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Rules Of Intraday Trading

Rules Of Intraday Trading

“Intraday trading is very risky”, “You can lose money in intraday trading”. How often have you heard these sentences? But is it always the case? Definitely not! Intraday trading is capable of generating great returns if you follow some rules of intraday trading.

It is rightly said, “No matter how flexible things are, some ground rules are always required”. If you focus on what is intraday trading, its strategies and pick the right indicators for intraday trading then you can definitely end up making a good profit.

Since the trading window is limited to approximately 6 hours only, here are some of the rules that can help you in earning a good profit.

So, let’s begin!

Golden Rules Of Intraday Trading

“The goal of a successful trader is to make the best trades, money is secondary”- Alexander Elder

It is quite evident that if you want to become a successful trader, it is important that you carry out the most profitable trades. And how can you do that?

You can make the best of trading by following some golden rules of intraday trading. Let us quickly have a look at some of them.

Choose The Right Intraday Trading Time

“Time is money” and this goes very well with intraday trading. Intraday trading is making more profits in a shorter span of time. Not just a minute but even a second can cause a difference when you are practicing intraday trading.

It is therefore important that you choose the best time frame for intraday trading. The early one hour, which is from 9:30 AM-10:30 AM, is considered the best time for intraday trading. You may ask, why?

Now in intraday trading, you need to play with high volatility, so during the early hours, the volatility is high in the market. Not just that, the liquidity is also high, which means that you can easily enter and exit the stocks thus making better profits.

It is also the time when the stocks are reacting to the news of the previous night or early morning. So, you need to keep an eye on the market as well.

Suppose there is a company ABC and after the market hours on Tuesday, they announced a change in their management. Now, this can impact the stock movement and price the next day.

Now other than taking the position, it is also important to consider square-off your position at the right time.

If you are having an account with Choice then square off the position by 3:15 PM to avoid losses or any kind of penalty.

Select Stocks for Intraday Trading

It is all about picking the right stock when it comes to intraday trading. So, you need to be extra cautious when you are picking the stocks for intraday trading.

You need to focus on some key aspects when you are choosing stocks for intraday trading. The factors are as follows:

  • You should choose stocks that are volatile. Look for stocks that have medium volatility so that you can make good profits. Imagine a stock that fluctuates only 1-2% in a day as compared to stocks that can move at least 10-12%. It is definite that you will be able to make better profits on the latter.
  • It is important that you focus on the liquidity of the stock as well. If there is no demand for the stock, it can get quite difficult for you to enter or exit the stock.
  • Conduct a proper technical analysis of the stock. Using technical indicators and intraday trading strategies can not only help you in picking the right stock but also help you determine the right entry and exit points.

For better analysis and techniques learn the best setting for RSI indicator and how to use ADX indicator for day trading?

  • Keep an eye on the news and the stocks that have the potential to react in the same.
  • Study the market trends, so that you can actively ride the tide and make profits out of the same.

Define your Risk and Targets

Too much greed in real life and intraday trading will not lead you to great results. It is very important for you to define your targets before you enter trading of the stock.

Suppose you purchased a stock for ₹100, and currently it is trading at ₹120. But rather than, selling it off at the same moment, you decide to wait for another 15 minutes.

Unfortunately, the stock prices move down to ₹115 the very next movement and then never climb the ladder. In this case, instead of making a profit of ₹20 per stock, you just made ₹15.

It is, therefore, crucial to know when to exit. Not only this, but you should also know what is your risk appetite. Every trader has a different risk appetite depending on the capital that is invested, the financial goals, and many such factors.

Since the market is very volatile in intraday trading, you need to put and use stop-loss in intraday trading, for every trade. It helps you decide on an exit point and also minimizes your risk even if the market works against you.

Make Use of The Margin Facility

Margin trading is a boon for intraday trading. It gives you the advantage of trading with money that you don’t have. Your stockbroker gives you an extra amount to trade. Now there is a lot of advantage of trading using margin.

Suppose you have ₹5000, and you want to buy shares worth ₹100/each. On the same day, you sold all of the shares at ₹130/share, thus making a profit of ₹1,500.

If you would have traded the same shares at the margin, then your trading amount would have been ₹25,000. In this case, the profit would have been ₹7500.

It is therefore great to use the margin trading facility. However, it is also important not to rely completely on the margin trading facility. This is because if the market works against you, there can be massive losses as well.

However, there has been a change in the margin recently. Let us have a look at the new margin rules.

SEBI New Rules For Intraday Trading

Initially, the stockbrokers used to provide margin to their clients based on their will. The margin used to be as high as 40X-50X as well. But recently SEBI introduced their new margin rules.

So, according to these rules, from the 1st of December,2020, with every quarter the margin was set to decrease by 25%.

  • 1st December 2020- 25% less
  • 1st March 2021- 50% less
  • 1st June 2021- 75% less
  • 1st September 2021- No margin

So, now the stockbrokers are allowed to give a maximum of 5X margin. This has caused a lot of intraday traders to trade with less capital and thus generate lesser profits.

Now after this rule most of the traders look for a way of how to do intraday trading without margin? It can be done with the capital available with you, but make sure that the fund you use for trading is enough to generate profit in intraday trading.

Guard your Emotions

It is a common sight that a lot of people start trading with the research tips of known ones or just random ones that they hear. It is possible that the stocks that generated the profits for someone else, might turn out to be a flop show for you.

Also, if the market is moving against the grain, then a lot of traders tend to panic sell their positions. This can cause them to book losses.

It is therefore important to guard your emotions when you are trading in the stock market and do your own analysis before you make any major trading decisions.


There are a lot of advantages of intraday trading, and it is really possible to earn good profits if done the right way. So if you are stuck in how to do intraday trading then start smoothly by following the rules mentioned above and make your whole trading journey easier and less complicated.

Always make sure that you are working in accordance with the market trends when you are doing intraday trading. This has a higher chance of yielding your profit. Take a note of all the golden rules of intraday trading, and you will definitely emerge victoriously.

If you are looking to start day trading, open Demat account today!

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