The literal meaning of intraday is ‘within the day.’ In the world of finances, this term is used to denote securities that are traded on the markets at the time of regular business hours. The securities involve exchange-traded funds and stocks. It also signifies all the lows and highs that the asset crossed during the day.
Intraday movements in prices are especially relevant to day or short-term traders who plan to make multiple trades during one trading session. These are busy traders who will settle their current position at the time of the market’s closing. They might rely on an options profit calculator to do that successfully.
The fundamentals of intraday trading
Intraday is the term used to denote the new lows and highs of all securities. For instance, a ‘new intraday high’ refers to the time when the security reaches a new high compared to all the other prices during a trade. In many cases, intraday high is equal to the current closing price.
Traders focus closely on the intraday price movement by utilizing real-time charts to make the most of the short-term fluctuations in price. All short-term traders usually rely on one, five, fifteen, thirty-, and sixty-minutes’ intraday charts at the time of trading in the market.
Conventionally, intraday scalping utilizes one- and five-minutes charts for extremely high-speed trading. Other such trading strategies might use thirty- and sixty-minute charts for all those trades that have holding time of a couple of hours. Scalping refers to the transacting strategy of handling several trades each day in the hope of earning profits from even the smallest movements in the price. Intraday traders might hold the position for a long time but they still function under a high risk.
Volume weighted average price orders are generally used on intraday trades for increasing trade execution efficiency by offering order exposure to different prices on a trading day. It provides an average price that specific securities trade all through a trading day. Pay when you profit is another feature that is of immense help in intraday trading.
Strategies to apply for intraday trading
Traders use several intraday strategies, which include:
- Scalping that helps to earn several small profits on every small movement through a trading day
- Range trading mainly uses resistance and support levels for determining their sell and buy decisions
- News-based ones generally get their trading opportunities from the increasing volatility around any news event.
- High-frequency trading involves the use of authentic algorithms for exploiting short-term or small market inefficiencies
Advantages associated with intraday trading
The greatest benefit of intraday trading is that negative overnight news might impact the security prices materially but it does not affect the trader’s position. Such vital news might include crucial earnings and economic reports, along with broker downgrades and upgrades that take place either after the market closes or before it opens.
The chance to utilize strict stop-loss orders, i.e., raising a stop price for minimizing losses from a long–drawn position, is easy in intraday trading. You also get greater access to margins and a higher leverage.