Intraday trading or "intraday". What strategy should a trader choose?
Earlier we mentioned that there are many trading styles among traders. We can say that there are as many traders as there are strategies. After all, even the same tactics in different hands will look different, with its own nuances.
We have already discussed the general The principles of scalping strategy trading. In this article we will talk about longer trading - intraday trading, which is called "intraday".
Intraday or "intraday" trading - a very broad generalization, but there is a unifying rule: transactions do not carry over to the next day.
What is intraday?
The style of "intraday" is divided into "active" and "positional". Active Intraday aims to capture movements within the same trading session and can involve both movement along with the price impulse and against it. Positional Approach may involve opening a position before the European (or even Asian) trading session and holding a position until the markets close (up to 3-4 hours of the American session).
An intraday trader does not need to instantly react to microscopic imbalances between supply and demand (as in the case of scalping), so he can use a traditional candlestick chart in combination with or without volume. Therefore, Almost all markets are suitable for intraday trading with some reservations.
The best market for intraday strategies
The best markets for intraday trading will be those that can generate smooth and powerful trend daysat least from time to time. There must be sufficient liquidity in the market (to properly execute trades and keep risk at the proper level) and volatility.
Volatility is the cornerstone for the success of intraday trading. There are traditionally more and less volatile markets, but volatility sometimes appears where it was not expected, for example, on the currency pair USDRUB in March 2018.
It also happens that markets that used to show high volatility lose it over time, such as bitcoin; and others, on the contrary, increase, such as oil in 2018. So intraday traders migrate from one market to anotherchoosing the one with the greatest profit opportunities right now.
It is important for an intraday trader to keep abreast of market sentiment and know what ideas and instruments are currently "in play. This is not about technical analysis, but about understanding the so-called "stock market sentiment. What market is in the news right now? Which market reflects the growing uncertainty and fears of investors?
What and when do intraday traders trade?
There are also traders who stick to one market. Their task is to change their trading tactics in time and synchronize with changes in the volatility (and other parameters) of their trading instrument.
- If we talk about statistics in general, intraday traders often trade on oil futures (CL or Brent). Oil often shows sharp directional movements, continuing throughout the day.
- Stock index futures more often trade actively within one session, less often - positively.
- Gold — более сложный рынок для работы внутри дня.
- Effectiveness of trading on currencies (Forex) во многом зависит от волатильности инструмента и навыков трейдера. В целом, валюты — довольно сложный рынок для работы внутри дня.
For the intraday trader, it is acceptable to work in the first hour of the opening trading session and then hold a position during the day, correcting protective stops. A profitable position, of course, requires attention and management. Often traders encounter situations where the accumulated profit instantly disappears due to a sharp counter movement.
Peculiarities of intraday work
If a scalper is trying to achieve a smooth growth of the balance curve, the intraday trader builds profitability for the whole month on a few big days (often no more than 3-5), while the rest of the time he manages the risks and keeps the trading account afloat.
Sometimes this can lead to emotional burnout: intraday traders quite often violate trading discipline and fall into a "tilt. Mistakes in trading are sometimes painfully perceived, the price takes a short stop and then heads in the direction of their original forecast.
Think and evaluate realistically whether you can trade intraday, whether you have the necessary level of psychological stability. Fortunately, it's quite easy to evaluate it: this style of trading doesn't require a high entry threshold and you can start with a small amount.
As a reminder, we previously told you about The principles of scalping strategy. In the following articles we will talk about position trading and swing trading.
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See also
Three basic trading strategies to enter the market for beginners