Updated – 13 Dec 2021
One should always keep in mind that intraday trading is not a “Get rich overnight” scheme.
Like any other investment, intraday trading has its own set of rules. The trader needs to learn the skill and demonstrate professionalism while executing strategies.
You should also beware of the “stock tips and tricks’ provided by your broker and stock market gurus. Until you have done your research and create your own intraday trading strategies, trading based on others’ tips is a sure recipe for losing money in the stock market.
So, before you trade intraday, keep yourself clear of the above two pitfalls.
New traders should have a learning mindset, a disciplined approach, and mechanical trading without letting emotions interfere with your trading.
When you do that, you have a better chance of making small but consistent money at intraday trading. Intraday trading strategies are all about capturing frequent small price movements.
Intraday trades are entered for a few minutes to an hour, they usually last less than a day. Some intraday trades are closed in a few seconds. For such a small trading window one needs to have a solid intraday strategy.
The strategies rely on using various charts, indicators, studies, and patterns to predict future price movements.
If you are looking for intraday trading strategies, then this article provides you the best intraday strategies. The strategies can be learned easily (even for new traders), backtested (check strategy on historical prices), and help you enter trade confidently.
In this article, I am sharing 7 best intraday trading strategies that would help you to book profits while trading in the stock market.
7 Best Intraday Trading Strategies to Earn Money in the Stock Market
#1. RSI and Stochastic Oscillator Intraday Trading Strategy
Relative Strength Index (RSI) and Stochastic Oscillator are trading indicators that show-
- Overbought (more stock purchase has happened in the market)
- Oversold position (more selling has happened)
Both the indicators confirm the perfect overbought and oversold conditions, i.e. you have a double confirmation.
When there is too much selling, the stock price is at the lower band and both the indicators show the oversold position.
In the above chart of ITC stock, the RSI is at the lower band and the Stochastic lines have dipped below the lower band. Both of which indicate an oversold position and the sign of price reversal.
You can enter an intraday buy trade at Rs. 176.50 when the stock is in an oversold condition.
The stop loss can be placed at Rs. 175.
Likewise, when there is too much buying, the stock price is at the upper band and both the indicators show an overbought position.
This is where the RSI and the Stochastic indicator runs out of the upper band. You can see the overbuying position at a price of Rs. 178. This indicates the price reversal, when the selling starts to happen next.
You need to close the position at Rs. 178 and book a profit of Rs. 1.50.
For a trading volume of approximately Rs. 2 Lakhs you can purchase 1100 ITC shares (2,00,000 / Rs. 176).
Your profit from the intraday trade will be (Rs. 178 – Rs. 176.50) x 1100 = Rs. 1650.
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#2. 9,15,65 Moving Average CrossOver Intraday Trading Strategy
Moving averages (MA) of the stock price help plot trend lines. One can have an “n” number of moving average lines right from 1 day MA to 200 days MA.
But for the strategy, you need to consider the 9, 15, 65-day moving average lines.
To get the specific day moving average click on the moving average tool and then select the number of days to get a 9-day, 15-day and 65-day moving average lines.
In the example below, the chart for WIPRO contains all the three moving average (MA)-
- 9 day MA – green color
- 15 day MA – yellow color
- 65 day MA – the purple color is applied
Buy Trade Strategy
You can enter an intraday buy trade when the below two conditions are fulfilled-
- All the three moving averages (9,15,65) lines pass through one bullish candle
- And the next candle gives the break out of the previous candle’s high
For example, look at the circled price candle where all the three lines pass through it, which fulfills our first conditions.
The next candle immediately above it is higher than the close of the circled candle indicating a breakout.
This is where you can enter an intraday buy trade at around Rs. 223.90. For a hypothetical trade volume of Rs. 2 Lakhs you can buy (2,00,000 / 223) approximately 900 WIPRO shares.
For the buy trade, you can put stop loss at the low of the bullish candle through which all three moving average passes i.e. at Rs. 223.75.
You can close the trade at Rs. 224.75 when the prices start dipping.
Sell Trade Strategy
You can open an intraday sell trade when both of the below conditions are fulfilled-
- The three moving average (9,15,65) lines pass through one bearish candle
- If the next candle breaks the low of the bearish candle
For example, the encircled bearish candle in the above chart is where all the three MA lines pass through, which means the condition one is fulfilled.
The immediate next green candle breaks the low of the bearish candle, thus meeting the second condition.
One can initiate a sell trade at Rs. 224.25 for 900 WIPRO shares.
The stop loss can be placed at the high of the encircled bearish candle from which all the three moving averages pass i.e. at Rs. 224.75.
One can close the sell trade at Rs. 223.25 collecting a profit of Re. 1 per share.
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#3. Intraday Trading with Ichimoku Cloud Intraday Trading Strategy
The Ichimoku Cloud is also known as the Ichimoku Kinko Hyo.
On the first look, the indicator may seem complex but Ichimoku cloud is a versatile indicator that helps you find support and resistance, identify trend direction, and gauge momentum.
The indicator plots on the top of the candle chart and consists of five lines. The two lines forming the red-green cloud shows the trend. The red cloud indicates a downward trend whereas the green cloud indicates an upward trend.
The blue line is the conversion line that you need to keep track of. The line moves closer to the price chart.
The other two lines (green and red line) on either side of the blue line are baseline and lagging span.
Intraday Trading Strategy
You need to trade whenever the price goes out of the cloud. When that happens, it is an indication that a potential trend is probably interrupting the price movement.
Enter a trade (buy/ sell) when the price crosses the blue line. Hold the trade until the price is above or below the blue line. Close the trade when the price crosses the blue line or until the end of the trading day.
For example, in the graph above you can see that the price of Asian Paints has moved out of the cloud. A first signal to trade.
One can enter an intraday buy trade when the green price candle crosses the blue line at Rs. 1856. Hold the position till the price is over the blue line.
The stop-loss needs to be placed on the low price of the green cross-over candle to protect any sharp movement. In this case, the stop-loss price is Rs. 1853 (a price on the other side of the blue line).
Enter the sell trade and book profit when the price once again crosses the blue line at Rs. 1863.
Suppose you bought 100 shares for Rs. 1.85 lakhs, then your intraday trading profit will be (1863 – 1856) x 100 shares = Rs. 700.
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#4. Head and Shoulders Price Pattern Intraday Trading Strategy
The Head and Shoulder chart pattern indicates a trend reversal from bullish to bearish. This means that the upward price trend is near its ends and selling may happen soon or later.
The pattern has a baseline (indicated with dotted lines) with three peaks, the middle peak being the highest in the head and the two peaks are depicted as the shoulders.
Head and Shoulder pattern forms when –
- Left shoulder: Price rise indicated by a price peak, then followed by a decline.
- Head: Price rise once again forming a higher peak than the left shoulder peak, then there is a decline.
- Right shoulder: Price rises again to form the right peak which is lower than the head.
The strategy is easy to implement as the chart pattern provides important and easy to see levels.
However, you should wait for the pattern to complete because it may happen that the pattern may not develop at all. It may also happen that a partially developed pattern may not complete in the future.
You need to be careful and no trades should be made until the pattern breaks the neckline.
That is because we are waiting for the price to move lower than the neckline after the peak of the right shoulder.
An intraday sell trade can be initiated when the pattern completes and the neckline is broken.
On a more conservative side, you can wait till the pullback is over. Pull-back is when the price pulls to the neckline after a breakout has already occurred.
One can enter an intraday sell trade at Rs. 794 with a stop loss placed at Rs. 796. The trade can be closed at Rs. 786 where the price is trying to find some support.
For a hypothetical trade volume of Rs. 2 Lakhs, one can short 250 Infosys shares. The profit from the short intraday trade will be (794 – 786) x 250 = Rs. 2000.
You need to be careful using the Head and Shoulder pattern because –
- The pattern formations are rarely perfect
- You need to find patterns and watch them develop, that can be a long waiting period.
- The stop-loss levels will hit sometimes due to pullbacks.
#5. Buy Intraday Gap Trading Strategy
Gaps in stock prices occur at the opening time of the market which provides an opportunity to trade intraday.
The gaps are created by different factors like global news, specific company news like earning announcements.
But before that, you need to use scanners to find the gaps. Or one can watch for gaps in major news events impacting the stock markets. Like the present coronavirus spread that has led to a gap opening in all the stock markets.
For a buy, intraday gap trading select the security that opens with a gap down. Which means that the opening price is significantly lower than the previous day closing price.
For example, the share price of Infosys opened on 26th Feb 2020 at Rs. 792.50 which was lower than the previous day closing of around Rs. 799.
You need to look at the first price candle and wait for its high to break out. Here in the example, the high of the first candle is at Rs. 794.30.
When the high of a 1st candle is broken, you can take entry for an intraday buy trade. The stop-loss can be placed at the 1st candles low around at Rs. 790.
One can close the trade on filling the gap at Rs. 800 or before and book a profit of Rs. 5.70 per share.
#6. Sell Intraday Gap Trading Strategy
Like the buy intraday gap trading, you have a sell intraday gap trading strategy.
Select the security that opens with a gap up, i.e where the opening price is substantially higher than the previous day’s closing price.
For example, in the above chart, the Infosys price opened gap up at around Rs. 757 while the previous trading day close was Rs. 739
Here also you need to wait for the low break out of the first price candle. In the example, the breakout happens at Rs. 749.35, where you can short the Infosys shares.
The stop-loss can be placed at the first candle’s high price at Rs. 759. But that seems to be very far off from the trade entry price and can cause high trading losses. On the conservative side, one can place the stop-loss at Rs. 752.
You can close the short position at Rs. 744 when the prices seem to be pulling back.
On a hypothetical trading volume of Rs. 2 Lakhs you can buy 260 Infosys shares for the above trade.
Profit from the sell intraday gap trading strategy = (749.35 – 744) x 260 = Rs. 1391
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Best Intraday Trading Strategies in India
#7. Intraday Trading with Bollinger Bands
Bollinger Bands help you assess how strongly the stock price is rising (uptrend), and when the stock is potentially losing strength or is likely to reverse.
The information can then be used to make intraday trading decisions. However, there are a few things that you need to keep in mind-
- In a strong uptrend, the price will typically touch or run along with the upper band. When the price fails to do so it shows that the uptrend may be losing momentum.
- You may notice some price drops even during an uptrend. This is known as pullbacks. The pullback will typically occur near or above the moving average (middle) line.
- In an uptrend, the price should not touch the lower band. If the price crosses the middle line then it is a warning sign of a probable reversal.
For example, the stock price of Hindustan Unilever crosses the middle line at Rs. 2195. At Rs. 2197 on can enter an intraday buy trade when the uptrend gets momentum.
The stop-loss can be placed at Rs. 2194 (on the other side of the middle line) to protect from any adverse price movements.
One can hold or exit the buy position till the price is along with the upper band i.e Rs. 2210. The profit from the trade for 100 shares would be (Rs. 2210 – Rs. 2197) x 100 = Rs. 1300.
But you should definitely close the position when the price crosses the middle line at Rs. 2205.
Bollinger Bands contract (all the three lines lie very close to each other) during periods of low volatility. In such a scenario the price may bounce off both the upper and lower bands producing a false signal. So you need to trade carefully.
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Trading Rules to Follow While Using Intraday Trading Strategies
#1. Never Carry Forward to Delivery
Intraday trades are meant to be squared off on the same trading day.
If you are carrying a loss position then don’t make the mistake which everyone else does. First, they take a position in intraday and when they are losing then they carry that for the next day.
And the process repeats every time the loss happens. Have a mindset of a trader. Trade using a stop-loss and cover-trade the same day.
#2. Keep Emotions off while Trading
Intraday trading involves risk. But there are techniques and strategies for intraday trading that help you manage risk and have a good enough cash flow.
For that to happen you need to learn strategies, be disciplined at trading and keep your sentiments & emotions out. That is because the market does not understand your emotions.
Just be practical and trade as per your strategy.
#3. Choose Less Volatile and Liquid Stocks
Stock selection is the most important part in intraday trading.
Choose a stock in which you have done some company research. Where you know what the company is doing, who the management is and the company’s area of operations.
For intraday trading choose less volatile and liquid stocks that are easy to trade. That is because high volatile stocks have the tendency to trigger stop-loss easily.
In illiquid stocks that have low volumes, your trade will not get executed for the non-availability of sufficient buyers or sellers.
#4. Choose Stock that has no Earnings News
While selecting stock for intraday trading make sure that the company is not declaring results or there is any kind of corporate action.
That is because the share prices can be very volatile on such days with wide fluctuations. Even on days of repo rate announcements, budgets declaration there can be huge price movements.
This can alter your risk-reward for day trading as the trades can be riskier on such days. So keep caution on such days and select stock carefully.
#5. Use Part of Capital for a Single Trade
Intraday trading involves high risk and there can be a complete or partial capital loss. In such a scenario you should not risk trading the whole of your capital in a trade or two.
The single trade should be restricted to a maximum of 10% of the total capital because if your trade goes into loss, you don’t lose more than 10% in a trade. Additionally, you get the time to revisit your strategy and trade the next time.
#6. Trade with the Trends
Trends show the market direction. It will be prudent to sell on a falling market and buy on a rising market. You should always look for a broader trend before you day trade.
Intraday trading gives the best result when the trend is established and the direction of the market is predictable.
#7. Always place a Stop Loss Order
Without a stop-loss, you may end up holding positions theoretically with infinite losses in case of adverse market movements.
Stop-loss is a risk containment tool that needs to be placed with every order. Stop-loss will help you cut losses, prevent unmanageable market-to-market (MTM) loss and frequent margin calls from your broker.
#8. Avoid Revenge Trading
Never try to recover your losses from a particular intraday trade by revenge trading or over-trading. Overtrading will lead you to lose more money.
Instead, you should restrict trading for the day, take a break and check your trade strategy for the losses. Then you can come afresh the next day.
#9. Do not Average Loss Position
Suppose you bought a share at Rs. 190 and the price starts to move against. At the price of Rs. 188 you may think of averaging. Which may well happen when the price touches Rs. 185 and so on.
This will exhaust your margins and will add to the loss position.
Instead, you should close the trade and look for another intraday opportunity.
Intraday trading has the potential to generate decent cash flows every month only when you have a proper strategy and a disciplined trading approach. This can range from Rs. 20,000 and above depending on your base capital.
But you need to have a trader mindset and a learning approach.