Dummies Guide on How to START daytrading in India? FAQs

Guidelines on how to Start day trading in The Indian Share Market.

  1. To start day trading in India, you will need to first open a Share Trading and Demat Account with a Stock Broker in India.
  2. Your Account Opening application process is done online. After the initial online application is completed, you are required to print out the Power of Attorney Form, sign it and post it to the brokers registered office address. It will take about 3-5 days to complete the whole application process.
  3. To open the above Share Trading Account, you will need to own an Indian Govt. Issued Identity card, a PAN Card and a Bank Account in India (bank balance is not relevant).
  4. While filing the Online Application, you are required to attach copies of the above ID card, PAN Card, 6 months bank statements and a cancelled cheque .
  5. After completing the above steps, Your account will be opened and issued with the login credentials for your Trading Account. You will now need to transfer your funds from the Bank Account to your Trading Account using Net Banking, IMPS, NEFT or UPI. The online transferred funds  gets added to your new Trading Account in just few minutes. You can now start buying and selling shares without having to wait any more.
  6. NSE is the preferred exchange for daytraders. The equity segment of the National Stock Exchange (NSE) in India opens at 9.15am and close at 3.30pm. This is the time between which you will daytrade in Stocks.
  7. There are four thousand plus public companies listed in the Indian exchanges. But, you will daytrade only the stocks of 150 odd companies, which are considered to have sufficient liquidity and leverage for day trading. These liquid stocks ideal for day trading in India are called the F&O underlying stocks.

Some pointers that might help you along the way, from a beginner daytrader to going professional.

  1. There is a misconception among the public that you will need a large sum of money to open a Share Trading Account and start daytrading. You can start Share Trading with any amount you like. 10k will be a reasonable amount to start with and get some practical hands on experience.

  2. With so many Stock Brokers around, there is also confusion as to which stock broker to choose. Whichever broker you choose to get started initially, after you gain sufficient experience with daytrading,  open a second account with a broker like Finvasia, where you can daytrade without paying any brokerage charges.

  3. When opening your new account, activate all exchanges and segments on your new Account Application. NSE, BSE, MCX Exchanges with Equity, Futures, Currency and Commodity segments activated. Get all the exchanges and segments activated, just in case if you need to use such facility in the future. It is easier getting it all activated in one go.

  4. After your Trading Account gets opened, depending on your bank balance in the statements you submitted, your stock broker will assign a Relationship Manager to you. The more money in your bank statement, the nicer this Relationship Manager will sound. Do not transfer all your life savings to your trading account to impress your Relationship Manager with your wealth. If you are just starting out as a daytrader, you are likely to daytrade and lose all that initial funds you transferred because of your own trading mistakes and ignorance. There is a thin line between responsible day trading and gambling with all your savings.

  5. If you are “exceptionally” talented, I mean the “creme de la creme” in your family, It takes about 3-5 years before you start making any consistent income from full time daytrading. If you are still young and an average Joe, give it a second thought before you consider daytrading as a full time profession. It is much easier for you to go out and find another job now, than wait 5 years to grow old and realize, it is not possible to make a decent earning from daytrading for 98% of the participants. Statistics provided by many stock brokers shows that, the success rate for individual daytraders in India is only about 2 percentage. Unless you are financially sound, this is not a full time profession you want to bet your future on.

  6. To start daytrading for a hobby or as a post-retirement timepass, you won’t need much capital, but as you progress, full time daytrading for a living becomes a capital intensive activity.  A daytrader starts by trading equity stocks with the little capital they saved up, but later matures in the derivative segment trading.  In the Indian context, the big money is made and lost in derivative segment trading and not by daytrading equity stocks like what the daytraders in the western world does. Considering the strict margin restrictions by the stock exchanges in India, metaphorically speaking, it gets easier to make 60 lakhs with a trading fund of 20 lakhs, than make 2 lakhs out with a small trading fund of 1 lakh in the derivative segment trading.  Almost all the successful Indian daytraders you have see on social media, who does this as a full time profession are doing derivative trading and has in excess of 20+ lakhs INR / 30k USD as their trading capital. If you are planning to take daytrading as a full time profession, to make a decent living out of this, you will require large amounts of trading funds after you figured out how the capital market really works. If you are starting new and have no prospect to access large trading funds (say about 15 – 20 lakhs INR) for leveraging your profitability after a time horizon of 3-5 years, do not get your life stuck with full time daytrading with no sufficient capital to fund your trading account as you progress successfully.

  7. In the Indian context, having surplus funds in your trading account is “the most important resource” for a want to be fulltime individual daytrader. If you are limited on your trading funds, acquiring trading knowledge, attending trading courses and subscribing to trading tools does not help. Without surplus funds for fulltime daytrading, it is a constant struggle with transferring funds to your trading account one week, and moving it back to your bank account the next week to pay your household bills. Without surplus trading funds, a fulltime daytrader could get activity-trapped doing technical analysis all night and day, but without actually making any money from a lifetime spent on this. In the excitement of watching the big players of this industry raining cash from daytrading and them making it look easy, be careful not to waste your trading funds on attending courses, trainings, seminars, subscribing to trading tools, paying for advisory services, paying excessive brokerage fees, etc, etc.

Some practical wisdom for daytraders in India.