1% profit. in the simple word, if you want to lose $1 then try to earn $2 or higher then $2.
try to take minimum stop loss and a bigger risk.
Money management is the key to success in intraday trading. this means how much risk you can take from one trade. and how to save money from the losses.