In the previous article, I gave a detailed account of the main principles of intraday trading. Today, I will continue by presenting you several intraday strategies and giving some advice to beginner traders.
Strategies of intraday trading
If you look at the principles and strategies of trading, you will see that they are mostly universal for all trading styles; however, there are unique ones, too.
The intraday strategy in Forex entails making trades inside a trading day. Open trades are not transferred to the next day to avoid swaps and the risk of gaps at the opening of the next session, which are quite frequent in the stock market but rare in the currency market and almost non-existent in the crypto one.
Various strategies of intraday trading are used rather frequently, unlike long-term ones. Strategies meant for D1 can be called the stablest ones because trends on such charts give the trader an opportunity to look at the chart less frequently, while channels are wide enough to minimize the number of hasty or thoughtless trades. Meanwhile, intraday trading is usually considered the riskiest one.
As a rule, traders use several strategies simultaneously to spot entry/exit points correctly and choose the position size so that the profit will be maximum. There are four most popular trading methods that are valid for intraday trading as well: impulse, breakaway, pullback, and scalping; the latter method belongs to intraday trading only.
To my mind, impulse strategies are optimal for all Forex traders. They are based on the most popular indicators: Moving Averages and oscillators (Stochastic and MACD). The idea of such strategies is to find a trend on larger timeframes and detect inner impulses that the trader is counting on. The main advantage of this method is a good chance to make a significant profit in a short time.
Impulses can amount to 30–50 points, sometimes 100 points. To make a profit on such a movement is a dream of every trader. Such strategies decrease risks, drawdowns, and psychological pressure. Impulse trading allows opening trades at the moment when the price is just at the start.
The breakaway method can be called a special case of the impulse method because it is based on the idea that a breakaway of a fractal or strong support/resistance level will let the market go on unhindered in the direction of the breakaway. For this trading method, 5–15 min intervals are used. A breakaway is hard to predict and can happen at any moment.
This method is the opposite of the previous one. This method is based on finding a flat where the price wanders from the support to resistance level and back. Also, the pullback method uses the opportunities to buy or sell at a pullback after a breakaway of this or that strong level.
Scalping is the most popular and attractive intraday strategy. It implies short-term or ultra-short-term trades and taking profits after small (up to several points) movements. This system is not only fast and profitable but also risky in each trade in times of high volatility, mind that. Some might think that scalping means a smaller income than medium- and long-term trading; however, you can close a lot of trades by scalping intraday and make a weighty profit with a low risk to the whole of your deposit.
Advantages and drawbacks of intraday trading
The advantages of intraday trading would be:
- Independence from global news that influences the market. If the price falls abruptly, an intraday trader will close the position or opens an opposite one, while a long-term trader might try to wait for a correction to end, hoping that the trend will continue;
- Low risks provided that you follow certain rules and stick to your money management system. Also, it is important to use a small part of your deposit;
- A high potential profit made by a large number of trades;
- A low entry threshold.
Meanwhile, its disadvantages are as follows:
- You spend much time working with charts and the market on the whole;
- Psychological pressure increases gradually, you make mistakes and lose control over your actions.
Who does intraday trading suit?
Intraday trading is not the easiest thing to understand and practice. Nonetheless, lots of people come to the market every day hoping for money but lose their spirits as soon as they get to know that trading is no casino gambling, and money does not appear from no place. Such traders do not realize that money here is not won but earned. They make trades in a hurry, hoping for luck, make mistakes, and lose.
To succeed in intraday trading, you need to be stress-resistant, react calmly to small misfortunes, know how to concentrate and be patient, be ready to work, and make decisions fast. A trader that can boast such qualities and skills is likely to remain in the market and make money intraday.
On the contrary, intraday trading will not suit those who:
- cannot control their emotions;
- takes inevitable losses inadequately, cannot cope with them as with any other business expenses;
- treats trading as gambling;
- does not want to learn anything new;
- craves for making money quickly and playing without any pains.
Also, intraday trading will not suit those who have no chance of full-time work during the trading session or get distracted constantly.
Summary and recommendations on intraday trading
Intraday trading can provide a successful trader with not only financial independence but also an opportunity to choose their working hours and place. On intraday trading, many lose, but some gain. Hence, you need to practice your trading skills every day, sticking to the rules of money management.
The list of recommendations is almost identical for everyone:
- Keep learning.
Learn at any opportunity, anything and anywhere, because market and technology never seize developing, and so does trading. New strategies appear while old ones work no more.
- Be realistic.
Certainly, there are those in the market who can earn millions every day but they have always been experts with substantial capital, extraordinary intelligence, and access to important information. If you are making your first steps in trading, do not plan to earn 100.,000 USD a month if you do not earn millions already. Start by learning not to lose money when trading intensely.
- Plan everything.
Before entering a trade, decide when you will exit it, where to place the Stop Loss and Take Profit, what to do next. A trader must have a plan in their head and follow it automatically.
- Choose your instruments.
For intraday trading, 2–3 instruments will be enough. It is much easier to look for entry points on 1–2 charts than on 10, losing opportunity and diluting your attention.
- Choose your time.
Intraday trading takes much time. If you cannot sacrifice this time, do not venture trading this way. To trade successfully, you need to concentrate on your work and the market. Also, choose a time for trading that will be optimal for you.
- Control your emotions.
Trading is hard for your psychic as well. It is too easy to lose control under a load of losses and start trying to play them back. And this leads to even more losses. Do not be greedy, never hold a profitable or losing trade for too long.
- Use reliable information.
In trading, information is everything. You should trust large and authoritative sources. This minimizes the risk of relying on false information that might cause you trouble.
- Risk wisely.
Investors afford to spend 10–20% of their capital on one company. For intraday traders, this is impossible. Risk 1–3% of your capital per trade. In case you lose, your emotions will not nag on you, and you will trade more successfully.
Good luck with your trading and business!
By Dmitriy Gurkovskiy, Chief Analyst at RoboForex