Intraday Trading Rules: A Complete Guide for Beginners

Recent data from FY2024-25 indicates that net losses for individual traders widened by 41% year-on-year, displaying a worrying trend of increased risk exposure among retail investors. To avoid becoming part of this statistic, one must strictly adhere to disciplined intraday trading rules before executing any buy or sell orders. Let’s learn about these rules in detail in this blog.

What is Intraday Trading 

Intraday trading involves buying and selling financial instruments within the same trading day. The primary goal is to profit from price movements without holding positions overnight, meaning all open equity positions are closed before the market session ends at 3:30 PM. No shares carry over to the next day. Traders aim for small price moves. All trades settle on T+1 basis.

What Are the Intraday Trading Rules in India? 

In July 2025, over 23 million NSE trading accounts were opened in India. To make the most of intraday trading, regulators and brokers establish specific intraday trading rules and guidelines to ensure orderly conduct during daily trading sessions, which include:

1. Same-day settlement: All intraday positions must be squared off (closed) before the closing bell; otherwise, the broker automatically closes them at the prevailing market price.
2. No delivery: Since shares are not held overnight, there is no delivery of securities to the demat account, and trades are settled on a net profit or loss basis.
3. Margin requirements: Traders must maintain a specific upfront margin to initiate trades, as regulated by SEBI to prevent excessive leverage risks.
4. Short selling: Unlike delivery trading, intraday trading rules allow traders to sell stocks they do not own (short sell) and buy them back later in the day to profit from falling prices.

SEBI & Exchange Rules for Intraday Trading 

SEBI rules for traders guide how NSE and BSE set intraday trading protocols, covering limits, trading hours, market halts, and monitoring systems. Such as:

• Equities trade from 9:15 AM to 3:30 PM with a pre-open session from 9:00 AM to 9:15 AM.
• BSE follows the same timings as NSE to maintain uniformity in the market.
• Circuit breakers halt trading for 45 minutes at a 10% index drop (Tier I), extend the halt for a 15% drop (Tier II), and close the market at 20% drop (Tier III) in indices.
• Stock-specific price bands range from 2% to 20%, applying static or dynamic limits, especially for futures and options.
• Intraday position limits for index derivatives are capped at Rs 5000 crore net exposure.
• Gross exposure on derivatives is monitored up to Rs 10,000 crore.
• Markets take snapshots four times daily, including a critical window from 2:45 PM to 3:30 PM for position monitoring.
• PAN and unique client identification codes are mandatory for every trade to prevent fraud.
• Bulk trades exceeding 0.5% of equity must be reported immediately to maintain transparency.
• Block deals are permitted only during a defined window between 8:45 AM and 9:00 AM.
• Short selling has no ban periods and is allowed for intra-day trades without restriction.

Margin Rules & Leverage in Intraday Trading

SEBI’s margin rules ensure proper margin collection and limit leverage to manage risk, including:

• Trading Members must collect a minimum 20% upfront margin (VaR + ELM) from clients in the capital market segment before any trade execution.
• In the F&O segment, SPAN margin and Extreme Loss Margin (ELM) are mandatory upfront collections prior to trade.
• Currency and Commodity Derivatives require initial margins and ELM upfront, with other margins like MTM by T+2 days.
• Leverage is limited; brokers offer up to 5x in equity cash intraday, but only against collected upfront margins.
• Intraday profits or same-day gains cannot be reused for further trades; available only T+1 after settlement.
• Real-time margin monitoring by exchanges; shortfalls trigger immediate calls, auctions, or trading bans.
• Collateral accepted includes cash, bank guarantees, demat securities (with haircuts), G-Secs/T-Bills, and liquid mutual funds via margin pledge.
• Effective June 30, 2025, securities valued at T-day VaR haircut, beginning, mutual funds at NAV with VAR equivalent.
• Cheques for upfront margins recorded T-day, cleared by T+5; dishonoured ones lead to revised reporting and penalties.
• No client-related entity margins are pooled; segment-wise exposure is tracked with risk management policies.
• Short reporting of margins attracts clearing corporation penalties, passable to clients with an audit trail if client fault.
• Daily margin statements are mandatory to clients before the next session; proper records and no misuse of collateral are required.
• For NRIs under PIS, funds/securities pre-pay-in count as upfront margins; MTF stocks in separate pledged accounts.

Compulsory Square-Off Rule Explained

The compulsory auto square off rule mandates brokers to automatically close all open intraday positions starting at 3:20 PM on NSE and BSE. This prevents overnight holdings and ensures T+1 settlement. If positions remain open beyond this time, brokers execute sell orders (or buy for shorts) at prevailing prices, often with extra charges. SEBI enforces this via margin monitoring to curb defaults. Traders get alerts beforehand, but non-compliance risks auctions for losses. The rule applies uniformly to equity cash and F&O intraday segments.

Most Important Intraday Trading Rules to Follow

Beyond regulatory compliance, successful trading relies on strict adherence to operational rules that safeguard capital against rapid market fluctuations. Essential operational tenets for sustainable trading are as follows:

• Liquidity rule: Trade only in highly liquid stocks where there is sufficient volume to enter and exit positions instantly without significant price impact.
• Volatility management: Avoid trading in stocks that are hitting upper or lower circuits, as trading gets halted, leaving positions stuck.
• Square-off discipline: Always close positions manually before the broker’s auto-square-off time to avoid additional “call and trade” charges.
• Risk-reward ratio: Establish a clear risk-reward ratio, such as 1:2, ensuring that the potential profit justifies the capital risked on the trade.
• No averaging losers: Adhere to the rule of never averaging down on a losing intraday position, as trends can persist longer than available capital.

Position Sizing & Capital Allocation Rules 

The position rules laid down by SEBI to ensure risk management in trading include:

• Intraday net position limits for index derivatives are capped at Rs 5000 crore per client across all exchanges to control systemic exposure.
• Gross intraday exposure is monitored up to ₹10, 000 crore, allowing some netting but with real-time checks.
• Exchanges conduct four mandatory daily snapshots of positions, including a critical final window from 2:45 PM to 3:30 PM for compliance verification.
• Excess collateral beyond position limits is permitted only if the trader remains fully compliant with all SEBI and exchange norms.
• NSE and BSE apply identical position sizing standards uniformly to all market participants in equity derivatives segments.
• Breaches detected on expiry days trigger immediate additional deposit requirements as penalties to deter violations.
• Client-level position monitoring occurs in real-time through exchange systems to catch excesses promptly.
• Value-at-risk (VaR) calculations and parametric limits are adjusted daily based on market volatility for accurate sizing.
• Brokers must notify clients instantly when approaching or breaching position limits to enable corrective action.
• Repeated position violations attract escalating penalties, including trading restrictions or higher deposits.

Stop-Loss & Target Rules for Intraday 

Exchanges indirectly support risk management through auto mechanisms like the stop loss and price band limits, such as:

• Brokers automatically square off intraday positions at 3:20 PM to enforce exit.
• Margin shortfalls lead to immediate position trimming to limit losses.
• Leverage caps indirectly act as forced stop-loss triggers on positions.
• Price band limits prevent sudden, sharp losses due to extreme volatility.
• Traders are expected to plan and execute stop-loss and exit targets within the trading day.
• Losses uncovered by margins trigger penalty auctions.
• Volatility bands adjust dynamically based on market conditions.
• Brokers notify clients promptly about pending margin shortfalls.
• Trading halts during breaches protect the market from disorderly moves.
• NSE and BSE enforce uniform participation requirements across segments.
• Overnight risk is not permitted in intraday, reducing exposure.
• Real-time monitoring tools help maintain discipline and limit losses.

Time-Based Rules (Avoid First 15 Minutes, Exit Before 3:15 etc.) 

NSE and BSE set strict time-based rules defining trading sessions and order entry cutoff times, which include:

• Pre-open order matching sessions run from 9:00 AM to 9:15 AM to determine the opening price.
• Continuous trading occurs from 9:15 AM to 3:30 PM for all equity and derivative trades.
• No new intraday orders are permitted after 3:20 PM, ensuring orderly square-off.
• Automatic square-off of open intraday positions occurs between 3:20 PM and 3:30 PM.
• The circuit breaker triggered halts suspend all trading activity temporarily.
• Special sessions like Muhurat trading are conducted annually with specific timings.
• A block deal window is fixed from 8:45 AM to 9:00 AM for large transactions.
• Post-close reporting and settlement follow defined timelines.
• The best time frame for intraday is usually between 9:30 to 11 AM.
• Time rules are uniformly applied across NSE and BSE.
• Exchanges list all trading holidays and do not allow trading on those days.
• Separate extended trading hours may apply for debt securities.

Intraday Trading Rules for Beginners vs Professionals

While fundamental intraday trading rules apply to all market participants, beginners and professionals differ significantly in their operational approach, risk management, trading psychology, and more, as follows:

Aspect/rule	Beginners (typical practice)	Professionals (typical practice)
Capital at risk	Limit risk to a very small share of capital (often below 1–2% of total trading capital) to preserve funds.	Use predefined risk budgets calculated per day, per strategy, and per instrument based on strict firm policies.
Leverage & margins	Use only basic intraday margin (typically 5x or less) and avoid complex derivative structures.	Utilise the full margin framework across cash, F&O, and hedged positions with continuous real-time monitoring.
Entry timing	Avoid the first 15 minutes due to volatility from accumulated overnight orders. Trade only when price and volume stabilise.	Trade throughout the entire session, including the volatile open and close, using tested models and algorithms.
Stop-loss discipline	Place a simple fixed stop-loss on every trade immediately and avoid moving it to accommodate losses.	Use layered stops, hedging strategies, and dynamic exit points based on volatility and mathematical models.
Trade frequency	Take very few, high-conviction trades per day to minimise errors and emotional decisions.	Execute a high volume of smaller trades across various symbols and strategies while adhering to net exposure limits.
Asset selection	Focus on a small, manageable list of highly liquid large-cap stocks or liquid index contracts.	Trade diversified baskets including indices, sectoral contracts, and spreads to manage risk across sectors.
Tools & indicators	Rely on simple technical indicators (like Moving Averages, RSI) and basic chart patterns.	Combine multiple indicators, order-book data, algorithmic execution, and quantitative models for decision-making.
Compliance	Follow the broker’s basic guidelines regarding margin calls, auto-square-off timings, and holidays.	Maintain internal compliance teams to track SEBI circulars, strictly monitor position limits, and handle reporting.
Record-keeping	Review trades occasionally to learn from significant wins or losses, but may lack detailed logs.	Maintain detailed trade logs, daily risk reports, and conduct periodic performance reviews to refine strategies.
Volatility response	Prefer to stay out of the market during sharp price moves, circuit breaks, or frequent halts.	Actively trade volatility using specific strategies while staying within SEBI and exchange risk frameworks.

Pattern Day Trading Rule (If applicable brokers) 

Unlike the US, SEBI does not have a specific pattern day trading rule but uses margin requirements and monitoring to manage trader activity, such as:

• SEBI uses margin and leverage restrictions to regulate frequent trading and risk exposure.
• Brokers set minimum equity requirements for customers engaging in daily intraday trades.
• Profits from intraday are credited on T+1 and cannot fund same-day trades.
• Leverage limits effectively prevent excessive frequency of trades.
• Client codes help exchanges monitor trading activity patterns.
• Real-time surveillance detects abnormal trading behaviours.
• There are no formal daily trade count caps or definitions.
• Margin requirements are standardised for all traders to ensure fairness.
• Exchanges flag unusual patterns, prompting regulatory audits.
• Compliance is maintained through routine reporting and checks.

Rule for Selecting Stocks for Intraday 

Selecting stocks for intraday is recommended based on liquidity, volume, and volatility to ensure efficient trading, such as:

• Choose stocks with high daily trading volume to ensure easy buying and selling.
• Prefer stocks listed in the futures and options segment with dynamic price bands.
• Avoid illiquid stocks with wide bid-ask spreads to reduce the cost of trading.
• Focus on the top 500 actively traded stocks on NSE and BSE for better price discovery.
• Monitor news and corporate actions impacting stock price movements.
• Circuit filters apply uniformly to restrict price volatility within limits.
• Select stocks with moderate volatility to balance risk and reward.
• Follow exchange bulletins for stock watchlists and unusual activity.
• Use historic price data to assess typical daily ranges.
• Stick to known liquid scripts to avoid manipulation risks.

Rule for Using Indicators in Intraday 

Technical indicators use price and volume data to support intraday decisions by reducing noise and highlighting patterns. Common rules for making better usage of indicators for intraday are as follows:

• Use 1-15 minute timeframes for intraday signals on moving averages, RSI, MACD, and Bollinger Bands via NEAT or broker terminals.
• Combine 2-3 indicators maximum to avoid conflicting signals; confirm with volume and price action.
• Check higher timeframes (30-minute or hourly) for overall trend bias before entering trades.
• Backtest indicators on historical NSE/BSE data to validate setups for liquid stocks.
• Avoid over-reliance; use indicators as confirmation tools with stop-loss and risk rules.
• For algo trading with indicators, obtain SEBI-approved unique IDs and broker pre-checks per 2025 circulars.
• Monitor real-time feeds for accuracy; no open APIs allowed for retail algos.
• Practice on paper trading before live use to build discipline.

Intraday Trading Taxation Rules 

SEBI facilitates trading tax compliance, where intraday gains are treated as business income with defined tax implications, such as:

• Intraday profits fall under speculative business income under section 43(5) of the Income Tax Act.
• Losses from intraday trading can only be set off against other speculative business income.
• Turnover exceeding ₹2 crore mandates a tax audit and filing of detailed reports.
• Maintaining proper books is necessary if the income exceeds ₹2.5 lakh.
• Securities Transaction Tax (STT) is charged at 0.025% on the sell side for equity intraday trades.
• Traders may opt for presumptive taxation under section 44AD if eligible.
• Advance tax payments are required quarterly by traders.
• Income Tax Returns must be filed under ITR-3 for business income.
• Brokerage and other allowable expenses can be deducted from gross income to reduce tax liability.

Do’s and Don’ts of Intraday Trading 

Some rules for best trading practices include these do’s and don’ts to maintain discipline:

Do’s:

• Always deposit full upfront margins before starting intraday trading.
• Ensure to square off all open positions before 3:20 PM sharp to avoid penalties.
• Monitor position limits regularly in both cash and derivatives segments.
• Use unique client codes for every trade to maintain transparency.
• Disclose bulk deals immediately as per exchange requirements.
• Strictly abide by all circuit breaker halts and trade suspensions.
• Make sure PAN is properly linked to all trading and demat accounts.

Don’ts:

• Do not reuse the same-day intraday profits for new trades to avoid margin violations.
• Avoid initiating new orders after 3:20 PM due to exchange restrictions.
• Never ignore margin calls from brokers or exchanges to avoid auctions or bans.
• Do not exceed prescribed leverage caps as per SEBI and broker policies.
• Avoid trading without a linked PAN, which is mandatory for compliance.
• Do not miss regular position checks to stay within allowed limits.
• Never delay squaring off positions beyond exchange cut-off times.

Real Case Studies (Profit & Loss Scenarios)

The difference between a successful trader and a bankrupt one often comes down to a single factor: discipline. History is full of examples where adhering to intraday rules saved fortunes, and ignoring them wiped out capital in minutes. Here are two contrasting scenarios from the Indian stock market:

1. The Cost of Ignoring Rules: Emkay Global’s “Fat Finger” Error (2012)

On October 5, 2012, a dealer at Emkay Global Financial Services intended to execute a small basket sell order for Nifty futures. Due to a failure to verify order quantity limits, the dealer accidentally executed an order worth ₹650 crore instead of the intended small amount. As a result of which the NSE Nifty crashed by 900 points in seconds, triggering a market-wide halt. Emkay Global had to book a massive loss of ₹51 crore due to this single error. Never trade without strict system-based risk limits (quantity checks) and never skip double-checking orders before execution. 

2. The Power of Discipline: Radhakishan Damani’s Survival Strategy

Before founding DMart, Radhakishan Damani traded actively in the markets. At the time, certain stocks were rising sharply despite weak fundamentals, and Damani took short positions in these names. As prices continued to move up, such as the ACC (Associated Cement Companies) rising from about ₹200 to nearly ₹9,000, he did not stay stuck in losing trades. He repeatedly exited early, accepting small losses rather than letting them grow.

This approach helped him preserve enough capital to participate again when conditions reversed. Many traders suffered heavy losses during the 1992 crash, but his focus on controlled exits allowed him to remain active and eventually benefit when the market corrected.

In intraday or short-term trading, discipline largely means managing the downside. Staying strict with loss limits improves the ability to continue trading when the environment becomes favourable again.

Conclusion 

Intraday trading works best when every decision is guided by discipline and structure. Instead of chasing rapid moves, focus on stability, order flow, and clean execution. When intraday trading rules are followed consistently, risk stays controlled and trading becomes more manageable. The real edge lies in staying calm, avoiding unnecessary exposure, and protecting capital day after day.

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