Benefits of Intraday Trading

According to market regulator Securities and Exchange Board of India (SEBI) reports, one out of three individuals who trade in the equity cash segment engages in intraday trading. The number of intraday traders increased to 69 lakhs 4.6 times in FY23 compared to FY19. 

This increased proliferation of intraday trading among traders is due to several reasons. It allows them to: 

• Make profits in both bullish and bearish markets 
• Take advantage of short-term market fluctuations
• Use leverage to trade larger amounts and 
• Actively participate in the market every day. 

To know more about these and related benefits of intraday trading, read on until the end! 

Benefits of Intraday Trading

Immediate Profit Realisation 

The first and most obvious benefit of intraday trading is that it allows traders to make quick profits within the same trading day.

In intraday trading, positions are taken and squared off before the market closes; it allows traders to capitalise on short-term price movements and secure their gains the same day. 

By the end of the day, you know exactly how much profit you’ve made. This quick turnaround makes intraday trading appealing for those who want to capitalise on new trading opportunities quickly.

Leverage By Broker

Imagine a scenario where you have Rs 1 lakh in your demat account, but you can trade with Rs 5 lakh. 

Yes, that’s possible because of the leverage given by the broker. 

For instance, Groww provides 5x leverage. If one has ₹10,000 to trade, Groww gives 5x leverage, ₹50,000 in this case. Thus, one can take bigger trades and earn higher profits. 

The leverage offered in intraday trading has made it a popular choice among traders. 

While leverage can increase profits, it also carries a higher risk. If the market moves against your strategy, your losses can be amplified because you are risking a bigger amount. That’s why it’s important to be cautious and use it carefully. 

Opportunities for Learning and Growth

Intraday trading offers many opportunities for learning and growth. Since traders make multiple trades in a single day, they get to practice and refine their trading skills. 

Each trading day presents different market conditions, trends, and price movements. So, one learns to tackle new challenges by reading charts, technical analysis, and making quick decisions based on observations.

Liquidity and Volume

In Intraday trading, creating positions in liquid stocks with an average daily volume of more than one crore is beneficial. High liquidity indicates plenty of buyers and sellers in the market, which allows traders to enter and exit positions quickly. 

High volume also means there is a lot of trading activity throughout the day, which creates more opportunities for intraday traders to find profitable trades. 

Eliminate Overnight Market Uncertainty

When the market opens, unpredictable events, such as supply, demand, economic factors, geopolitical events, company news, etc., impact share prices.

Let’s say you made a gap-up position, but the market opens with a gap-down the next day or vice versa. Due to this, your strategy may not work or may backfire. That’s why holding positions overnight when the markets are closed is very risky. 

However, intraday trading eliminates this overnight market uncertainty since all positions are closed by the end of the trading day.