What is Intraday Trading?: The Ultimate Guide

Mar 25, 2022
a crypto trader sits back and looks at his profits on a screen

The preferred timelines to make gains differ for each investor.. Some invest for long-term gains, while others invest to earn capital faster. This is where intraday trading comes in. Intraday trading is when a user trades throughout a given day and closes their position on the same day. Also, known as the opposite of interday trading -- when someone holds an investment for more than one day. Investors use this technique with stocks, ETFs, and cryptocurrencies. If one seeks to benefit from short-term fluctuations, interday trading is a great opportunity. This is especially so in the volatile crypto market. In this article, we will discuss what intraday trading is, the advantages and disadvantages of this technique. Finally, we will include some tips about trading with this technique. 

What is Intraday trading?

Intraday trading is a technique where an investor opens and closes his positions in one day. The concept of intraday defines the highs and lows of a given investment in a single market day. In other words, the “intraday high” is the highest price of the day for investment. Meanwhile, “intraday low” signifies the lowest price of the day. 

Let us assume that Tom is an intraday trader. He buys 1 Bitcoin at what he analyses to be a low of $38,400. Tom sold it a few hours later at the price of $38,900. Hence, he made a $500 profit. Although the cryptocurrency market does not close (unlike the stock market), this type of trade would be similar to stocks. Investors exchange stocks during business hours. 

The typical intraday users analyze trading charts of 1-,5-,15-,30- and 60-minute when trading. Therefore, allowing them to analyze price fluctuations in-depth. Timing is crucial with these types of trades, and each moment counts. It is a much more engaging form of trading. There are many techniques that traders use with this type of trading. For example:

  • Scalping: Scalping is a trading technique that focuses on making small profits. This involves buying an investment and selling it fast once they make a profit. Scalping generally amounts to a high volume of trades throughout the day. It also requires traders to be very careful. This is as one large dip could cost all the profit you made in a day. 

  • Range trading: Range trading focuses on support and resistance levels. Traders look to buy at a consistently low level (support). Then they try to sell at the peak of a given period (resistance). The danger of this type of trade is when the investment breaks the support level (meaning losses). When the price breaks the resistance level, potential profit is unrealized.

  • News-based trading: This is when a trader focuses on good or bad news surrounding a particular investment. For example, if a country proposed Bitcoin as a legal tender, a day trader would be paying close attention. The volatility during this period could earn him a massive profit. 

What are the advantages of intraday trading? 

As with every trading technique, intraday trading has its advantages and disadvantages. Some advantages are:

  • Diminished effect with overnight news: Intraday trading is less susceptible to negative news overnight. Therefore, traders have more control over profits and losses. It's is a different story for an interday trader. One piece of fear, uncertainty, or doubt (FUD) while the long-term investor is sleeping could destroy his portfolio in hours. The investor would have no control over their investments (unless a stop-loss function is enabled). All in all, background stress is lower. 

  • Tight stop-loss: Speaking of stop-loss, this is another function that can help mitigate losses. As a day trader, sudden volatility in price can result in losses. Luckily there is a stop-loss feature, which is useful -- especially so with the highly volatile crypto market.

  • Learning experience: Intraday trading offers a learning experience for those involved. Since the trader would be making a high volume of trades, this is all gained experience. With experience comes the ability to make better and more informed decisions in future trades.

  • No emotions: Intraday trading is devoid of emotions. Traders can trade without bias and solely on technical analysis. For some, this could be a huge plus. Emotions can often cloud judgment in trading.

What are the disadvantages of intraday trading?

However, intraday trading is not all beneficial. Like any other form of trading, some risks come with it.

  • High risk: Risk is the most significant disadvantage of intraday trading. This type of trading requires continuous action while trading. If you are not paying attention, things could turn red fast.

  • Smaller profits: Intraday trading also has smaller potential profits. Because the time frame is shorter, there is less room for the price to move.

Ultimately, intraday trading has its pros and cons. It is a high-risk, high-reward type of trading -- which might not be suitable for everyone. However, for those looking for a challenge, it can be profitable.

Intraday trading tips?

Here are some tips if you wish to get involved with intraday trading:

  1. Have a plan: Before entering any trade, intraday traders should have a plan for how they will exit the position. This will help them to manage their risk and limit their losses.

  2. Use stop-loss orders: A stop-loss order is an order to sell a security when it reaches a certain price. This can help intraday traders to protect their profits and limit their losses.

  3. Use limit orders: A limit order is an order to buy or sell a security at a specific price. This can help intraday traders to get the best price for their securities.

  4. Trade high liquidity stocks: These stocks tend to have high volume numbers. It allows for many stocks to be bought or sold without significantly impacting the price. It also allows you to enter and exit a position rather quickly. Stocks such as Apple and Tesla are good examples of highly-liquid stocks.

  5. Stay disciplined: Intraday traders should always stick to their plan and not let emotions get in the way of their trading decisions.

  6. Use charts and technical indicators: Technical analysis helps to spot trends. Thus, allowing for more informed decisions about when to buy and sell securities.

Intraday traders should be aware of the risks and rewards of trading in the securities markets. By following these tips, intraday traders can improve their chances of success while trading.

Is intraday crypto trading possible?

As mentioned earlier, the crypto market is open 24 hours a day, seven days a week -- unlike the stock market. Hence, intraday crypto trading doesn't necessarily work the same way. However, for traders that want to turn a profit fast on the market, the cryptocurrency market is ideal for that. Major cryptocurrencies are liquid and highly volatile, often changing several percentage points in a single day (or less). Thanks to technological innovation in the blockchain industry, there are new financial services to help traders act on this volatility instantly. Take YouHodler's Multi HODL feature for example.

Multi HODL uses an automated, loan-based engine to help traders multiply their cryptocurrency in both bullish and bearish markets. Multiplier levels can be set as high as x50 and the interface is extremely intuitive for new traders and expert traders alike. Simply choose a crypto to multiply, pick a direction you think the price will move, set a multiplier level and open your position. Traders can manage risk and set stop loss levels in addition to closing the position anytime they like. It may not be intraday crypto trading but it's as close as many crypto traders will get.

Disclaimer: “The content should not be construed as investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product. It is made available to you for information and/or education purposes only.

You should take independent investment advice from a professional in connection with, or independently research and verify any information that you find in the article and wish to rely upon.”

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