InvestorQ : I am just starting out on intraday trading. I have done some basic studies. Can you guide with some basic rules that I can follow?
Nishant Chandani made post

I am just starting out on intraday trading. I have done some basic studies. Can you guide with some basic rules that I can follow?

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Niraj Mehta answered.
3 years ago
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Intraday trading is about buying and selling the stock on the same day such that the net position at the end of the day is zero. You can buy and sell the position or you can also sell the stock and buy it back before the end of the day. Whatever the profits and losses in intraday trading; they are credited or debited to your trading account on the same day. It is quick but also risky as it involves a time window of just about 6 hours. Intraday transactions are closed out by the broker if the trader forgets to close it out. Since the net position is zero at the end of the day, there is no impact on the demat account of the trader as there is no delivery. Here are some key points that you must know about intraday trading when you are a beginner.
An intraday trade order entitles you to higher leverage. That means you can put a ten rupee note and then get exposure to trade for Rs.50. That means you can pay a small margin and take a large open position. But you need to ensure that you define it as an intraday trade at the time of placing the order itself. Ideally, if you define the stop loss and the profit loss at the time of placing the order, then you can get still more leverage in the intraday trade. But don’t get carried away by the leverage. It is a double edged sword and can work both ways.
That brings us to the second point. When you are leveraged in an intraday trade, remember that it works both ways. If you have paid a margin of Rs.10,000 and taken a position of Rs.70,000, then your profits can multiply by 7 times. At the same time, your losses can also multiply by seven times. Hence stop losses are very important while trading intraday.
As a trader, you need to ensure that any open positions taken by you are closed out. If you leave it open, then your broker will automatically close all open positions after 3 pm at the available price. Remember that if the broker is not able to close the position due to technical issues, the loss will still come on you. Take responsibility to ensure closure of positions. That onus is on you and you alone.
Intraday trading is not always going to be profitable. You will also make losses since you are trading within a time span of 6 hours and the price movement may not be favorable. Be prepared for the losses and focus more on cutting your losses rather than trying to avoid losses altogether. What matters in intraday trading is not the profit or loss made in a single day but whether you are profitable over a period of time.
Learn charting and do not depend on outside calls and tips. Those friendly SMS and WhatsApp messages are good for entertainment value. Don’t put your hard money on these kinds of ideas. You can just look at these ideas for reference but intraday trading is best done by reading charts on your own. Simple charts are enough to enable you to trade. You don’t need to be an expert in charts, you just need to be familiar with interpreting the charts. Basic awareness can be good enough.
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