Buying and selling the same security within a single trading session, with all positions squared off before market close.
Intraday trading means buying and selling the same stock (or derivative) within the same trading day, so that no position is carried forward overnight. In Indian broker platforms, this order type is typically labelled MIS (Margin Intraday Square-off) as opposed to CNC (Cash and Carry) for delivery trades.
The appeal of intraday trading is Leverage. Brokers offer significantly higher margins for intraday positions - sometimes 5x to 20x - because the risk of an overnight gap is eliminated. For instance, with ₹1,00,000 in an account at 10x leverage, an intraday position worth ₹10,00,000 in a stock like Infosys is possible.
However, SEBI's peak margin rules (introduced in phases from December 2020) have tightened intraday leverage. Brokers must collect margins upfront based on the Value at Risk (VaR) + Extreme Loss Margin (ELM) of the stock. For a high-volatility stock, this might be 20-40% of the trade value, effectively limiting real leverage to 2.5x-5x.
All intraday positions on Indian exchanges must be squared off before 3:15 PM (equity) or 3:25 PM (F&O). If the trader does not close the position, the broker's risk management system auto-squares it at market price - which can result in unfavourable execution during the closing minutes.
Intraday trading generates STCG (Short-Term Capital Gains) taxed at 15%, or it may be classified as speculative business income taxed at the income tax slab rate, depending on the frequency and volume of trades. The classification varies by case and is typically determined by a tax advisor.
India Context
On NSE/BSE, intraday is labelled MIS. SEBI peak margin rules limit real leverage. Auto square-off at 3:15 PM for equity. May be taxed as speculative business income.