During Intraday trading,traders pay keen attention to same-day price fluctuations using real-time charts to benefit from short-term price movements. It allows the user to buy and sell the same company’s stocks on the same day before the market closes.
What is Intraday trading?
Intraday trading means buying and selling stocks the same day before the market closes. Also known as day trading, it allows traders to grab profits from fluctuating price movements throughout the day.
To become a day trader, the person has to buy stocks of a company and specifically mention ‘intraday’ when using online trading platforms. This allows the user to buy and sell the same company’s stocks on the same day before the market closes. The securities mostly traded in intraday trading include stocks and ETFs (Exchange Traded Funds). It is significant to short-term or day traders who make multiple trades over a single trading session.
Basics of intraday trading
As we talk about the day trading basics, one must know that here the traders pay keen attention to the same-day price fluctuations using real-time charts to benefit from short-term price movements. Short-term traders prefer using 1, 5, 15, 30, and 60-minute intraday time-frame charts. For higher-speed trading, intraday scalping uses 1 and 5-minute charts. Other intraday trading strategies that hold for several hours use 30 and 60-minute charts. When dealing with intraday trading stocks, the trader may keep their position longer and operate under high risks.
Volume-weighted average price (VWAP) is a technical indicator used in intraday charts that measures the security’s average price over a trading period. It is most useful for short-term traders. It enhances the trade execution efficiency by giving exposure to a variety of prices for the day trader.
Intraday trading indicators for stock picking
- Liquidity – Liquid stocks help to easily purchase and sell larger quantities of stocks because of high volume numbers without impacting the price. Intraday trading with liquid stocks allows traders to quickly get in and out of trades.
- Medium to high volatility – Intraday trading depends on frequent price movements. Trading in sticky price stocks will not allow traders to trade profitably. Stock movements can be filtered in percentage terms or the rupee value of a stock. As a stock market trading thumb rule for day traders, stocks that move atleast 3 per cent per day on an average or by atleast Rs 150 on an average are chosen.
- Go with the trend – Intraday traders should always prefer trading with the trend. It is best first to identify the trading waves and then trade accordingly.
- Identify the stock type – Expert traders divide the liquid stocks into strong and weak stock categories. Those that move in the market direction are strong stocks, and those which move in contrast are weak stocks. Generally, strong stocks are preferred during an uptrend, and weak stocks are selected during a downtrend.
Impact of brokerage on intraday trading
Intraday traders deal in large volumes of daily trades, and brokers usually charge for every transaction made on the trading platforms. As we talk about brokerage, many traders often about brokerage account meaning or brokerage account definition on the internet. It is an investment account where investors deposit money with a licensed brokerage firm that places orders on behalf of the investor. However, the type of brokerage account may vary according to the investor’s needs.
Brokerage is higher in intraday trading, as daily transactions are high. The higher the value of the transactions, the higher the brokerage. Therefore, trade value and volume impact the profits earned in the intraday trading market.
Intraday trading indicators
Day trading for beginners can be risky, but if you follow the right strategies, things can be easy. Below are some common intraday trading indicators to be observed during day trading.
- Moving Average – It is the commonly used indicator. It comprehends the price movement as a stock’s price doesn’t move only in one direction.
- Bollinger Bands – It is much more advanced than the Moving average. It comprehends the price movement much better.
- Momentum Oscillators – When stock prices move unrelated to the bullish or bearish market trends in intraday trading India, the Momentum oscillator indicator is used.
- Relative Strength Index (RSI) – RSI is calculated in the index form and ranges between 0 to 100. It increases with the increase in stock price and vice-versa.
