What is Intraday trading?
Intraday trading means a trader is buying and selling shares or other trading instruments on the same day to benefit from the stock price movement during the day.
In short, a trader closes his open trades before the closing of the trading session. He does not carry any overnight risk that can affect his profits.
There has been a sharp surge in intraday trading volumes in recent years due to rising number of demat accounts. The trading costs have reduced drastically as discount brokers charge only nominal fee compared to traditional brokers.
Intraday trading got a booster during the Covid-19 lockdowns as well. People who were restricted to their homes picked up day trading as a source for generating income.
Intraday trading is possible in any segment whether it is cash, futures and options (F&O), commodity or currency derivatives. One can also take leveraged positions in stocks that are not available in F&O segment.
Even though intraday trading eliminates overnight risk, there are other risks such as sudden news during trading hours, illiquidity in the instrument, and fluctuating volatility of the instruments. Other factors such as trading plan, money management, and risk management also affect a traders’ profitability in the long term.