Intraday trading is a process of buying and selling shares on the same day. Read the article below to learn more about intraday trading.
What is Intraday Trading?
Intraday trading is the process of selling and buying stocks on the same day. Intraday trading is also known as Day Trading. Stock prices keep fluctuating throughout the day and intraday traders try to profit from these price movements by selling stocks and buying stocks on the same trading day. Day trading refers to buying and selling stocks on the same day before the market closes. However, if you fail to do so, your broker may close your position or convert it into a delivery trade. This type of trading is always profitable whether one is an experienced trader or a beginner because the market indicators and trends will guide them correctly.
Advantages and Disadvantages of Day Trading
The most significant advantage of intraday trading is that positions are not subject to overnight news that could potentially materially affect the price of a security. Such news, which includes important economic and earnings reports, as well as broker upgrades and downgrades, occurs either before the market opens or after the market closes. Trading on a day trading basis offers several other key benefits. One of the advantages of intraday trading is the ability to use tight stop loss orders. The act of raising the stop price and also minimizing losses on a long position. Other advantages include increased access to margin and therefore greater leverage. Intraday trading can also provide traders with more learning opportunities. However, while there are advantages, there are also disadvantages to intraday trading. The disadvantages of intraday trading are that being short of time or not having enough time to work on a position can see increased profits, in some cases even profits, and increased commission costs due to trading more often taking the margin of profit that the trader could have expected.
Advantages of Intraday Trading
The following advantages of intraday trading are:
Ending Overnight Risk
One of the main advantages of intraday is that it has no overnight risk. Because, traders must close their positions before the end of the trading day, ensuring that profitability remains unchanged by events or movements that occur during this period. So, any stock market tragedy, whether global or local, will not be able to affect your profits for the day.
Delivering Higher Returns
When the intraday concept is combined with an effective trading strategy then you can witness incredible profits in a short period of time. But, again the key here lies in the type of strategy you develop and the method used to implement it.
Fourfold Leverage
Another great benefit is that anyone with a small capital can start their day trading journey. In addition, there are some brokers who provide four times leverage benefits specifically for experienced brokers who have earned millions or more in their registered trading accounts.
Great Opportunity to Learn
Undoubtedly, intraday offers an invaluable platform to learn, examine and apply various trading techniques in a short period of time, allowing you to test strategies and then determine which one suits you best.
Disadvantages of Intraday Trading
In addition to the advantages, intraday also has disadvantages, see the disadvantages below:
Very Risky
One of the major drawbacks of intraday trading is that it is very risky, which is why most traders lose their initial capital within 2-3 months of starting this business. Risk and trading management are the keys to success in intraday trading and one must learn to combine them with great care.
Not a part time job
Intraday trading requires one to sit in front of his desk from 9:00 AM - 3:30 PM, track the market efficiently and then have a speculative bias. It requires full-time commitment, precision and a lot of discipline which is not possible with a part-time job.
Requires extreme focus
Attention to detail and mental strength: Some traders trade every 15 seconds in intraday. In that scenario, drifting to other work, or looking at the smartphone can make us miss a trade. One’s attention to minute details and focus must be very high throughout the day in intraday trading. Intraday is mentally exhausting and not for everyone.
Volatility
The volatility of the 5 minute or 30 minute charts is very high when compared to the monthly or 6 month charts. This is why it is a bit easier to trade on the longer term charts.
3 Best Indicators for Intraday Trading
Intraday indicators help track market trends and are most reliable as they are based on calculations and not assumptions. These indicators provide information regarding price movements based on the trends they study. These indicators also help traders gain insight into the supply and demand of a security and to understand market psychology. Here are some of the different indicator modes in which intraday indicators or tools are categorized:
Oscillator
Oscillators are generally a group of indicators that tend to move up and down between upper and lower limits. Commonly used types of indicators include the Commodity Channel Index (CCI), Stochastics, Relative Strength Indicator (RSI), and Moving Averages Convergence Divergence (MACD).
Volume
Volume is a leading indicator that relies on trading volume. They combine volume data with price data and help show the strength of a trend. The most popular indicators of this type are Chaikin Money Flow and On Balance Volume (OBV).
Overlays
Overlays are the most popular indicators. They overlay directly on the stock price movement. They also serve a number of different purposes and some traders even consider multiple overlays to their best advantage. Some popular examples of this type of indicator are Bollinger Bands, Moving Averages, Keltner Channels, Parabolic SAR, and Fibonacci Extensions and Retracements.
Best Time-Frame for Intraday Trading
Intraday trading success depends on proper timing, which means entering and exiting at the right time. This requires a lot of understanding of the intraday trading time frame to place a trade. When it comes to intraday trading, the daily chart is the most commonly used chart that represents the price movement at a one-day interval. This chart is a popular intraday trading technique and helps depict the price movement between the opening and closing bells of the daily trading session. There are several methods in which intraday charts can be used. Know about some of the most commonly used charts. A skilled trader constantly studies charts for short, medium and long term trend analysis. From hourly charts that depict price movements broken down into hourly segments to tick charts that represent every trade executed in the market, traders use a variety of intraday trading charts. The commonly used regular trading charts are listed below.
- Intraday hourly chart
- 15 minute chart
- 5 minute chart
- 2 minute chart
- Tick trading chart
Intraday Trading Strategy For Success
Traders use many intraday strategies. These strategies include:
Scalping
Scalping, which attempts to make many small profits on small price changes throughout the day.
Range Trading
Range trading, which primarily uses support and resistance levels to determine their buy and sell decisions
News Based Trading
News-based trading, which typically captures trading opportunities from increased volatility around news events.
All of that is the detail about intraday trading, hopefully it can help you to know more about daytrading. You can also read our other articles by visiting our website. In addition, get free forex trading class info by following GICTrade instagram! You can also start trading with GICTrade, Register Now !!!
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