Intraday trading techniques / strategies are essential for the day traders. Fluctuations in the stock market teach many traders so many things. With the help of proper Intraday trading tricks and knowledge trader can improve it’s trading style and generate handsome amount of profit.
Intraday Trading Strategies
Before we directly jump to intraday trading strategy, you need to understand the gaps. First of all, let’s have look on the GAPS.
Gap occurs when futures prices suddenly drop lower, with the high price for the day being below the previous day’s low or with prices moving higher with the day’s low exceeding the previous day’s high.
Trading history indicates there’s a high probability that gaps will eventually be filled. A gap is filled if prices later trade in the range at which the gap occurred. Since gaps are usually (not always) filled, they become price objectives for the chartist. Gap typically occur when major new market information becomes available, such as a change in medium – range weather forecast.
Types of Gaps
Gaps can be classified in to the Four Types.
Intraday Trading Strategy with GAPs
Trading with Gaps
Gaps in trading are a common phenomenon and very commonly occurring in stocks. A Gap is nothing but an empty space between the closing price of the previous candle and the opening price of the next candle.
With analysis of different types of gaps and nature, Intraday traders can get the idea about the further movement of stock price.
Break Away Gap
- A Break away gap is typically formed at the start of an uptrend or when price is just coming out of a consolidation phase.
- It is called as a Breakaway Gap because price tends to break out from its previous consolidation to establish a new market move.
- Image below shows an example of a breakaway Gap.
- It Signal a change in market psychology about the future prospect of a security, especially when accompanied by above average volume.
- A Bullish Breakaway gap forms when a security gaps up after an extended decline, extended based on consolidation period.
- A bearish breakaway gap forms when a security gaps down after an extended advance.
Runaway or Continuation Gap
- This type of gap is formed within the prevailing trend is usually said to occur midway of a trend.
- When a runway gap is identified, traders know that the previous trend will continue and trade in the direction of the trend.
- Trading while the continuation or runway gap is occurred, is most probably one of the safest methods to trade.
- An upside runway gap will often occur in a momentum stock. This causes the stock to open significantly higher than where it closed the previous day.
- A downside runway gap will often occur in a stock which moving swiftly lower.
- Runway gaps are not filled very quickly, as prices are skipping to the next trading levels.
- This type of Gap is one of the important gaps and is formed. Common gaps can be formed at any time of the trading session.
- Common Gaps are more likely to be filled within a few price bars/candles and therefore be used for very short intra-day trading.
- This Gaps are formed towards the end of the previous trend and indicate the last final push in momentum before price start to fizzle out.
- Exhaustion gaps are found with the stocks as it is commonly identified with a gap being formed with an unusual surge in volume.
- It occurs within the direction of the previous trend.
- This type of GAP occurs let in a big price move and is often a warning that the strong trend may soon come to an end.
- The example above shows an exhaustion gap to the upside which occurred in the stock. And the gap was quickly filled. These emotional price gaps caused by panic can provide some excellent trading opportunities when looking for a reversal.
Intraday Trading Techniques
Here are some smart intraday tricks to help you trade in the stock market;
- Avoid carrying positions overnight
- You must 1st target when the scrip price is about the 1st target, risky traders square and safe traders square is off 50% of the position
- The square off may remain 50% when the scrip price is about 2nd target and if the scrip price is not near the 2nd target through the entire day, then you must square off at the closing
- You must exit when scrip price break, stop loss level, regardless of the quantity is available to you. In this situation, you must never wait further and adhere stop loss immediately
- You can choose to trade all instead of choose one or two scrip
- You can make use of Stop Loss available with Buy & Hold, BTST and Positional options
Common Investment and Intraday Trading Tricks
Besides the above said trading tricks, here are a few more common trade and investment tricks that you can follow to achieve best Intraday trading strategy:
- The broker will give the stop-loss level, which will specify the level above or below and the market will say if the call has gone wrong
- You must be aware that the stop-loss serves as an essential risk control mechanism, therefore it must be always readily available for the trader
- You must try to book the profit at least when prices reach targets and if you continue to hold the positions, then you must use trailing stops for locking in your expected profits
- Avoid chasing the stock, particularly when you are unable to buy the stock, as it may hit the circuit levels on the successive days and thus do not buy them
- Everyone is aware of the fact that trading involves considerable risks in it. Every trader must trade at his own risk and comfort. Moreover, you must also be aware that the analyst will not be responsible in any terms of your loss
Must Read – Intraday Trading Rules
Investment & Day Trading Formula
- You can consider your investment whenever the market is high and expected to fall soon
- When the market is low and if there is not external factors disturbing, then it will rise, therefore you can consider this marketing condition
- The best time to invest is when the market is down, however you must remember the fundamentals to avoid risks
- Avoid chasing a stock and buy when the market is in the grip of panic
- Try to invest only in the fundamentally strong stocks and that are undervalued
- Try to avoid loss-making companies and look for dividend paying record
- Try to invest a fixed amount every month on the stock
- Try to buy when everyone is selling and sell when other traders buys
Related Article: Day Trading Tips for Beginners
I am Hitendra Dixit. I am a civil engineer, at the age of 47 I have changed my profession and came in to stock market. I got excellence award for best share market training institute in India. I provide training in live market, during training sessions I do trade with real money in front of members. Many of my members left their job and became a professional trader with my support and guidance.