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Best Intraday Trading Strategies

06 January 2022
4 minutes

Intraday trading refers to buying and selling stocks on the same day for financial gains. In other words, individuals square off their positions before the market closes to earn a profit. That said, in comparison to regulator equity investments, this is riskier owing to higher volatility. Hence, one must implement a prudent intraday trading strategy to fulfil their financial goals. 

Here are a few trading strategies you can check before you begin your trade. 

Best Intraday Trading Strategies

Here are some top intraday trading strategies that individuals can utilise to make financial gains. 

  • Momentum strategy

As the name suggests, the basis of this strategy for intraday trading is to make the most of the momentum in the market. This involves tracking the right stocks before a significant change in the market trend materialises. Based on this change, traders buy or sell securities. The choice of stock depends on the latest news, the announcement of takeovers, quarterly earnings, and more. 

Thus, it is vital for intraday traders to study such news regarding stocks that are on their watchlist and place buying or selling orders accordingly. Since share prices fluctuate owing to various external factors, intraday traders must make quick decisions to earn returns. The duration for which individuals hold the shares depends on the momentum of the market.

  • Breakout strategy

When it comes to buying and selling securities on the same day, timing is undoubtedly one of the most crucial factors. This intraday trading strategy involves finding the stocks which have broken out of the territory in which they usually trade. 

Alternatively, a trader can identify stocks that are about to trade in a new price range. In other words, traders have to spot threshold points at which share prices increase or decrease. If the stock prices rise above the threshold point, intraday traders consider entering long positions and buying shares. That said, stock prices plunge below the threshold point, it is an indication for individuals to consider short positions or sell shares.

The fundamental idea behind this strategy is that when share prices cross the threshold point, the trend will continue, and volatility would increase simultaneously.

  • Reversal strategy 

This trading strategy is associated with high risk. It involves making investment decisions against the market trend, based on analysis as well as calculations. In comparison to other methods, this intraday trading strategy is more difficult. This is because intraday traders need to have extensive knowledge regarding the market. Furthermore, pinpointing the pullbacks and strengths accurately can also be quite challenging.

  • Scalping strategy 

The scalping trading strategy involves making financial gains from small price changes. This method is commonly used by intraday traders when buying and selling commodities. In addition, usually, individuals engaging in high-frequency trading utilise this technique. 

Individuals must keep in mind that the fundamental or technical setup in its entirety does not have much relevance in this case. That said, price action has a greater significance in the case of a scalping strategy.  When picking stocks, individuals opting for this intraday trading strategy must ensure that they choose shares that are liquid as well as volatile. Furthermore, they must make sure to put in a stop loss for all orders.

  • Moving average crossover strategy

Another successful intraday trading strategy in India is the moving average crossover strategy. When the prices of stocks or any other financial instrument move above/below the moving average, it serves as an indication that there is a change in momentum. 

When share prices rise over the moving average, it is called an uptrend. Whereas when stock prices are lower than the moving average, it is referred to as a downtrend. In the case of an uptrend, experts recommend entering long positions or buying stocks. That said, when there’s a downtrend, traders enter short positions or sell their shares. 

  • Gap and go strategy

The gap and go strategy involves finding stocks not having any pre-market volume. The opening price of these stocks represents a gap with regard to yesterday’s closing price. When the price of a stock opens higher in comparison to the closing price of the previous day, it is known as gap up. However, if the opposite happens, it is known as gap down. Intraday traders opting for this strategy identify such stocks and buy them believing that the gap will close before the closing bell. 

Intraday Trading Rules

Here are some basic rules of intraday trading: 

  • Plan your trading strategy and stick to it
  • Identify stocks that are ideal for intraday trading
  • Trade with funds that you can afford and the loss doesn’t impact your financial standing
  • Research thoroughly and pick stocks that have high liquidity 
  • Keep track of your financial gains and losses
  • Make sure to close all open positions

When it comes to intraday trading, there are various methods that one can opt for to earn returns. That said, it is essential to understand an intraday trading strategy completely before implementing it to make financial gains. 

Further, individuals must make sure to stay updated with the latest stock market news and follow the market trend to make the correct decisions at the right time.

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