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What is Day Trading?

What is Day Trading?

Beginner’s Day Trading Guide

Investors can buy or sell securities whenever they please, but they do it on a day when the price is right. That’s trading, and when they close the entire transaction in just one day–that’s day trading.

Key Points

  • Day traders buy or sell securities and complete the entire transaction within one day.
  • Day traders deal in investments such as stocks, commodities, and currency.
  • A day trader with trading knowledge and experience can earn substantial profits.
  • Flexible trading is essential for day trading to take advantage of fast fluctuating rates.

But when a person buys and sells securities within the same day - when he closes a transactional cycle in one day - we call it day trading. The person can go through the process multiple times in any given day. Day trading can occur in any marketplace, but it is more commonly seen in the stock market and the foreign exchange market (forex). People who perform day trading are known as intraday traders. The day traders who intend to hold on to their shares for a little while longer (say, a couple of days) are called swing traders - riding on the momentum of the stock’s movement.

Who Can Do Day Trading?

Day trading is profitable for those who have learned how to do it right. Beginners should be careful with intraday trading, for even professional and experienced traders can suffer substantial losses. Have a day trading strategy in place before going ahead with the deal.

So what is day trading?

A day trader buys or sells a share, currency, or commodities within a day. In other words, the person who trades or the day trader closes the whole deal or multiple whole deals within one trading day. It involves quick decisions as the rates rise and fall in seconds, so day traders must have a vast knowledge of the market.

Day trading is not conventional investing but is a form of trading that takes advantage of the rapid market price fluctuations within one trading session. Day traders are generally more active in the foreign exchange (Forex) to trade currencies and stock markets for stocks, shares, and other securities.


Suppose the market rate of stock A is INR 95, and the day trader buys it at that rate, waits for the rate to rise by INR 5, and sells at INR 100 to make INR 5 per share. The market lot is 100, and depending on the number of shares in hand, he makes a quick profit at the rate of INR 5 per share.

However, the market trends can be deceptive, and day traders can get carried away with the rapidly rising prices. The strategy here is to fix a reasonable profit and sell when the scrip reaches that rate. If the trader hesitates and waits for a higher price, it sometimes doesn’t take even 5 minutes for the rates to begin to drop, and traders may have to sell at INR 5 lesser than the purchase price and incur a loss.

Who Is A Day Trader?

Day traders have ample funds and knowledge of trading in the stock or commodity market or Forex, depending on the security they want to trade in. These traders sometimes take the risk of deliberately raising the prices so that they can earn higher benefits.

Experienced day traders are quick to sense short-term market turns. They research and gain all the necessary knowledge from news concerning economic statistics, market trends and sentiment, interest rate fluctuations, and corporate earnings to generate strategies to help their trading decisions. They look for situations that can suddenly cause an upturn or downturn in the market and move to earn the maximum benefits.

Who Makes a Living by Day Trading?

People with vast knowledge of the stock market and the patience to wait for the right moment to strike a deal can make a living through day trading. But people who are risk-averse or do not know how to assess and manage stock market fluctuations and risk can lose heavily from day trading.

Day Trading Stocks

Liquid stocks are the best for intraday trading as the investor needs to square them off before the market closes for the day. Large-cap stocks offer high liquidity, which is why their intraday trading impact is lower on stock rates.

How Does Day Trading Work In India?

Day trading stocks in India include equity, currency F&O, equity F&O or derivatives, and commodity F&O. As per exchange requirements -day traders need a trading account linked to their bank account to start day trading. The Demat account helps in long-term investing.

Although regular stock market investors will have a trading and Demat account, it is better to hold a separate account for intraday trading in India. That will help the investor during income tax returns filing as long-term and intraday investment tax rules differ.

After setting up the Demat and trading account, the investor studies the daily stock rates to learn and recognize price movement trends. The use of technical, analytic tools can simplify the process.

In intraday trading, a delay in the decision can change a profitable situation into a huge loss, as buying or selling at the right time is of utmost importance. Thus taking even one position at the wrong time can put an intraday trader in trouble.

The guideline from seasoned intraday traders is not to begin trading within the first hour of the market’s opening. An in-depth market study is essential; take time to study the market and its movement before dealing to safeguard against the volatility typical in the Indian stock market.

Day Trading Vs. Regular Trading

The noteworthy difference between day trading and regular trading is that in the latter, the seller surrenders the stocks, and the buyer accepts delivery. There is a physical movement of securities between the two. The shares will be removed from the seller’s Demat account and added to the buyer’s Demat account.

The entire transaction takes a few days to complete. Intraday trading allows the squaring-off of positions on the same trading day. That means a trader can offset a buy with a sell, so there is no need to transfer shares from the seller to the buyer.

In Conclusion

Unlike regular trading, intraday trading offers much higher margins on lesser capital within a short tenure. But they are also highly risky and require constant monitoring. The best way to profitable day trading is to use short-term investing strategies.


Is it possible to get rich by day trading?

While some people can make a living through day trading, most day traders experience long-term losses. And that is not because day trading is not a lucrative trade but because they jump into it without learning the stock market trends or get too greedy and fail to make a call at the right time.

Successful traders require intense knowledge and must also create and adhere to a trading plan. Intraday trading is not about becoming wealthy overnight but making money daily over some time. Intraday trading necessitates quick thinking and mental presence. A day trader can choose from literally thousands of stocks to trade. The first step in making day trading profitable is to select the right stocks.

How many hours will I have to work as a day trader?

Day traders might put in a wide range of hours. Many people enjoy working all day. Others manage to do it in an hour or two or even less. There are also day traders who only trade at market openings and closings.

Effectively a day trader must keep a close watch on the market from the opening bell at 9 am, which signals the start of trading in an Indian stock market, right up to the closing of the trading session at 3:30 pm. Such a non-stop watch helps the trader to make the right move at the right time to reap rich rewards from day trading. Therefore in India, a day trader must work six and a half hours daily.

What is the reason for day traders to fail?

The traders who don't take trading seriously fail and frequently lose money. Most beginner traders look for quick ways to get rich and don't properly plan their strategy for approaching the market. Although they may not know it, some unskilled traders engage in gambling.

How much time should I take to train myself to become a day trader?

Suppose the aspirant is committed enough and spends enough time using their knowledge and the day trading tactics taught on simulator or demo accounts. On average, they can start day trading in roughly three months.

What does a day trader do? Are day traders in India successful?

Day traders buy and sell securities several times a day. But they must square off all transactions within one working day. They cannot carry forward opening positions to the following day. In India, several people make their living through day trading because it is a simple and calculated approach to earning money.