Be it a beginner or an established trader, following the basic intraday tips is a common practice before starting the trading day. However, your trading strategy changes with time and the concurrent events play a huge role in its working. In order to maximize returns, it is essential to understand the market. For this purpose, there are trading indicators. Trading indicators are beneficial tools that are used with a comprehensive strategy to maximize returns.
Information Offered by Intraday Trading Indicators
- The direction of the trend to determine the movement
- The lack of or existing momentum within the investment market
- Profit potential due to the volatility
- Determine the popularity through volume measurements
These are the vital pointers shared by trading indicators. These basic, but beneficial pointers help in assessing the market conditions and allow traders to make better decisions with respect to trade positions.
Useful Intraday Trading Indicators
Moving Averages:
Traders often hear about daily moving averages (DMA), which is the most common and widely used indicator. The moving average is a line on the stock chart that connects the average closing rates over a specific period. The longer the period, the more reliable the moving average. This indicator will help you comprehend the underlying movement of the price, as prices do not move only in one direction. Stock prices are volatile and the moving average indicator smoothens the volatility to provide an understanding of the underlying trend of the price movement.
Bollinger Bands:
This intraday trading indicator is one step ahead of the moving average. This band comprises three lines—the moving average, an upper limit and a lower one. All these are representative of the stock’s standard deviation, which is nothing but the amount by which the price increases or decreases from its average. This provides traders an understanding of the stock’s trading range.
Momentum Oscillators:
Stock prices move up and down. There are short-period cycles that are unrelated to the bullish or bearish market trends. In such cases, it is easy for day traders to miss out on such changes, which is when the momentum oscillator is beneficial. This indicator is depicted within a range of 0 to 100 and is advantageous when the price has achieved a new high or low, and one wants to determine whether it will further rise or fall. In other words, the momentum oscillator helps to understand when the market sentiments are undergoing modifications.
Relative Strength Index (RSI):
The RSI is one of the useful intraday trading tips to compare the share price’s gains and losses. This information is then formulated in an index form, which further helps in narrowing down the RSI score ranging between 0 and 100. This index increases with price rises and vice versa. Once the RSI increases or decreases to a specified limit, you can modify your trading strategy.
Decoding the Intraday Trading Indicators
Moving Averages:
If short-term averages are exceeding the long-term averages, it indicates a bullish market trend. Traders may take a buy call with specific strategies like stop-loss either at the long-term moving average or retracement support and vice versa. This intraday tip can help traders earn decent profits through intraday trading.
Bollinger Bands:
If the stock is trading at a price below the Bollinger Band lower line, there is potential for the price to increase in the future. Traders can choose to take a buy position. On the other hand, if the current stock price is over the upper line, traders can sell the share.
Momentum Oscillators:
If the share price has reached a historical high, and the level of the oscillator is not the same as the price, it is indicative of slowly decreasing demand. This also indicates the possibility of a stock price fall. And the opposite is true for stock price rise.
RSI:
Most analysts will recommend traders to sell the stock when the RSI touches 70 and a buy recommendation when it falls to 30. However, all stocks may not adhere to this pattern, so it is important to analyse the volatility and RSI history before making a decision.
Using intraday trading indicators help in averting risk and placing appropriate trades based on technical analysis and market sentiments. Angel One offers detailed charts and stock analysis reports that comprise these trading indicators. These tools help in planning an effective trading strategy, while minimizing risks.
Things You May Also Like to Know
FAQs
It is a good practice to look at multiple indicators while taking your position in the market. Most intraday traders will swear by the following indicators which they use regularly.
- Moving average
- Bollinger Bands
- Momentum Oscillator
- Relative Strength Index (RSI)
Using these indicators will help you manage market risk exposure and maximise your profit. You need to invest time in understanding the different indicators to base your trading decisions.
Traders use technical indicators to analyse the past and the current trends to accurately predict the future. Opinions may vary, but a popular choice for an intraday technical indicator is Relative Strength Index or RSI.
However, here are some words of caution. An indicator isn’t a trading strategy on its own. Its job is to help you identify a trend to build a strategy. Traders use multiple indicators for better visibility to base their strategy.
The popular choices include,
- Moving Average Line
- Moving Average Convergence Divergence (MACD)
- Relative Strength Index (RSI)
- On-Balance-Volume (OBV)
- Bollinger Bands
- Supertrend Indicator
- Advanced-Decline Line
Professional traders combine market knowledge with technical indicators to prepare the best trading strategy. Most professional traders will swear by the following indicators.
- Moving Average Line
- Moving Average Convergence Divergence (MACD)
- Relative Strength Index (RSI)
- On-Balance-Volume (OBV)
Indicators offer essential information on price, as well as on trend trade signals and give indications on trend reversals.
Intraday traders use not one but multiple indicators. It allows them to get a clear view of the market. Each index is purposefully designed to evaluate the market in different time frames to discover underlying trends. While chosen in tandem with overall trading strategy these indicators give essential information on price signals, market trends, the momentum of the market, popular securities via volume assessment, and possibilities of profit on trading those securities.
You can use any good charting software to generate a Supertrend Indicator. Open it for the stock you want to follow and then set the time frame to 10 minutes. Track the indicator for possible buy or sell signals.
