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Intraday Trading Strategies - Get Maximum Benefits From Intraday Trading And Formulas

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23 Nov 2023

It’s quite difficult not to get tempted by intraday trading. After all, that is how you can make money fast from the stock markets. Only a few good hours in front of the computer screen can do wonders to your wealth statement.

A trader is a keen observer who doesn’t let emotions come his/her way. So, it’s important that you do research well and keep a tab on your emotions. All you need to do is exercise timely restraint. But everything is not as easy as it sounds. Intraday trading is also a double-edged sword where a single false step can cost you dear. There is no sure shot recipe for success in intraday trading. However, a good intraday trading formula can come in handy for most dealings.

Intraday Trading Guidelines

Candlestick charts originated in Japan way back in the 1700s. A candlestick, represented in red and green, shows the market’s open, high, low and close prices throughout the day.

Suppose the wide part of the candle is filled with green. It means that the open was higher than close. But if open to close was low, the candlestick will be represented in red.

Above and below the real body of the candle are ‘wicks’ or shadows. These represent the highs and lows of a day’s trading. Assume, for instance, that the upper wick of a red candle is short. It means the open price is close to the day’s high.

Similarly, a short upper wick of a green candle signifies that the day’s close is near the high. In short, a down candle is shaded red and an up candle is shaded green.

Pivot point theory: This is an effective intraday trading formula. It anticipates the movement of a stock based on its performance on the previous day. A rundown of the previous day’s trading data of a stock will give us inputs like intraday high (H), intraday low (L), and closing price (C). We need to add them up as: H + L + C = X Now, the derived value must be divided by 3: X/3 = P (which is called the pivot point) Then, multiply P with 2: X/3 X 2 = Y It is assumed that a stock moving above the pivot point is likely to continue its journey till the first resistance level. In some cases, it will move to the next resistance level.

Likewise, a stock trading below the pivot point is likely to drift lower to the first support level and continue to the second support level.

Fraction theory: Just like the pivot point theory, it’s also a popular intraday trading formula that relies on inputs collected from the previous trading day. The previous day’s high (H), low (L), and closing (C) need to be added up and multiplied by 0.67 as:

The resistance and support is calculated in the same manner as in the pivot point theory. The stock’s possible buy (PB) is determined as Y – C. You can pick up the stock above PB and look for the resistance level.

Intraday trading Strategies relies on inputs from the previous day as well as the current trading session. The previous day’s highs and lows of the stock should be tallied with the current day’s high and low. This tally should take place at 10.15 am after the markets open.

You can trade for a gain of up to 0.5%, and the stop loss is set at 1% lower. In short, the risk in this type of trading is twice the probability of earning any profit.

The problem with intraday trading strategies is that very few stocks will fetch profits for you. Only about three to four stocks, out of 100, will follow the above theory in day trading.