What is Day Trading?
Day trading, also known as intraday trading, is a trading strategy where you buy and sell financial instruments within the same trading day. All positions are closed before the market closes, ensuring you don't carry overnight risk.
Key Characteristics of Day Trading
- No Overnight Positions: All trades are squared off before market close (3:30 PM for NSE/BSE)
- High Frequency: Multiple trades executed throughout the day
- Leverage Available: Brokers offer intraday margin (up to 5-20x leverage)
- Quick Profits/Losses: Results are known by end of day
Popular Day Trading Strategies
1. Scalping
Making numerous small profits on minor price changes. Traders hold positions for seconds to minutes, aiming for 0.1-0.5% gains per trade.
2. Momentum Trading
Identifying stocks with strong price movements and riding the trend. Look for stocks with 2%+ movement in first 30 minutes of trading.
3. Gap and Go Strategy
Trading stocks that open with significant gaps from previous close. Focus on gap-ups/gap-downs with volume confirmation.
4. Range Trading
Identifying support and resistance levels and trading within that range. Buy at support, sell at resistance.
Essential Tools for Day Traders
- Real-Time Charts: 1-min, 5-min, 15-min candlestick charts
- Level 2 Data: Market depth and order flow
- News Feed: Real-time market news and corporate announcements
- Scanner/Screener: To find high-volume breakout stocks
- Fast Internet: Crucial for order execution
Risk Management Rules
- 2% Rule: Never risk more than 2% of capital on a single trade
- Stop Loss: Always use stop-loss orders (typically 0.5-1% for day trades)
- Position Sizing: Calculate proper lot sizes based on risk
- Daily Loss Limit: Stop trading if you lose 6% of capital in a day
- Avoid Revenge Trading: Never chase losses emotionally
Best Stocks for Day Trading in India
Focus on high liquidity stocks with daily volume >10 lakh shares:
- Large Cap: Reliance, TCS, Infosys, HDFC Bank, ICICI Bank
- Mid Cap: Tata Motors, Vedanta, SAIL, Adani Enterprises
- Index ETFs: Nifty BeES, Bank BeES for safer plays
Tax Implications
Important: Intraday gains are treated as speculative business income and taxed according to your income tax slab (up to 30% + cess). Maintain proper trading records for tax filing.
Common Mistakes to Avoid
- Trading without a plan or strategy
- Overtrading to recover losses
- Ignoring transaction costs (brokerage, STT, GST)
- Using full margin without proper risk management
- Trading during high volatility without experience
Getting Started
1. Paper trade for at least 1-2 months
2. Start with small capital (₹50,000-1 lakh)
3. Trade only 2-3 stocks initially
4. Gradually increase as you gain experience
5. Keep a trading journal to track performance
Risk Warning: Day trading is highly risky and not suitable for everyone. 90% of day traders lose money. Only trade with money you can afford to lose.