Intraday Trading

Intraday trading refers to opening and closing a position in a security in the same trading day. This can be buying and selling to capitalize on a potential rise in a security's value or shorting and covering the short to capitalize on a potential drop in value. Intraday traders capitalize on small moves in the value of a security by using "leverage" or "margin", which basically means borrowing money. Most day trading accounts are allowed to take an initial position in a security that is 4X the value of their account (per securities regulations), but some professional accounts get more leverage (i.e. 10X). For instance, a day trader with Rs.10,000 in his/her account can take a Rs.40,000 position in a security for day trading purposes. This amount is not allowed to be held overnight (only about 2X the value of the account can be held overnight per securities regs). The leverage inherent in day trading allows small gains in a position to yield meaningful profits (and losses). Most day traders are very strict about cutting losses with "stop loss" orders. This limits the potential downside (but not the upside) on any particular trade, hence the adage "cut your losses short and let your profits run". With this basic strategy, a day trader can be wrong on 50% of his/her trades and still make good money. Day trading styles vary from "scalpers", which take positions for only a few minutes, to holding a position for most of the day. Some day traders are momentum followers and jump onto any given move, while others try to identify intraday reversals. Virtually all day traders use technical analysis (stock charting) heavily in their decision making

Day trading used to be the preserve of financial firms and professional investors and speculators. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, day trading has become increasingly popular among casual traders due to advances in technology, changes in legislation, and the popularity of the Internet.

Some day traders focus only on price momentum, others on trend patterns, and still others on an unlimited number of strategies they feel are profitable. Winning day traders find they must learn to be more patient for the opportunity to ride on the strong move, that may arise at any moment.