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Getting Intraday Trading Strategy Right

by Tavaga Invest

There is a method in the chaos of intraday trading with careful strategies and rules

Getting Intraday Trading Strategy Right

Retail investors while investing fundamentally have reservations against looking at price charts from a technical analysis standpoint.

What to use is a function of what is your mandate: For professional Fund Managers working for Asset Management Companies (AMCs), the mandate is outperforming their respective indices whereas if you run Multicap advisory, Portfolio Management Service (PMS), or manage your own money, the endgame is to furnish absolute returns.

To show absolute returns year after year there are many things that should work out for you. Historical charts showing CAGR returns beyond a 3-year period are rightly labeled as ‘For Educational Purpose Only’ because neither you nor your clients would be happy to see underperformance (negative portfolio returns) beyond a couple of years.

However, it is ironic that the biggest beneficiaries of bull runs are ‘inactive’ / passive investors, not the active investors who like to churn the portfolio.

The practice drawing the most flak is intraday trading and retail investors are often encouraged to look elsewhere (such as pooled investment funds) for earnings growth and multiplying wealth. But it would go a long way if we know what is it that we are avoiding then again, blindly following popular advice. Intraday trading in India or day trading is not a taboo but is a strategy that needs to be dealt with with the utmost care.

What is intraday trading?

Intraday trading or day trading can be defined as buying or selling financial securities in a short time frame to make profits from the securities’ price movements. 

Intraday trading requires two parties for a trade, one to sell and the other to buy the security. Order books are maintained to align buyers and sellers. At present, trades come down to a matter of seconds.

Market functions

The approach which is often advised for retail investors is holding securities with sound fundamentals for a long duration, as opposed to intraday trading. We will call this investing in the markets, to distinguish it from intraday trading.

Usually, individuals who invest in the market, either on their own or through an advisor, have another full-time job or another source of income to fund their investments. Whereas intraday trading requires more attention and nearly the whole trading day of an individual. The latter are often day traders and intraday trading is their main source of income.

How to get started on intraday trading?

For intraday trading, we have to first open a demat account with a broker. If we open our trading and demat account with online or discount brokers, we could benefit from their lower-than-average brokerage fees, unlike those of full-time brokers.

Ideally, an investor should also have a trading IT system in place, with charting platforms that provide live data feeds for a real-time picture of the markets.

Finally, intraday tip, to trade well, we should understand how to use the broker trading terminal to place our intraday trading orders. 


Is it safe to do intraday trading?

The risks are generally higher in intraday trading than in regular trading.

The key difference between investors and day traders is that investors allow their assets to grow and accumulate wealth, whereas day traders need to withdraw their earnings on a monthly, weekly, or even daily basis in order to get by. For most day traders, trading is their primary, full-time occupation.

Hence, intraday trading today can be tricky for retail investors as they will be going up against the most seasoned traders, who may be the other party for their daily trade. 

Such traders, many of whom are employed by investment banks or trading houses, have access to such state-of-the-art analytic tools, deep pockets, and a vast wealth of research that a regular individual investor will be hard-pressed to match.

Can we make money in intraday trading? Yes, of course. Traders earn their bread and butter with intraday trading. But the odds are often stacked against the average trader. Compared to intraday trading, there are other financial strategies and instruments that are less mercurial for the risk-averse. The burden of timing the market, constant technical analysis, and unavoidable losses don’t need to be borne if one does not wish to.

Intraday trading rules

Intraday trading is a rigorous exercise that requires considerable time and resources of the trader for performing various tasks, ranging from researching and reading the market to executing the trades with the broker. 

intraday trading rules

There are some trade rules which most day traders adhere to because they act as guidelines and may be regarded as intraday trading tips. They are:-

1. Which stock is best for intraday trading? 

Day traders do not spend their energy analyzing all the stocks (or other securities such as commodities) on the exchange. Rather, they focus on selected stocks or securities in which to trade. The criteria for filtering out stocks may be summarised as follows:-

· Liquidity – The stock under question should have an ample amount of liquidity in its counter (at the market) so that the trader can take positions without worrying about the impact costs.

· Volatility Day traders would be more interested in the stocks which have the potential for sizeable price movements in a trading session. Traders use screeners to filter stocks for volatility.

· Research – Research is imperative for sharpening the intra-day strategy for traders. Not just the securities and their immediate environment but also macroeconomic events that affect financial markets are likely to be a vital part of such research. Historical trends as analyzed by technical analysis are another aspect of research useful for a day trader. The key tip for a day trader to do well is to try and anticipate scenarios that give rise to trading opportunities and arm themselves with strategies for those.

· Stocks in the news Stocks that are in the news are often preferred because news about them could potentially change their demand and supply in the market, affecting price, and could potentially be used for sketching an intraday strategy.

2. Risk-return trade-off and profit target 

 Risk-return trade-off, an important metric for intraday trading, can be done with the help of the risk-reward ratio. The risk-reward ratio is the ratio that helps the trader measure the risk they are taking to earn the reward. 

A risk-reward ratio of 1:2 will mean the trader is willing to risk Re 1 of investment to earn a return of Rs 2. Traders fix this ratio according to their style and often follow it with discipline.

3. Stop-loss orders 

 Intraday traders should not trade without stop-loss and target orders (both for selling off the securities). In the absence of stop-loss orders, for example, traders may end up losing a sizeable portion of their capital.

Setting Stop Loss
Setting Stoploss

4. Leverage 

With most brokers providing leverage five to 10 times the capital brought in by the trade, the onus on the day trader grows to keep an eye on the margin in which they are trading, so they don’t overstretch their resources.

Leverage acts as a double-edged sword, powerful if used judiciously, and dangerous if used indiscriminately. Only the most skilful and experienced traders should ramp up their trades on margin money.

5. Keeping a check on emotions 

Behavioural finance is not just for investors. Day traders should keep in mind the pitfalls of human psychology and behavioural anomalies too. Traders should avoid the behavioural biases that behavioural finance talks about.

The more disciplined an intraday trader wants to be, the more careful they have to be in letting their emotions get the better of them through a trading day. After all, in intraday trading today, trading decisions have to be taken in a matter of seconds, especially when algorithms are at work. 

Intraday trading example-

Intraday trading, in simple words, is buying today and selling today. Buying and selling have to occur within one trading session on the same day.  For example, a trader buys a stock XYZ for Rs 100 at 9:25 AM and sells XYZ for Rs 102 at 12:45 PM. The intraday profit will be 2 per cent.

Intraday trading returns are typically maximized by using leverage. Leverage enables a trader to invest more than the available capital. However, trading with leverage is as risky as how lucrative it sounds.

For example, the trader buys XYZ for Rs 100. Of the sum invested, Rs 50 is the trader’s capital and Rs 50 is invested on margin. If the stock goes up to Rs 110, the trader earns a return of [(110/50)-1] *100 = 120 per cent. If the trader had invested Rs 100, the return would have been only 10 per cent.

Conversely, let’s assume that the stock loses all its value. The situation will end up being a nightmare for the trader. The trader will lose all the equity value as well as the loan amount, in addition to the cost of bearing interest on margin capital. However, if the trader’s position falls below the minimum maintenance margin, a margin call is initiated. The margin call puts the trader under the obligation to deposit more equity in the account to make up for the margin money lost. Margin calls are initiated well before the trader risks losing all the money.

Is Intraday trading profitable?

Yes, intraday trading is profitable. The trader must develop a strategy, account for the possible downside, and stick to the plan. People lose money while intraday because of the following reasons:

  • The trader indulges in extremely volatile trades, which do not follow the market trend. The trader fails to time the trade and misses the entry point. Similarly, the trader misjudges the impact of an event-driven stock and loses to extreme volatility.
  • The trader gets carried away by emotions and decides to adopt cost averaging as a technique to average the losses. Cost averaging is buying more quantity of the falling stock so the average cost comes down. However, when the trader buys more of a stock that is falling, the trader also doubles the value at risk. Cost averaging is a viable concept for long-term investing. It should be avoided while trading intraday at all costs.
  • The trader executes multiple trades at once without a plan to cover all the positions if things go sideways. Therefore, the trader must not take too much on the plate at once. A trader may enter 1 or 2 positions and closely monitor and devote their time to those two positions.
Is Intraday trading profitable
Source Trading View; Tavaga
  • The trader does not have a written risk management plan or a profit-booking rule. The idea of trading is to lose small and win big. To be able to achieve that, the trader must cut their losses short and not get greedy while booking gains. A buy rule and sell rule must be clearly stated. The trader must also be aware of the quantum of capital that can be put at risk in a single day and the loss appetite that the trader can bear for a trading day.
  • The trader does not prioritize studying charts and trades based on market news and conversations. The trader misses out on the various technical tools at their disposal.

Intraday trading can yield positive payoffs if the trader is vigilant and responsive to market events without biases.

How is intraday trading different from regular trading?

Intraday trading is one of several types of trading strategies. The most common types of trading strategies are as follows:

  • Scalping: Traders resort to such strategies to exploit extremely small movements in the price. The idea of scalping is to keep making quick trades with small profits. The traders involved in scalping keep positions open for seconds or maybe a few minutes. Scalping is done for assets with tighter spreads so the traders have to bear a low cost of spread differential. Therefore, scalping is done when the markets offer enough liquidity.
  • Intraday Trading: Day trading involved closing the position on the same day and not carrying forward the position overnight. Therefore, day trades can last for minutes, hours, or even an entire trading session. The position will be squared off on the same day, regardless of profit or loss.

Day trading and Scalping are both short-term trading techniques that do not require the delivery of shares. Both strategies exploit intraday price movements and make use of leverage.

  • Swing Trading: For those who cannot afford as much time as day traders, swing trading offers a perfect fit. Swing trading takes delivery of shares and requires the traders to stay invested for several days or weeks. Swing trading exploits the momentum and trend of an asset. Technical analysis is equally important for swing trading. Breakout strategies offer the best returns for swing traders in that the price of the asset breaks out of its resistance and surges to offer an opportunity for swing traders.
Market Movement
  • Position Trading: Position trading is investing in its true sense. An investor takes delivery of shares after buying the shares on the exchange. The investment horizon can span from months to years. The main objective of position trading is to exploit the power of compounding. The investor believes in the long-term business potential of the company and expects a healthy return in the long term regardless of the short-term volatility. Position trading makes extensive use of fundamental analysis to shortlist potential investment options. Technical analysis is carried out to identify potential entry and exit points.

Popular Intraday Trading Strategies

  • The rules of intraday trading are applicable to any day trader and will hold them in good stead no matter what they trade in and why. An intraday trading strategy, on the other hand, helps a day trader conduct their business according to a chain of thought and logic to arrive at a targeted result.
  • An intraday trading strategy is a set of rules a trader uses to decide when to enter and close a trade. Trading strategies utilize trade screeners and trade triggers. 
  • A trade screener is a condition or a set of conditions that must be met for an asset to enter the watch list of a day trader. A trade trigger identifies the exact point (mostly price point) at which a trade will be entered. All trading strategies will have rules for entry, exit, risk management, and position-sizing.
  • Entries are the moments when conditions converge identified by and for the trader to enter trades. They can be filtered by a number of conditions. For instance, a day trader can specify an entry position when the stock price hits a 12-month low.
  • Exits can specify positions that would minimize a loss, or close a winning position after a target profit has been achieved.
  • A day trader chooses a trading strategy mostly with the aim to minimize losses during trades. Risk is not eliminated but strategies allow the trader to cuts the losses early and move on before a lot of damage.
  • Position-sizing refers to the number of shares or contracts a market participant, such as a trader, risks with each trade. It is dependent upon the size of the trading capital. Obviously, traders with more trading capital would be able to take larger positions than traders with less capital.
  • Over time, intraday trading strategies or approaches have been identified and named. What is the best strategy for intraday trading is difficult to pin down as traders favor strategies based on their risk appetite and objectives. As the markets mature with time, the strategies, too, evolve, 

Some of the commonly deployed intraday trading strategies are as follows:-


A crossover intraday trading strategy is when a trade is triggered when two similar, but not the same, market metric intersect. 

A crossover strategy is better understood by looking at the two kinds of crossovers – price crossover, and moving average crossover.

A moving average crossover occurs when a short-term moving average of an asset crosses over a longer-term moving average. 

For example, say the 5-day moving average of an asset runs below its 10-day counterpart (lower magnitude in price). If the price of the asset significantly increases, the 5-day moving average will rise. It may even intersect, cross, and rise above the 10-day moving average, making the crossover a bullish or golden one. Traders following this strategy will engage in trades at this event. 

If over time, the same asset sees its price significantly decrease, the 5-day moving average falls and this time may intersect, cross and fall below the 10-day moving average, making it a bearish crossover and triggering trades.

A price crossover occurs when the price of an asset increases above (or decreases below) a moving average of that asset. For example, the price of an asset may be below its 5-day moving average, but if the price of the asset suddenly increases and exceeds the 5-day moving average, then it will be called a price crossover and it would trigger trades. 

Simple Moving Avg
*[(Simple Moving Average 50 days (Yellow), Simple Moving Average 20 days (Green)]
Source: Yahoo Finance, Tavaga Research

Moving average envelope

A moving average envelope is another intraday trading strategy that utilizes moving averages. It involves constructing a confidence interval (let’s say a 10-per cent confidence interval) for a medium-term moving average (let’s say a 25-day moving average) to identify support and resistance levels. If the price of the asset moves beyond the 10- percent confidence level, it signals the trader to engage in the appropriate trade.

For example, if the price of an asset moved below 5 percent of the 25-day moving average, it could signal that the price of the asset has broken support and experiencing a downward price trend. The trader would then act accordingly.

Moving average envelope
Source: Yahoo Finance, Tavaga Research

Bollinger bands are used to make moving average envelopes.

Bollinger Band
Source: Tavaga Research

Above is an example of how Bollinger bands can be used for trading when the price hits the lower end of the band, the trader should go long on the asset and when the price hits the upper end of the band, the trader should go short on the asset.

Event-driven intraday trading strategies

Event-driven intraday trading strategies can be described as strategies that try to profit off events such as earnings announcements, natural disasters, or events of unusual nature.

Whenever such events occur in the marketplace, there is increased uncertainty, which in turn increases the volatility in the market.


A reversal intraday trading strategy tries to identify changes in the price and help traders take a bet on the same.

In the case of an upward price trend, the reversal would cause a break in the rise, after which the price moves downwards. Indicator tools, which help identify changes in the price direction, abound. A well-known indicator to identify reversals is the RSI (relative strength indicator).

The RSI determines if an asset is overbought or oversold. If the asset is overbought, the trend is going to reverse and the trader should take a short position. Vice versa for an oversold asset, the asset is oversold.

Source: Yahoo Finance, Tavaga Research

Improvised strategy

A trader can create their own trading strategy based on their ideology. With an understanding of how the markets work, traders may choose securities to fit in with their ideologies and principles. They may go with forex, equities or stocks, or derivatives. After choosing the market to trade in, they have to create their entry and exit points using filters.

Care should be taken to test their strategy on historical prices first, and if it reaps positive results, it can be deployed in live markets.

If we believe that negative news on Brexit drags down the Pound-sterling (GBP) and props up the Euro (euro), we should choose the market to fit trades that act on such global news — forex. 

The trades to execute in such cases would be to go short on GBP and long on the euro whenever there is news on the stalling of Brexit. 

The next step would be to test it against historical data and then deploy the strategy if it corroborates the hypothesis.

What are the timings for Intraday trading?

There are different operational timings for different securities markets. The table below shows the Indian intraday trading time limits of the markets:-

Time in market
Source: Yahoo Finance, Tavaga Research

Intraday trading requires considerable time and effort.  Ideally, a person who is starting out as a trader should practice on a demo account with mock money, before beginning to trade with real money. 

Intraday trading also requires traders to have access to a sizeable amount of capital and is not a get-rich-quick path. 

Summarizing Intraday trading tips

  1. A person who is just starting out as a trader should practice on a demo account with mock money, before beginning to commit real money.
  2. It takes money to make money, therefore intraday trading requires traders to have access to a sizeable amount of capital and is not a get-rich-quick path.
  3. Choose stocks that provide enough liquid and a fair chance to exploit strategies.
  4. Before entering into a trade, always set a hard limit on entry and exit prices.
  5. To protect a position’s downside, always establish the level of stop-loss
  6. It is advisable to close the trades of the day, as the trades were carried out solely from an intraday standpoint. Carrying over positions will prompt the delivery of shares.
  7. While paying attention to the technicals of stock, also look out for corporate events
  8. The brokerage may make or break the net realized profit. Therefore, select brokerage firms that provide user-friendly terms and platforms for trading
  9. Book profits when the target price is triggered
  10. Lastly, do not argue with the market

Who should participate in intraday trading?

Intraday trading requires time and effort:

  • Time: An intraday trader has to be present actively throughout market hours, five days a week to effectively monitor the positions. The trader has to devote enough time pre-market opening to draft the strategy for the day. The trader has to spend time after the market to analyze the strategy outcomes and calculate the net gain or loss.
  • Effort: The trader must have a sound knowledge of how markets function. The trader should be able to gauge the demand and supply of stock. The trader needs to be on the lookout for plausible opportunities constantly.

Where to place intraday trades?

A trader can place intraday trades only during market hours. The trades can be placed with the brokerage firm by either calling the broker or logging into your trading account. The trading account should allow the trader to trade in the desired asset, such as currency or commodities.

Intraday trades for equity are similar to placing a normal buy order. The only difference is that the trader has to select the option for day trading and untick delivery. The trader can also enter multiple options of stop loss and advanced trading instructions while placing the order.

Zerodha Intraday Trading Terminal
Zerodha Intraday Trading Terminal

Is there any limit for intraday trading?

No. Intraday trading is only limited to the extent of the capital that the trader can commit. The trader can execute any number of trades on the exchange.

However, the limit exists on the side of the broker. If the trader decides to use leverage for trading, the brokers generally outline the margin limits. For example, a brokerage firm may allow a trader to trade no more than 20 times the funds available in the trader’s account. Even in that case, the trader can always infuse more capital to be able to trade more.

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robin sharma October 8, 2022 - 3:31 pm

Great content! I really liked this. It really helped and today I have learned something new from you This is gonna be huge. To select intraday stocks for tommorrow you can use nextday watchlist feature on the Intradayscreener website. Intradayscreener.com has created a custom algorithm that considers multiple data points like price action, Volume action, Open interest action, Funds action etc. to generate a watchlist for stocks to buy tomorrow that are likely to show some good move in the share market next day.

refer and earn demat account October 19, 2022 - 2:53 pm

Thanks for this blog. it’s very helpfull.

Shruti Patel November 21, 2022 - 2:42 pm

The article was really helpful to me because it discussed some extremely valuable strategies and gave everyone advice on how to start a career in the stock market.


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