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Intraday Meaning

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by Gavin in Blog
July 15, 2021 2 comments
intraday meaning

What is intraday meaning when it comes to trading? Intraday trading has evolved over the years and has been gaining huge attention among novice traders.

Let’s look at what is intraday trading.

Contents

What Does Intraday Trading Mean?

Intraday Trading refers to the method of trading where a trader buys and sells securities within the same day to benefit from the price fluctuations.

It can be very well considered as a day job as the traders have to be available full-time during market hours to wait and watch and enter the trade only when it meets their criteria.

Professional traders do intraday trades for a living and have in-depth knowledge to capitalize on the intraday price movements of the stocks.

Basics of Intraday Trading

It requires the traders to have sufficient capital as the “Financial Industry Regulatory Authority” classifies the accounts of traders who make more than 3 trades for more than 5 trading days as “pattern day trader” account and such traders are required to maintain a margin of $ 25,000 in their account.

The day traders use leverage for trading to benefit significantly from the price movements of stocks.

Such leverage as provided by brokers generally range from 2:1 to 4:1.

The mental and emotional stability of an individual plays a pivotal role in achieving success while trading intraday.

It becomes emotionally draining for traders as the volatility is quite high during the day.

Intraday traders focus primarily on highly liquid and volatile stocks as small price movements in such stocks can give them significant profits with the use of leverage.

Intraday trading is subject to the influence of earnings, economic statistics, scheduled announcements and interest rates.

The market reacts to such events when expectations have not been met or exceeded and result in sudden quick moves, which can benefit intraday traders.

The most recent example where a significant move was seen during the day was Tenneco Inc (NYSE: TEN) with an increase of 19.07% on 01/06/21 and such an intraday move benefitted the traders holding intraday positions significantly.

intraday trading meaning

Intraday Trading Pros and Cons

With the possibility of making higher returns, intraday trading also comes with risk.

The benefits are many due to which it seems to be the most popular among the retail community.

The numerous advantages of it are: –

  • The traders benefit from volatile markets. News-related events have a considerable impact on share prices and the intraday players can benefit from huge price movements.
  • Funds are not locked up for extended periods.
  • Intraday trading can be pursued as a full-time profession by individuals having vast knowledge about trading and the rewards can be impressive to make it lucrative enough.
  • It also allows the traders to enjoy leverage.

Intraday trading, besides its numerous advantages has also got many flaws such as:

  • The returns will not always be a rising slope and there will be times when the traders suffer a considerable amount of drawdown. Choppy markets can become difficult to navigate.
  • The risk is high in trading intraday as the markets often become volatile and the traders are exposed to a higher amount of risk due to leverage.
  • If positions are held overnight, the risk of gaps can be high.

Trading Strategies For Intraday

Intraday trading can involve stocks, options, currency trading, stock & index futures contracts, interest rate futures, commodity futures, etc.

The wide variety of instruments in the market offer flexibility to the intraday traders and trading on different instruments requires a different set of intraday strategies.

Momentum or Trend following Strategy- Traders follow this intraday strategy to ride the trend by going long on a rising stock and short selling falling stocks.

Contrarian Strategy- In this strategy, traders short a stock which has already reached overbought conditions and go long on those which are in oversold territory. The view is that a reversal is likely to take place during the day.

Scalping- Scalping refers to the method of trading where traders enter and exit the trade within a few seconds to minutes to take quick profits while being exposed to a smaller amount of risk. The scalpers can be referred to as “lions” waiting to pounce on their prey as they enter the trade at key points such as support/resistance zones and book quick profits to reduce their risk.

News Based Trading- This strategy benefits the traders from the increased volatility during the day due to news events.

Range Trading Strategies- Such strategies are used by traders where stocks are trading in a range. They buy at support levels and sell at resistance, aiming to capture small intraday movements.

Intraday Trading v/s Swing Trading

Both styles of trading have advantages and disadvantages. Traders should choose their style of trading based on their skills and mindset.

intraday trading strategies

Bottom line

Intraday trading can be quite hectic for traders.

It can be physically and mentally draining.

It seems quite lucrative for novice traders but without in-depth knowledge, it can prove to be a disaster for the newbie.

One must analyze his skills and then determine whether such style of trading is his cup of tea otherwise can very well shift to swing trading or short-term investment trading.

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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2 Comments
  1. Herman Jackson says:

    Thanks for the information. Do you have any written materials, articles, videos, etc. on How to “Trade Options of Futures” & Day trading Options? Please let me know if there will be a fee for this request. I have been trying to get that information for the last 3 months.

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Options Trading 101 - The Ultimate Beginners Guide To Options

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