In finance, intraday refers to the financial transactions that occur in the market within a single business day or trading session. Investors monitor intraday highs and lows of financial instruments in order to determine the best times at which to enter the market for various securities. Tools that day traders often use to analyze potential entry points include real-time news, Level II quotes, and intraday candlestick charts. Day trading involves the routine intraday buying and selling of securities to benefit from short-term price shifts during a trading session, with a withdrawal from most positions before the end of the day. The term intraday may also refer to the securities traded on the market during business hours, including stocks, commodities, currencies, and futures contracts.
When engaging in day trading, investors may employ various strategies. Some intraday traders rely on news releases and trend analysis, holding a position until the trend shows signs of reversal. Others may use a strategy called scalping, which involves selling off a security just after a purchase becomes profitable. Fading means taking a short position on a stock that has rapidly spiked in price, banking on the likelihood that the stock price will undergo a correction. Through technical analysis, day traders attempt to buy at the low price of the day and sell at the high price of the day.
With intraday trading, the number of trades possible within the day is virtually limitless, generating either massive returns or colossal losses. Behavioral finance studies indicate that about 80 percent of day traders lose money, while many traders in the other 20 percent receive millions per year through intraday trading. Particularly when trading on margin, a day trader should implement a stop-loss order for a fixed price level at which he will sell in order to limit potential losses from precipitous price movements. Furthermore, adherence to a well-defined strategy and establishment of a maximum loss per day prevents catastrophic losses that surpass the original investment.
Intraday candlestick charts graphically depict the intraday high, low and closing price of a given trading session. The box portion of the candle reveals the opening to closing range, with a white box indicating an upwardly trending day and a shaded box depicting a downtrend during the day. A line extending from each end of the box, called the wick, shows the full price range of the session. Investors can recognize positive trends in a series of white candles over consecutive days, while downtrends manifest as a sequence of shaded candles. In order to identify potential entry and exit points, traders look for doji lines, resembling crosses with no boxes, and engulfings, patterns showing a small candle of one color followed by a larger candle of the other color, all of which potentially represent trend reversals.