Secrets Of Intraday Trading

Short-term intraday trading, or as it is also called intraday trading (from the English intraday – intraday) , is a rather difficult business. Intraday trading is much more difficult than doing, for example, medium or long-term trading. Intraday trading requires a certain experience from the trader and is by no means recommended for beginners. Although, ironically, almost every trader starts with this type of trading. There are several reasons for this. First, the apparent simplicity of trading (a misconception imposed by advertising of various kinds of stock brokers and dealing centers). Secondly, the desire to make money right here and right now.

Intraday trading involves opening and closing deals within one working day of the trader, without transferring positions to the next day

Why is intraday trading so difficult and dangerous? There are several reasons for this:

High volatility . Obviously, the shorter the timeframe of the price chart, the higher the relative price volatility on it

When trading on short time intervals, a trader also focuses on short intervals of price movement. That is, he expects to make 1-2% (or more) profit on these short price movements, and this forces him to make significant bets (including using a large leverage ). That is, we have a kind of cocktail of high rates with high price volatility, and this is a rather risky combination.

Difficulty of analysis . Technical analysis on small timeframes is not a very reliable. Most indicators show the best results on timeframes and the patterns (chart patterns) of technical analysis give fewer false signals on longer timeframes.

This is due to the fact that a pattern formed on a chart with a small period and giving a signal in one direction may turn out to be part of a pattern drawn at the same time on a chart with a large period giving a signal in the opposite direction.

As for fundamental analysis , it is almost completely useless on small timeframes and all its recommendations for this case will be reduced to one single one: do not hold open positions at the time of important economic news release.

Basic principles of intraday trading

Well, let’s look at the basic principles of intraday trading, which will help you, if you do not earn “a whole bunch of dough,” then at least not drain your entire deposit. And you can drain the deposit on such intraday trading very, very quickly. So let’s go.

The first principle. Limit yourself

What restrictions are we talking about? Well, first of all, you should set clear risk limits for each individual trade, and for the day as a whole. The risk limit for each trade must be determined by your money management system. The daily limit means that percentage of the total loss for the day, upon reaching which the trade must be closed. Remember that the desire to recoup is a bad counselor. It is better to postpone the trade until the next day, in this case the saying is the best fit: “The morning is wiser than the evening.”

In addition, you should limit yourself in profits. It sounds strange, but, nevertheless, this advice is very sensible. As the probability of getting confused is great when trying to recoup, so is the likelihood of getting into a rage in the pursuit of profit. In both cases, the trader can lose control over the situation, succumbing to emotions, which in turn is fraught with large losses.

The second principle. Look Back at Big Time Frames

When intraday trading, you are forced to operate on charts with periods less than . As mentioned above, on small timeframes, technical analysis tools are not as effective as on long periods.

Let’s say you are trading a Head and Shoulders pattern formed on a chart timeframe. The pattern is almost complete and you just have to wait for the moment when the price breaks the neckline in order to open a short position. At the same time, it is clearly seen that the price is currently hitting a strong support line and is already starting to turn upwards.

Agree that if you look at these higher timeframes, your desire to open a short position will at least greatly diminish, and as a maximum, you will start looking for the moment to open a long position on a chart with an period.

Principle three. Track news releases

If on a chart with a period of one day (or even more so, one week) price fluctuations caused by the release of important financial news will be practically invisible, then on small timeframes that an intraday trader is forced to use, such fluctuations can easily knock out all STOP LOSS orders …

Therefore, if you do not use a news trading strategy (which, in fact, is precisely based on such sharp and strong price fluctuations at the time of their release), then make sure that at the time of the next news release you do not have open positions.

In order to keep track of the news, you can use one of the many economic calendars provided now by any, even the most seedy stock broker.

Fourth principle. Don’t try to trade everything at once

Intraday trading already puts the trader in a rather rigid framework, forcing him to work in constant psycho-emotional stress. He is forced to follow everything at once, and he has a serious shortage of time to think about his decisions. Decisions must be made clearly and quickly, and they must be implemented just as quickly.

Therefore, you should not waste your precious attention on a large number of traded financial stock. To begin with, it is recommended to choose no more than 2-3 stocks that are weakly correlated with each other and to concentrate all efforts on analyzing them. Otherwise, you run the risk of losing all your attention on the little things, losing sight of the most important points of the analysis.

The fifth principle. Prioritize quality over quantity

In intraday trading, like nowhere else, it is necessary to focus on the quality of the transactions. Never trade just for the sake of  intraday trading. Always remember that the absence of positions, under certain conditions, can also be a good position.

Trade only obvious patterns backed by multiple indicators and confirmed on higher timeframes. You should not open a position when there is no clear confidence in the completion of a particular pattern, or when there are no reinforcing signals from other technical analysis tools.

Always close when things go against your scenario. Do not open new positions and tighten stops on existing positions in situations where you do not understand what is happening in the market now.

Advantages and disadvantages. Who is intraday trading suitable for?

In addition to the risks described above (greater relative to medium-term and long-term trading) and the difficulty of analysis, intraday trading has other disadvantages:

  • Constant psycho-emotional stress associated with the need to open a large number of positions (relative to a long-term trader), as well as the need to withstand inevitable drawdowns almost daily;
  • Large commissions are again associated with a large number of opened trades.

But of course there is a downside to day trading . For all its complexity and riskiness, intraday trading undoubtedly has a number of undeniable advantages:

  • The ability to quickly play out important economic news;
  • The ability to earn money right here and right now;
  • The potential for more earnings in comparison with long-term traders (if a long-term trader makes 20% on a trend lasting several months, then a day trader can process hundreds of price movements at the same time, each of which can bring him 3-5% profit).

Based on this, we can conclude that  intraday trading is suitable for stress-resistant people who are able to think quickly and quickly make decisions, who are able to go to the goal without reacting to intraday trading failures. It requires composure and concentration of attention, but at the same time the trader does not need to have such patience as is necessary in long-term trading, because here the result is not long in coming.


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