Stock Market itself is a rick platform and when it comes to intraday trading, if you have risk apatite which has the potential of high rewards and a regular income, then you can choose intraday trading as a career option. Intraday trading has advantages over conventional long term investing and these are explained in our article on intraday trading. read it here.
Intraday trading requires a lot of analysis or else normal prediction will only land you in huge loses and hence it is important that you are ready to explore different technical indicators and understand the intraday price movement at large to benefit from the daily price movements of different instruments. In this article, we will discuss different popular intraday trading strategies which will help you to benefit from the daily price movements.
Top Intraday Strategies
- Momentum Trading
- Trend Reversal
- Breakout Trading strategy
- Moving Average Crossover
- Gap Trading Strategy
Momentum Trading
Finding momentum stocks for the day is one of the most crucial and successful strategies in intraday trading. If you see daily gainers in stock markets, there exist few stocks daily that have moved very large and most of this movement of the stocks have a particular reason for their movement. You have to identify the momentum in these stocks and trade in them to make the most of the profits.
Momentum stocks can be identified by following news because most of the movement occurs when there is an announcement regarding the company such as earning details, financial results, Dividend announcement, growth opportunities, and other company-related information. and also many times, when there is a major breakout in the stock their will be momentum that will be picked up by the stock.
Trend Reversal
In Price movements, it is believed that every trend will have a little correction on its forward movement. For example, a bull movement after a long upward move will correct very small before continuing the upward bull movement. You have to catch these trend reversals and buy the stock near support levels and make use of the upward trend. In a similar way in a continuous downtrend, you can find the correction and buy near resistance levels and make use of the continuing downtrend.
Breakout Trading strategy
Another important strategy that is used in intraday trading is the use of supports and resistance levels for the stock price movement. When the stock is within the limits of support and resistance, then no signals are given, but when the stock crosses these levels then the suitable indicator will be given either a buy or a sell signal.
If the stock price moves below the support level, then it is a support breakdown and it indicates a sell signal. In a similar manner if the stock price breaks a resistance level it is a resistance breakdown and it indicates a buy signal.
Moving Average Crossover
The moving average is one of the simplest and most popular intraday trading strategies that rely on the moving averages of the price of the stock. In this strategy, two moving averages of different time periods are plotted at the same time on the chart of the stock and observed for the crossovers of one moving average line with the other moving average line. This crossover of two moving averages line indicates a change in the direction of movement and a proper call has to be taken on the type of transaction to be executed.
moving averages crossover is also one of the most popular strategies used in Algorithmic trading. you can learn and know about algorithmic trading from our Algorithmic Module
Gap Trading Strategy
This is another Intraday trading strategy that identifies stock or instruments that have opened with a gap up or gap down. Gap opening means that the opening price of the instrument at the time of market opening is much above or much below the previous trading day closing price. This is mainly because of the difference in the demand and supply of the instrument. This happens when there is some news either positive or negative about the company and investor rush to either buy or sell the shares in large quantities which creates a gap opening for the stock.
In Gap Intraday Trading strategy, Identify those gap opened tocks on that day and take positions in the direction of the gap opening. Remember that this strategy has very limited profit potential and it is important that users have to book these very small profits.
And also within the day, if the gap gets filled by the opposite movement of the stock, there is an opportunity to make an opposite position and make a profit from the price movement in the direction opposite to the gap.
Conclusion
There are thousands of trading strategies in the market and each of them has its own method of explaining the movement in the market. But it has to be noted that not a single trading strategy is 100 per cent accurate and each of these trading strategies has its own risk factor involved.
The best methodology is to differentiate between the strategies that are suitable for Bull movements and Bearish movements and accordingly use them based on the overall market condition that is existing at a particular time.
