Traders are a fan of the Intraday trading segment because of its quick money-making abilities. We needn’t even run a poll to prove this. Traders who choose to test themselves in intraday waters would love to learn through Intraday Trading Examples.
Also known as Day Trading, the whole trading span of intraday trading is limited to a single day.
The idea remains that financial security (stocks, commodities, derivatives, currency) is first purchased and later sold at a price higher than its purchase price.
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Traders can learn through intraday trading examples how to leverage the stock market volatility that is fluctuations in stock prices to make profits by taking positions in stocks for a price lesser than the particular stock’s value and close all the positions later in the day before the stock market closes.
This process of closing all open positions on a stock before the market closes is called “Squaring Off”.
Intraday traders square off their positions, that is the traders that have purchased stocks must sell and those who have sold must buy at the end of the day.
But, all this looks easier on paper than actually having to do it in real life. Therefore, we dedicate this article to the task of providing a practical lesson on how to trade using Intraday Trading Examples:
Intraday Trading With Example
For executing Intraday trading, traders need to be well versed with the various intraday trading orders. What looks like a simple task to many, the trading process will require a trader to make several orders. We talk of every such order provided with Intraday Trading examples.
The trading process doesn’t only consist of the purchase and selling of the stock. There are various orders that a trader will have to implement in order to efficiently trade and make profits by trading on stock markets.
The list of various types of Intraday orders consists of – Market Order, Limit Order, Stop Order, Stop Limit Order, etc. So, it becomes important to learn about the types of intraday orders, the purposes they all serve, and how and when to place them.
Also Read: Intraday Trading Rules
When a “Market Order” is placed it means that the trader wants to purchase or sell a particular stock. The trader instructs the stockbroker to immediately purchase or sell the stock at the available price.
The stock market moves quickly, rather too quickly sometimes for a trader’s liking. Traders need to move just as quickly and place their orders at the right time as soon as they see an opportunity rise, hence, the market orders need to be fulfilled immediately.
Example of Market Order – When a trader places a market order to purchase 100 shares of Airtel, the stockbroker instantly credits 100 shares of the stock in the trader’s Demat account.
Also, traders should have a look at the stock’s liquidity before placing the market orders. As stocks that have comparatively high liquidity tend to enjoy higher ease in trading transactions.
When a trader places a Limit Order, it depicts that the trader has set a particular limit for selling a stock. The stock automatically gets sold as soon as the stock reaches the price.
A Buy Limit Order placed by the traders gets fulfilled at the mentioned limit price or lower, whereas a Sell Limit Order gets automatically executed at a specified limit price or higher.
Here is one of the Intraday Trading Examples within a limit order:
Example – A trader wants to purchase TATA stocks currently available at a price of Rs 200. The trader believes the prices are too high for his liking and thus decides to wait on the stock and places a Buy limit order at Rs 195.
The stock price does eventually fall to ₹195, and the Buy Limit order gets executed. Once the trader has his stock, he places a Sell Limit Order at Rs 200.
The order will only get executed if the stock price again fluctuates upwards of Rs 200 or higher.
A trader places Stop Orders to purchase or sell a stock after its price fluctuates past a particular price. By placing a Stop Order, the trader safeguards himself against losses and also secures the profits.
The order remains inactive until the stock reaches the specified stop price. The trader would ideally place a Buy Stop Order at a price above the current market price in an attempt to gain the maximum profits.
Similarly, the trader places a Sell Stop Order at a price below the current price of the stock as a measure against incurring losses. The order gets fulfilled automatically as soon as the stock touches the stop price.
Let’s take a quick look at this Intraday Trading Example:
Example – A trader owns a stock that has a current value of Rs 100. The trader then places a stop order to instruct the stockbroker to sell the stock for Rs 98.
In case, the price comes down to Rs 98 or even lower, the stop order gets executed as a market order to sell the stock. The stock automatically gets sold at the best available price at the time of the trade.
Stop Loss Order
A trader places a Stop Loss order with a stockbroker to purchase or sell a stock as soon as it reaches a particular price. The stop-loss order is employed by traders to limit their losses.
Before placing a Stop Loss order, the trader needs to decide a stop price. The stop price shouldn’t be set too close to the current price as the market fluctuations can lead to unnecessary activation of the orders.
Example – A trader holds a position on a share whose value is Rs 100 that is bullish. But if the trend reverses, in that case, the trader can make use of the stop loss. This minimizes the loss and helps him to exit the trade at the right time.
So here, let’s consider that the trader set the stop loss at ₹95.
Through this order, the trader has instructed the stockbroker to sell the stock the very moment the stock price comes down to Rs 95. This protects the profits for the trader and saves him from incurring major losses.
Stop Limit Order
Stop Limit Order is the type of order that provides the traders the best of both a stop order and a limit order. The stop-limit combines stop order and limit order, which means that a trader can set a stop price as well as a limit price on his order,
However, in stop-limit, the order becomes a “limit order” as soon as the stock price hits the target price. This is completely in contrast to the stop-loss order, which gets executed as a market order once a target price is met.
Example – A company’s stock is valued at Rs 100 and the trader expects it to rise. The trader sets a stop price at Rs 120. In case of a stop order, the order would get executed as a market order once the stock price reaches Rs 120.
However, in a stop-limit order, a trader can also set a limit price on the order.
The trader sets a limit price of Rs 125, which is the most that the trader is willing to pay for the stock. The order only gets placed if the stock does reach the stop price at Rs 120. Otherwise, the order does not get executed.
Intraday is probably the most exciting trading game.
Such is its charm, that Intraday trading is also the most populous of all the trading segments. Many aspiring traders who see day trading as a way to make some quick money face challenges when they first start out trading.
However, those challenges can be reduced when and if the inexperienced trader learns about what all constitutes the process to place an intraday order. Intraday trading examples will teach traders the way around in day trading, and help execute intraday trades effectively.
The seemingly simple process of intraday trading involves the placement of various orders. Thus, the trader must be aware of their purposes, how to place them to get the maximum profit, and likewise limiting losses.
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