In the case of an intraday trade, financial securities are not stored in a trading account and not in a demat account. If the shares you trade in intraday are already in your holdings, then the buying price of your shares does not get affected.
The securities in an intraday transaction get stored in the trading account and at the time of expiry, they get squared off from the trading account. The stock does not get included in the demat account. Â
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For example – You buy 100 shares of X company at Rs 500. Now, after a few years the current market price of the share rises to Rs 1000. Which is double your buying price. Now, you buy 100 shares at Rs 1000 and sell those shares at Rs 1010 on the same day. In this case, your buying price will be Rs 500 and it will not be affected.Â
What is Intraday Trading?Â
When the financial instruments are bought with the idea to sell them in the same trading session, it is called intraday trading. While trading on an intraday basis traders analyze the chart and take positions. Traders place stop-loss and take-profit targets and they usually buy in large quantities. Intraday traders trade on small profit margins however, they keep the quantity high.
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Intraday trading is purely based on technical analysis, and technical analysis is the study that was made by taking the data of the instances that have happened in the past. Therefore, the analysis can be missed and can turn the trade into a loss. Traders are ready to take a loss under this situation, and they take a position by keeping the risk-reward ratio in mind.
To perform intraday trading, traders do not require a demat account. Now, depository participants allow traders to open a trading account digitally without submitting any hard copies.Â
A depository participant acts as an agent of the depository. The most commonly known depository participants are brokers. Stockbrokers help traders in opening an online trading account and allow traders to buy and sell shares online.
The broker provides a trading app which is a platform that allows traders to see live asset price fluctuations, buy and sell financial instruments, and many more. The trading app automatically calculates the average buy price of a stock if it is bought multiple times at different price levels.
How To Calculate Buy Price?
The first thing a trader should know is that the average price gets calculated on a First-in-first-out (FIFO) basis.
For exampleÂ
Let us assume you buy a lot of share X at Rs 200. The lot size of share X is 1500. Now, due to the market inability, the share price has fallen to Rs 180. That is the current market price of share X is Rs 180. At the CMP you purchase another lot. So, the average buy price of the share would be Rs 190.
The calculation
 Average buy price =( 200 + 180) / 2 = 380/2 = Rs 190.Â
Traders can calculate the average buying price using the above formula. Similarly, when you sell the shares back again the average price rises. Traders need to make sure they take a calculated risk, especially when trading online.
Conclusion
Intraday trading is a risky method to make money in the financial markets however, it requires a lot of practice. A successful trader focuses on minimizing the loss more than maximizing the profit.
