Know the Advantages and Disadvantages of Intraday Trading


We define intraday trading as opening and closing positions on the same business day. By the end of the day, you have the option to purchase the stock, sell it, or even sell the stock and then buy it again. In either scenario, there is no stock delivery since there is no net position.

However, your trading account will be credited or debited for any gains or losses from these intraday trades. However, have you ever considered the advantages and disadvantages of intraday trading? Intraday trading undoubtedly has disadvantages, as well as some obvious benefits. The blog contains the details of benefits and drawbacks of intraday trading and the top trading brokers.

What benefits and drawbacks do intraday trading offer?

Since you only have six hours to close an intraday transaction, it makes intraday trading distinctive in that you hold the position for a short period of time. A position is opened and closed on the same day in an intraday trading. Intraday trading is a complex game that involves self-control, talent, risk-taking, and bravery. In order to catch speed and enter and depart at a profit, it also requires speed. Let’s start by taking a closer look at a few of the advantages and disadvantages of intraday trading.

Since you merely pay a margin and trade on the stock market in intraday trading, you don’t need as much capital as you would in delivery trading. Your earnings may increase as you trade on margins. If your margin is six times, for instance, a profit of 100 rupees becomes a profit of 600 rupees.

The ability to trade both directions is a distinctive characteristic of intraday trading. When engaging in intraday trading, you can make money by buying or selling shares.

Short selling is expensive, challenging, and not easy in India. You may successfully employ a bearish opinion on a stock during intraday since you can even sell it short and buy it again by evening.

On paper, intraday trading appears to be hazardous, but in practice, you trade with stop losses and profit objectives, which automatically reduces your risk in terms of the largest possible losses. In that sense, intraday trading is superior to margin funding since it resembles borrowing money from the market without having to pay interest.

You may get significant gains in intraday trading if you execute a few deals successfully. But keep in mind that this magnifying impact can both help and hurt you.

Now let’s talk about some of the drawbacks of intraday trading. In intraday trading, your window is only roughly 5 to 6 hours long. You must shut out the position if you don’t acquire the necessary moment inside that time frame.

Losses may be amplified and increased in the same way that profits can. Your cash flow risk is also pretty substantial if you are a full-time intraday trader.

The top trading brokers on intraday exchanges are more susceptible to market manipulation than other types of trading. You can be seduced by a few profitable transactions and risk money loss through aggressive behavior.

The majority of intraday trading is a disciplined game. Your intraday trading success may suffer if you let your self-control and risk management flag even just one day.

You must develop your analytical, chart-reading, and trading skills. putting on all these headgear and playing the roles regularly may quit the demand one day. In most circumstances, sudden spikes in volatility can work against you and increase your losses to uncontrollable levels. Be careful with that since one or two terrible days are plenty. You run the risk of missing out on long-term trading opportunities by trying to quickly join and leave positions. If you are an intraday trader, you have too little room for mistakes.

Describe intrinsic value

Intrinsic value is a significant factor in the fundamental examination of equities. What exactly is this idea? An objective valuation for the firm represented in rupees and based on things like future cash flows, asset value, brand value, and other intangibles is referred to as intrinsic value.

There is nothing concrete and undefined about intrinsic worth. When two analysts examine the same firm, they may come to two different conclusions on the company’s intrinsic worth. It is helpful since you often purchase equities when the market price is well below the stock’s underlying worth. The margin of safety is the name for this space. Similar to this, you should reduce your holdings of equities whose market price is significantly higher than their intrinsic worth, since this is an indication of stock market froth.

How are technical diagrams read?

To read technical charts and patterns, follow these steps.

Choose the stock first, and then choose the precise indicator you wish to monitor, such as moving averages, PFC, etc. When searching for something, you must use the right symbol. Whether you’re looking at extremely short-term, short-term, or longer-term patterns will determine your time horizon. You have the option of using weekly charges, daily charts, hourly charts, minute by minute charts, tick by tick charts, annual charts, etc.

Monitoring pricing and volume represents the third phase. Both of them are essential. Price patterns reveal the price’s direction, but prices do not convey the mover’s confidence. Only the  top trading brokers’ volumes can demonstrate that.

Wrapping Up

One of the primary advantages of intraday trading is the absence of any overnight risk. Because the trader must close the position before the trading day is through, the profitability is protected against changes brought on by occurrences during this time. Lastly, pay attention to moving averages such as DME, SMA, EMA, etc. That is a crucial stock analysis tool. Patterns in charts are often represented by price lines that cross the moving averages. It recognizes trend patterns and provides trade alerts.


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