What is Intraday trading, and how does it work?

Intraday securities are traded on exchanges during regular business hours, meaning "within the day." Stocks and exchange-traded funds are among these securities (ETFs).
Written by
Danish Mohd
Published on
September 25, 2023

Intraday Trading

Intraday securities are traded on exchanges during regular business hours, meaning "within the day." Stocks and exchange-traded funds are among these securities (ETFs).

Intraday also refers to the asset's daily highs and lows. A short-term or intraday trader seeking to place many bets keep an eye on intraday price changes.

These industrious traders will close out all their positions when the market ends.

How does intraday trading works?

To engage in intraday trading, the trader should choose this option on the online trading platform of the relevant Depository Participant (DP) or stockbroker.

When engaging in intraday trading, the trader establishes a position in the stock market and closes the transaction as soon as the price movements of a particular share are favourable.

The reverse situation is automatically taken at the closing market rate if the trader closes the position open throughout the day. After the trading day, the trader does not own any shares because the goal is to make money based on price movement.

What differentiates intraday trading from regular trading?

Intraday trading takes place within a single day. It means that any shares bought during the day must be sold by the end of the day, just before the markets close. The shares will be automatically squared off at close if not sold.

Delivery-based trading allows shareholders to hold onto shares for periods, allowing them to maximize profits.

Intraday trading allows for smaller capital accounts and margin payments, compared to delivery trading, which requires a substantial amount for every transaction.

A trader who can accurately assess and predict the value of shares at brief, discrete intervals is capable of intraday trading. However, other technical instruments can help in predicting short-term price changes.

However, delivery-based trading may be preferable if a person feels long-term investing is more suitable.

They can choose shares based on the intrinsic value and relevant assessments (such as the company's fundamental indicators, like the price-to-earnings ratio, book value, and the like).

What benefits and drawbacks do intraday trading offer?

Intraday trading has the advantage that positions are not affected by bad overnight news that could dramatically alter asset prices. Intraday trading also offers the capability of using tight stop-loss orders, which involves raising a stop price to reduce losses on long positions.

Another is the expanded availability of margin, which leads to higher leverage. Traders have more possibilities to learn when they engage in intraday trading.

However, there are also storm clouds to go along with every rainbow. Insufficient time for a position to see profit rise, or in some circumstances any benefit, is one drawback of intraday trading.

Another is increasing commission expenses and trading more frequently, which reduces the profit margins a trader can expect.

Pros of Intraday Trading:

  • The risk from overnight news or after-hours broker moves has no impact on positions.
  • Stop-loss orders can protect the place.
  • Increased leverage is available to regular traders.
  • Many trades improve hands-on learning opportunities.

Cons of Intraday trading:

  • Multiple commission fees are associated with frequent trading.
  • Mutual funds are an example of an off-limits asset.
  • Before a position needs to be closed out, there might not be enough time for it to turn a profit.
  • When using margin to finance purchases, losses can accumulate quickly.

How to select the stocks for Intraday trading?

When trading intraday, you must square off your position before the market's close. To execute such trades, you must select equities with sufficient liquidity.

Many advise investing in highly liquid stocks, such as large-cap firms. As a result, your deal is less likely to affect the price.

Does day trading provide a profit?

To make intraday trading profitable, the trader must research the markets before trading. They must keep up with domestic and international trends by reading the market.

They can find out about new developments in the industry as well as get government and business updates. These factors should be the trader's primary emphasis because they will decide how the stock markets will move.

Additionally, traders must set aside time to research the stocks and shares of specific businesses.

It is a good idea to have a solid understanding of which stock is available for quick sales to ensure that intraday trading benefits investors. You can initially experience a few losing trading days, but keep this from discouraging you.


The benefit of trading during the day is the crucial aspect of intraday trading. In other words, positions are unaffected by the possibility of bad news breaking overnight.

Detrimental news from the previous evening or night may, in many markets, hurt the transactions of the following day (the day after the news breaks).

It includes crucial earnings and economic announcements as well as broker upgrades and downgrades before or after the market opens.

As a result, as a trader, you stand to have better leverage. Even if you make a few mistakes, learning on the fly can help you improve with time.

Intraday trading can teach new traders. Although this kind of trading has some benefits, you must be wary of storm clouds because you must close your trades within a day.

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