In this article, I would like to express my personal attitude to and experience in intraday trading. Also, I would like every reader to decide for themselves whether intraday trading suits them before they make any precipitous steps.
I will give you the information in two parts. In part one, I will speak in detail about the principles of intraday trading and in part two, I will give you some examples of strategies and recommendations on this type of work.
What is intraday trading?
So, what is intraday trading? The very name of the method and style speaks a lot about their essence: trading takes place during one workday/trading day/trading session/certain trading day in Forex or the crypto market.
Most beginner traders, if not all of them, start with intraday strategies, even unconsciously, or knowing no alternatives. Their logic is quite understandable: they compare trading to any other job that has its work hours by the contract or law. And this seems really cool: you wake up in the morning, have a nice meal, analyze the market, make a trade (buy/sell your asset), and several minutes or hours later you make a net profit. Next, you can go on trading to make more money or switch to other activities, enjoy yourself, and spend your money.
I might be mistaken but I guess that 90–95% of traders would be happy to live in such a “trading conveyor”. Well-known statistics which say that 90% of traders lose their money, literally hints at this conclusion. However, the reality of intraday trading is much more severe than the theory. Why? Well, an intraday trader works morning till lunch and closes all trades with a profit only in theory. In reality, the trader can spend days in front of the computer screen, meditating at the markets and deciding whether to close trades with a loss or try to play them back. A large number of trades, inevitable losses, attempts to play them back — all this makes the theory of intraday trading just a theory.
Let us get acquainted with the basic concepts of intraday trading closer. We will discuss intraday trading strategies and principles, thus analyzing and making some conclusions about this approach meant for you to understand whether this technique suits you 100% or you should stay away from it.
Principles of intraday trading
If there were a trading method with a 100% guarantee of a desirable result, trading would be a closed business for the chosen ones and not a field for experiments for extraordinary, bold, and smart people. The lack of this so-called “Grail” does not stop traders; conversely, it inspires them to search and noble risk. As long as all traders are different, their methods also differ, though have certain features in common. Common characteristics define the level of risk, while individual traits make create the potential for success in the long run.
Intraday trading is a method of short-term trading practiced by traders of different levels and classes.
Principles of organizing and practicing intraday trading
The Rational Limitation principle
This means that the trader must limit the risk of each trade and the trading day on the whole toughly. Your risk limits must come from your money management system. Under the day limit, we mean the percentage of aggregate losses a day upon reaching which the trader must stop their work. The desire to play back the losses is a bad friend in trading.
Also, you may need to limit your profits. This might sound weird but, trying to compensate for their misfortunes, a trader might fall prey to emotions and lose up to the whole of the capital.
The Look At Larger Timeframes principle
An intraday trader tends to work with timeframes below D1 — H4 and H1. On smaller timeframes, such as M1, M5, and M15, the instruments of tech analysis might be less efficient than on larger ones (H1 and higher).
For example, if on M15 you see a Triangle pattern after a descending impulse, get prepared for a sale as the continuation of the decrease. However, if the same Triangle forms on H1 or H4 at the support line of a long-term and stable channel of growth, your desire to sell might evaporate because you risk a bounce and a new wave of growth. Hence, this principle requires constructing the strategy from an older timeframe to a smaller one. Seeing an uptrend on D1 or H4, look for an entry on M5 or M15. At the same time, exit on a signal from a smaller timeframe also not to sit for too long with a loss.
The Track The News principle
It is no secret that important statistics or data, speeches of influential people, and other meaningful events might make the market excessively volatile. Such volatility might either bring large profits or huge losses. Hence, if the trader does not use a news-based strategy (which was specially designed for making money on steep and wide price surges at the times of news publications), they must be careful not to have any positions open at the moment when some important news emerge. If on larger timeframes the fluctuations provoked by the news will be almost unnoticeable, on smaller timeframes used by intraday traders such fluctuations might easily trigger all Stop Losses.
The Don’t Trade Everything At a Time principle
Intraday trading imposes rather tight frames on the trader. They have to keep an eye on everything at once, which leaves little time for analysis, making decisions, thinking over, and following trades. Decisions must be taken quickly and made effective at once. Hence, the trader should not dilute their attention by trading several instruments. You need only 2–3 of them to start with and focus on the work with them unless you want to suffer serious losses due to being inattentive.
The Quality Over Quantity principle
As in any other activity, the priority of quality over quantity must be your basic one, and with time and effort, their quantity can transform into high-quality trading.
You should never trade for the sake of sheer trading, though this is the case of many market players. No open positions in some circumstances might be a good position.
You should only trade complete and proven chart patterns, signals. Otherwise, do not open positions at all. Close positions fast, as soon as you see that the situation goes against your scenario. Do not open new positions or pull closer your SLs if you have little idea of what is going on in the market.
To be continued…
By Dmitriy Gurkovskiy, Chief Analyst at RoboForex