Explore Intraday, Option, and Algo Trading – A Beginner’s Quick Guide
The past few years have witnessed technology laying the groundwork for anyone to trade in the financial markets. The advent of many platforms facilitating an Online Demat Account has ensured anyone can start their trading journey. Whether a person is a fresher in trading or is on his exploratory journey in any of the segments like intraday trading, options trading, or algo trading, one must familiarize himself with the basics before taking up any activity in the market. This article explains these underlying concepts in simple language along with how trading hours in India, MCX holidays, and market schedules can influence a trading style, especially for young professionals wishing to start off.
Understanding the Online Demat Account
A Demat Account holds shares and other securities in an electronic form and hence is an abbreviation for the dematerialized account. It is like a bank account that holds money; only this one holds financial instruments like shares, bonds, mutual fund units, etc. Opening an Online Demat Account has become very easy, often requiring few documents like a PAN card, Aadhaar card, and a bank account. This account is mandatory for trading or investing in the Indian stock markets. One can start trading according to their risk appetite and understanding once this account is set up.
What is Intraday Trading?
Also referred to as day trading, intraday trading involves buying and selling stocks or derivatives within a day. In contrast to investing, where the goal is to hold stocks for the long term, day trading is short-term oriented and intends to profit from price movements.
Features of Intraday Trading:
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Traders square off their positions before the market closes
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Traders look to profit from price changes during the day.
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It is called active trading because traders need to follow the market constantly.
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Brokers usually charge far less than for delivery trading.
With the above-mentioned opportunities, traders face market risks. For beginners, it is suggested to start with a small amount of trading so that they can learn as they go on.
Trading Hours in India for Intraday Trading
In India, the trading schedule confines itself to defined hours. The following are the prescribed trading hours in India for equity markets:
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Pre-Opening Session: 9:00 AM to 9:15 AM
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Normal Trading Session: 9:15 AM to 3:30 PM
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Post-Closing Session: 3:40 PM to 4:00 PM
Intraday traders must ensure that they complete all their trades between 9:15 am and 3:30 pm. If the orders are not squared off within this time frame, brokers will square them off automatically as per their policies.
What is Options Trading?
Options trading is a contract that gives the buyer of the option the right, but not the obligation, to buy or sell the underlying asset at a given price on or before a particular date.
There are two important types of options:
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Call option: the right to buy the asset.
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Put option: the right to sell the asset.
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Traders typically use options for the following:
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Hedging present positions.
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Speculating on the direction of the market.
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Earning income through various selling options.
Introduction to Algo Trading
Algo trading refers to applying pre-defined trading instructions via computer programs. Traders base these instructions on price, time, volume, and other market conditions.
Advantages of Algo Trading:
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Traders reduce emotions in decision-making.
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Traders achieve more rapid order execution.
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Traders find a method to efficiently process bulk orders.
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Traders gain the ability to back-test trades using historical data.
While institutions extensively use algo trading, brokerage firms gradually open it to retail traders through platforms that allow for algorithm creation and deployment. To get started in algo trading, beginners need to understand the basics of the market and programming or use pre-made algorithms provided by brokers.
Effect of MCX Holidays on Trading
The Multi Commodity Exchange (MCX) is responsible for commodities such as gold, silver, and crude oil, while MCX holidays are national holidays when commodities markets, either partially or fully, close for business on account of festivities or other such occasions.
This has consequences for trading:
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No trading occurs on commodities throughout such dates.
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Positions taken may open with a price gap on these favorable sites when trading resumes.
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Such dates are important for traders involved in equities and commodities.
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MCX holidays differ from stock market holidays, so traders should keep checking the calendar from their official website to avoid confusion.
How MCX Holidays Impact Your Trading Strategy: Insights for Young Professionals
Young professionals, seeing trade as an alternate income generator or simply as a hobby, should factor in the possible consequences of market holidays affecting their trading strategy. A few points to note are:
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Reduced Liquidity: Before holidays, lower market volumes make it harder to carry out trades with ease.
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Global Markets are Gapping: When Indian markets close, the currency may still move in international markets, thus establishing some price gap when the Indian markets formally reopen.
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Algo Trading Stops: Algo traders should amend or even stop their algorithms on these days to avoid erroneous trades arising out of market closures.
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Planning and Discipline: Traders should plan trades with awareness of holidays to prevent any unintentional holding of positions during market closures.
Conclusion
Setting up an Online Demat Account will open trading opportunities such as intraday, options, and algo for one. Each of these forms of trading has its niche features, risks, and requirements. A clear trading strategy, structured and calibrated against the effects of trading hours in India, MCX holidays, and market activity, forms an essential part of one’s trading strategy. Trading is not a sure path for profits, but those who prepare better, remain mindful, and have expectations grounded in reality will successfully navigate the markets.
