Intraday trading provides leverage to your trading capital, ranging from 5 times to 10 times or even more.

This means, if your trading capital is only Rs 50,000; you can actually use it as Rs 5,00,000. Therefore, the profits you could make on investing Rs 50,000 can now become 10 times more, thanks to the leveraging.

Mind you, your losses could also be more. So it is basically a double-edged sword. Use it carefully.

Novice traders can trade initially in Minifty which is a derivative of Nifty, the index of National Stock Exchange. But you do not buy or sell Nifty. You transact on Nifty Futures or Minifty Futures. The difference between these 2 are one of lot size. While Nifty Future represents 50 stocks, Minifty lot size is 20.

The price for buying or selling Futures has been set by the stock exchange. For instance, Nifty with its 50 lot size is worth (5300 present level x 50 lot size) = 2.65 lacs. However, the exchange allows the trader to buy it at Rs 24,000 approx. This figure may vary as exchange may change various margins as it may seem fit during volatile trading. Also, change in Nifty level also plays a role.

So in this case, a Rs 24,000 capital is leveraged to buy Rs 2.65 lacs worth of contract.

For Minifty, the calculation is 5300 x 20 = 1.06 lac. The exchange has fixed Rs 10,500 approx. per lot of Minifty.

A capital of Rs 50,000 will buy approx. 2 Nifty lots. Suppose the trader has bought 2 lots at 5300 and NIfty Future price moves to 5320, the trader has a profit of (20 points x 50 lots x 2 lots) = Rs 2,000.

These days, a 20 point movement is coming after hours of wait. More likely, the trader has to make several small trades and take smaller profits of 10-12 points each time. So in a day the trader is able to have 3 profitable trades, on an average garnering 13 points per trade, s/he earns (11 points x 50 lot size x 2 lots x 3 times) = Rs 3,300. This income is gross income. After deducting brokerage and taxes (around 2 points per lot on an average), one is left with around Rs 2,700. The brokerage varies between brokers while there is a talk of Government reducing tax on intraday trading.

Another easy way of making quick small amounts several times a day will be by Bank Nifty. It moves very fast compared to Nifty and at any small movement delivers some 25-40 points. On a lot size of 25, that translates into Rs 625 - 1000. Not bad for a movement that takes maybe 10-20 minutes at the most. One can trade 4/5 times a day on Bank Nifty.

As a rule of thumb basis, you can take a daily income of Rs 1,200/1,500 on a capital of Rs 30,000 and Rs 2,000/2,500 daily on a capital of Rs 50,000.

For subscribing to Intraday training, please call Arunangshu M Lahiri on 097400-76212 (Bangalore) or 933087-6212 (Kolkata).

For booking or additional queries, Email to: amlahiri@earningeschool.com.