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Intraday Trading in India: A Guide

Published by Usman Ahmed, MBA (Researcher)

Intraday trading is quite popular in India. However, it is also one of the riskier investment markets in India. Since intraday trading primarily relies upon price movements of underlying assets, staying abreast of the market to make healthy profits is crucial. However, things become easier once you learn the art of day trading. In this piece, I’ll discuss different markets of intraday trading in India.   

In India, day traders usually trade equity and derivatives, including equities, currencies, and commodities. Let’s quickly review each of the trading markets. 

1) Equity Intraday Trading 

Equity intraday trading involves buying and selling underlying stock on the same day. Usually, traders need to square off their trades before the trading session ends. 

Most clients trade shares of companies listed on the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE), India. One of the prime reasons why traders prefer to trade stocks of listed companies is the liquidity element. Essentially, it can become challenging to find a buyer for a less liquid stock, especially when you have limited time to close your positions. 

Not to mention, intraday trading is not allowed for “T group stocks” in India. Concerned exchanges have employed restrictions on such stocks to restrict price manipulation. 

2) Intraday Trading in Equity Derivatives

Indian traders can also trade equity derivatives comprising options and futures. However, the choice might only be available on highly liquid stocks selected by the concerned exchanges i-e BSE, NSE, etc. 

Generally, futures and options trading is offered on stocks having high market capitalization. Not to mention, shares of companies falling in the list of top 500 are known to be the most liquid stocks. 

3) Intraday Trading in Currency Derivatives

Although the scope of currency trading in India is limited, you can trade currency derivatives in India. While currency derivatives are offered mainly on BSE and NSE, you can also buy or sell them on India’s Metropolitan Stock Exchange (MSE). It is worth mentioning here that all the options and futures trading in currencies are cash-settled in India Rupees.

The Reserve Bank of India currently allows listed four currency pairs to be traded as derivatives.

  • Indian Rupee to U.S. Dollar (INR / USD)
  • Indian Rupee to British Pound (INR / GBP)
  • Indian Rupee to European Euro (INR / EUR)
  • Indian Rupee to Japanese Yen (INR / JPY)   

Not to mention, the RBI also allowed traders to trade three cross-currency pairs, including EUR/USD, USD/JPY, and GBP/USD, on the respective exchanges.

4) Intraday Trading in Commodity Derivatives

Day traders can also try their fate in trading commodity derivatives such as oil & gases, energy products, metals and other agricultural products. Unlike currency derivatives, commodity futures and options are accessible on many exchanges in India. For example, you can trade currency derivatives on three exchanges only. However, intraday traders can trade commodity derivatives on a minimum of five stock exchanges, including ICEX, ACE NMCE, NCDEX, MCX. Not to mention, MCX is the biggest platform to trade commodity derivatives amongst the listed stock exchanges. 

Clients can trade in non-agricultural products between 9:00 AM to 5:00 PM IST. On the other hand, the trading market for agro-based derivatives remains open between 09:00 AM to 11:30 PM IST. 

Some Common Terms Used for Intraday Trading in India

1) Margins 

Margins are sometimes referred to as leverage trading. Leverage enables clients to trade large positions with limited funds. However, leverage trading involves high-risk exposure. Traders can lose part or all of their investment in a matter of seconds in a fast-moving market. 

2) Market Orders

A market order is an order to sell or buy an underlying stock immediately. When traders initiate a market order, their positions are likely to be filled at the best available prices. 

3) Limit Orders

Limit orders enable clients to execute their trades at the desired price. For example, you hold shares of a well reputable company valued at INR 520 per share. If you wish to sell them at INR 530, you can initiate a limit order. It’s simply the instructions given to your broker to buy or sell your stock for a specific price. 

4) Stop Loss

Stop-loss holds significant importance in intraday trading. It helps traders limit their losses if the market moves against them. Trading without stop-loss can be suicidal for a day trader. 

Final Words 

Intraday trading in India can help you generate quick returns with relatively low capital investment. However, it needs you to remain vigilant all the time. Also, the return rate remains low when compared with other long-term investments.   

Usman Ahmed, MBA (Researcher)
Usman Ahmed, MBA (Researcher)
Usman Ahmed is a currency trader and financial market analyst with more than 7 years of active trading experience. Besides holding a Masters degree in Business Administration, he has worked for some of the most renewed companies in the forex industry including FXCM, IQOption, MetaQuotes, Alpari, FXStreet, DailyFX and several others. Usman possesses strong technical analytical skills and is famous for his very own, informative and entertaining, writing style. He believes in naked chart trading analysis that is commonly known as price action trading. He follows global financial news and macro-economic events very closely.
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