10 Rules for Successful Intraday Trading

The Ultimate Guide to Intraday Trading: 10 Proven Rules for Stock Selection & Profit Maximization

Introduction

Intraday trading, also known as day trading, is a fast-paced trading style where traders buy and sell stocks within the same trading day. Unlike long-term investing, intraday trading capitalizes on short-term price movements, requiring sharp analytical skills, discipline, and a well-structured strategy.

While the potential for high profits exists, so does the risk of significant losses. To succeed, traders must follow strict rules for stock selection, entry/exit timing, and risk management.

In this comprehensive 1500+ word guide, we will explore:
✅ 10 essential rules for picking the right intraday stocks
✅ Key strategies for maximizing profits
✅ Common mistakes to avoid
✅ Advanced techniques used by professional traders

By the end, you’ll have a step-by-step framework to improve your intraday trading performance.

Rule 1: Master the Fundamentals of Intraday Trading

Before jumping into trades, you must understand how intraday trading works.

Key Concepts Every Intraday Trader Must Know:

• Market Hours: NSE/BSE trading hours (9:15 AM – 3:30 PM)
• Order Types: Market, Limit, Stop-Loss, Bracket Orders
• Leverage & Margin: How brokers provide leverage (up to 5x-20x)
• Settlement Cycle: T+1 (Trade + 1 day settlement)

Why This Matters:

Without a solid foundation, traders often make avoidable mistakes—like misusing leverage or holding positions overnight.

Rule 2: Learn Proven Day Trading Strategies

Not all strategies work for intraday trading. The best ones include:

1. Scalping

• What it is: Making small profits (0.5%–1%) from multiple trades.
• Best for: Highly liquid stocks (e.g., Reliance, HDFC Bank).
• Tools Needed: Level 2 data, Time & Sales.

2. Momentum Trading

• What it is: Riding strong trends in high-volume stocks.
• Best for: Stocks breaking out of key resistance levels.
• Indicators: Volume, MACD, RSI.

3. Breakout Trading

• What it is: Entering when a stock crosses a key resistance/support.
• Best for: Stocks consolidating in a range before a big move.
• Chart Patterns: Flags, Pennants, Triangles.

4. Reversal Trading

• What it is: Predicting trend reversals at key levels.
• Best for: Overbought/Oversold stocks (RSI >70 or <30).
• Risk: Higher, as reversals can be false.

Pro Tip: Stick to 1-2 strategies and master them before trying others.

Rule 3: Apply Strict Stock Selection Criteria

Not all stocks are good for intraday trading. The best ones have:

High Liquidity

• Why? Ensures easy entry/exit without slippage.
• How to Find: Look for stocks with high average volume (e.g., >1M shares/day).

Strong Volatility

• Why? More price movement = More profit opportunities.
• How to Measure: Use Average True Range (ATR).

Sector & News Correlation

• Why? Stocks react to earnings, government policies, global trends.
• Example: IT stocks rise on weak INR; Pharma stocks jump on FDA approvals.

Best Intraday Stocks (Examples):

• Nifty 50 stocks (Reliance, ICICI Bank, Infosys)
• F&O stocks (high liquidity & volatility)

Rule 4: Track Market Leaders & Laggards

A smart trader watches:

Market Leaders (Strong Uptrend)

• Stocks outperforming the index (e.g., breaking 52-week highs).
• Example: If Nifty is up 1%, but Tata Motors is up 5%, it’s a leader.

Laggards (Potential Reversals or Shorting Opportunities)

• Stocks underperforming despite a bullish market.
• Example: If Nifty is up, but HUL is down 2%, check for weakness.

Tools to Use:

• Stock Screeners (TradingView, Moneycontrol)
• Heatmaps (NSE Heatmap, ET Markets)

Rule 5: Set Clear Exit Points Before Entering

Most traders fail because they don’t know when to exit.

Profit Booking Strategy

• Trailing Stop-Loss: Adjusts as the price moves in your favor.
• Fixed Target: Exit at 1:2 or 1:3 risk-reward ratio.

Stop-Loss Strategy

• Never move stop-loss wider—stick to your initial plan.
• Example: If you buy at ₹100, set SL at ₹98 (2% risk).

Pro Tip: Use bracket orders to automate exits.

Rule 6: Prioritize High-Volume Stocks

Why Volume Matters:

• Low volume = Slippage (difficulty exiting trades).
• High volume = Tight spreads, better execution.

How to Check Volume:

• Relative Volume (RVOL >1.5) = Higher than average volume.
• Volume Spike Scanners (Zerodha Streak, TradingView).

Rule 7: Master Short-Selling Techniques

Markets don’t always go up—short-selling lets you profit from falling stocks.

When to Short?

• Breaking Support Levels
• Overbought RSI (>70) with Bearish Candles
• Negative News Impact (e.g., poor earnings)

Best Stocks for Shorting:

• Weak sectors (e.g., PSU banks in a bearish phase).
• Stocks with high delivery % selling.

Rule 8: Capitalize on Upward Momentum

How to Ride Trends Like a Pro:

• Enter Early: Don’t chase after a 5% move.
• Use Moving Averages (50 EMA, 200 EMA) for trend confirmation.
• Avoid Overtrading: Not every stock will trend—wait for the best setups.

Rule 9: Trade the Right Volatility Levels

How to Measure Volatility?

• Average True Range (ATR): Higher ATR = More volatility.
• Implied Volatility (IV): For options traders.

Best Volatility for Intraday:

• Too High: Risky (panic moves).
• Too Low: No profit potential.
• Ideal: 2-3% daily range.

Rule 10: Follow the Trend Religiously

The trend is your friend – But how to identify it?

• Higher Highs & Higher Lows = Uptrend
• Lower Highs & Lower Lows = Downtrend
• Sideways = Avoid trading (chop zone)

Best Trend Indicators:

• Moving Averages (20 EMA, 50 EMA)
• ADX (Above 25 = Strong Trend)

FAQs on Intraday Trading

❓ How Do Day Traders Determine Stock Correlation?

• Use correlation matrices to see how stocks move relative to Nifty/Sensex.
• Example: IT stocks often move together (Infosys, TCS, Wipro).

❓ How to Decide Exit Points?

• For Profits: Trail stop-loss or book partial profits at resistance.
• For Losses: Never risk more than 1-2% per trade.

❓ How Can I Improve My Day Trading Skills?

• Journal every trade (entry, exit, mistakes).
• Backtest strategies before using real money.
• Follow expert traders (but don’t blindly copy).

❓ What’s the Biggest Risk in Intraday Trading?

Overtrading & Lack of Discipline – Many traders blow accounts by ignoring stop-losses.

Final Thoughts: Key Takeaways

1. Stick to liquid, volatile stocks (Nifty 50, F&O stocks).
2. Use stop-loss always – No exceptions.
3. Follow trends – Don’t fight the market.
4. Keep learning – Markets evolve; so should you.

Ready to Start? Open a demo account, practice these rules, and transition to live trading with confidence!

Disclaimer: 

Stock market investments are subject to risks. This article is for informational purposes only. Please consult a certified financial advisor before investing.

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