Introduction

There are many types of trading, but intraday trading, by far, is one of the most popular ways of trading. Granted, intraday trading comes with its fair share of risks, comparatively more than other trading methods. This is solely because, despite the risks associated with intraday trading, it is irrefutably one of the most rewarding trading methods that traders can access. Here we will take a look at different aspects of intraday trading including intraday trading time and the benefits of intraday trading. 

Understanding Intraday Trading

Before getting started, however, you must know the basics of what intraday trading is all about. Intraday trading is a trading method that involves the buying and selling of securities like stocks, ETFs, bonds etc, on the same day within a specific time bracket. These securities cannot be held after the market closes, however, intraday traders do have the potential to make huge gains from the momentum of stocks and the market volatility.

As intraday trading comes with its set of risks, traders must exercise caution by placing the target and stop loss orders immediately after executing trades. This will help minimise any potential losses that might occur due to any sharp price movements in the market. 

Advantages of Intraday Trading

Here is a look at some of the main advantages of intraday trading.

• The Use of Leverage 

Think of the practice of leveraging in the stock market akin to taking a bank loan. By using leverage, intraday traders can increase their profit on trades. Leverage is taken from brokers who evaluate an intraday trader’s shareholding record and the cash availability they hold. Traders can opt for margins between five to ten times the cash they have in their trading account.  

• Fewer Chances of Overnight Risks 

There are many reasons why stock prices keep fluctuating. Some of these reasons include a company’s financial results, its position in the industry, several macroeconomic factors etc. Negative overnight news stories could very well end up causing losses to a company’s stocks the next day as well. However, since intraday trading timings are between 9:15 am and 3:30 pm on the same day, the possibility of such overnight news adversely affecting the stocks is non-existent. Any activity or trades that need to be carried out are carried out in one day, without carrying all the stress of overnight price changes with them when they finish trading. 

• Sell First Buy Later

Another great advantage of intraday trading is that it holds the possibility of providing the trader with greater potential for profits in a bearish market. This is mainly because of selling securities first and then buying them later. There is no doubt that futures and options also let traders carry out such trades but with the need to invest higher than intraday trading. This is why if, as a trader, you believe in the ‘sell first, buy later’ strategy, intraday trading might be perfect for you.

Conclusion

There are many benefits to intraday trading undoubtedly. From the use of leverage, less overnight risk and the option to use the ‘sell first buy later’ strategy, intraday trading truly is a great way to trade. However, it is important that trades remember that it can be equally risky as well. This is why anyone new to the world of trading needs to step cautiously around intraday trading and implement certain safety measures like stop loss orders when they trade. This will help them reduce any potential losses that they might end up incurring.