Intraday Trading When And By Whom To Execute Trades?
For intraday trading, time matters a lot in intraday trading. Intraday trading time analysis is all about understanding the time frame and then working out for placing intraday trades accordingly. Most of us tend to treat charts as generic periodical information, but there are lots of sub-divisions that break up the trade based on the intraday trading time frame. Let us get cleared by an example.
The daily chart is the simplest chart used in intraday trading. However, for granular traders, there are charts based on hour, minute and tick-by-tick to identify and trade much shorter duration trends. Let us have an insight on how to use intraday trading time analysis and their application in execution of intraday trades using these charts.
What Does Trade Charts Depict And How To Use Them?
Intraday traders generally select the chart that is best suited to them based on their risk capacity and level of trading expertise. Time charts are therefore staple diet for intraday traders!
- Hourly Chart – In an hourly chart the trading chart is further broken to hourly segments. The high, low, and median prices are plotted for each of these hourly intervals. They can be used to trade time-specific trends. For example, the first hour and the last hour of trading are generally happened to be more volatile, while the middle hours tend to be stable. Hourly charts are thus used to trade such unique hour-wise characteristics of intraday trading. These charts also rely on volumes and volatility for a more informed view.
- 15-minute Charts – Such charts are plotted over a period of 3-4 hours or through the day. The only difference being that the stock price is segregated into 15-minute segments. The charts are generally used to identify very short-term trends in the market. These charts are normally studied with news flows and volume changes. If studied properly, they give useful insights on how to take intraday positions. Intraday trading is all about moving money in and out of the market with a positive risk-reward ratio in every trade. Very short-term trends can be captured easily by these 15-minute charts. These charts also capture opening, closing, high and low prices at every 15-minute intervals for a stock or even for an index. These charts are generally used by very short-term traders.
- 5-minute Charts And 2-minute Charts – When we talk of these charts, the actual time frame for analysis can range between a few trading hours to a few trading sessions. This is the price intervals that are considered. For example, the 5-minute chart plots the open, high and low of the stock price at regular 5-minute intervals. This chart is randomly used by intraday traders as it gives them signals of breakout on a very short-term basis. The whole idea is to quickly move in and out of a position so as to end up with a net profit after considering all the costs. Quite often, stock prices give large and quick opportunities that last for a period of few seconds or few minutes. The slightly longer-end trading signals can be hooked by these 5-minute charts. At times, even traders who use day charts take the help of 5-minute charts for granular confirmation. A shorter version of the 5-minute chart is the 2-minute chart. It shows the price movement over a few hours during the trading day. In this case, each candlestick shows the opening, closing, high and low possibilities at two-minute intervals. This chart turns out to be very helpful for traders who are looking at extremely short-term opportunities but work best in case of highly liquid stocks. Also such trades need to be executed in large volumes to be really profitable.
- Tick-by-tick Charts – A tick is a price point whether it occurs in a millisecond, microsecond or in a minute, irrespective. The chart can only be used where the stock has very high levels of liquidity and shows definite trends within a very short term. This line chart represents every trade executed in the stock market and not just an order placed. The tick-by-tick charts of highly liquid stocks show constant moving ticks. These charts also work best for expert intraday traders willing to trade in large volumes and small spreads. For most of the intraday traders, tick-by-tick charts is an additional data point.
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