Intraday: Definition, Intraday Trading, and Intraday Strategies

What Is Intraday?

Intraday means "within the day." In the financial world, the term is shorthand used to describe securities that trade on the markets during regular business hours. These securities include stocks and exchange-traded funds (ETFs). Intraday also signifies the highs and lows that the asset crossed throughout the day. Intraday price movements are particularly significant to short-term or day traders looking to make multiple trades over the course of a single trading session. These busy traders will settle all their positions when the market closes.

Key Takeaways

  • Intraday is shorthand for securities that trade on the markets during regular business hours and their price movements.
  • Day traders pay close attention to intraday price movements, timing trades in an attempt to benefit from the short-term price fluctuations.
  • Scalping, range trading, and news-based trading are types of intraday strategies used by traders.

The Basics of Intraday Trading

Intraday is often used to refer to the new highs and lows of any particular security. For example, "a new intraday high" means the security reached a new high relative to all other prices during a trading session. In some cases, an intraday high can be equal to the closing price.

Traders pay close attention to intraday price movements by using real-time charts in an attempt to benefit from short-term price fluctuations. Short-term traders typically use one-, five-, 15-, 30- and 60-minute intraday charts when trading within the market day. Typically, intraday scalping uses one- and five-minute charts for high-speed trading. Other intraday trading strategies may use 30- and 60-minute charts for trades that have hold times of several hours. Scalping is a strategy of transacting many trades per day that hopes to profit from small movements in a stock's price. The intraday trader may hold their positions for a longer period but still operate under high risks.

Volume weighted average price (VWAP) orders are often used on an intraday basis to increase trade execution efficiency by giving an order exposure to a variety of prices throughout the trading day. VWAP gives an averaged price that particular securities trade at throughout the trading day.



Intraday Trading Strategies

Traders use numerous intraday strategies. These strategies include:

  • Scalping, which attempts to make numerous small profits on small prices changes throughout the day
  • Range trading, which primarily uses support and resistance levels to determine their buy and sell decisions
  • News-based trading, which typically seizes trading opportunities from the heightened volatility around news events
  • High-frequency trading strategies that use sophisticated algorithms to exploit small or short-term market inefficiencies

Advantages and Disadvantages of Intraday Trading

The most significant benefit of intraday trading is that positions are not affected by the possibility of negative overnight news that has the potential to impact the price of securities materially. Such news includes vital economic and earnings reports, as well as broker upgrades and downgrades that occur either before the market opens or after the market closes.

Trading in an intraday basis offers several other key advantages. One advantage is the ability to use tight stop-loss orders—the act of raising a stop price to minimize losses from a long position. Another includes the increased access to margin—and hence, greater leverage. Intraday trading also provides traders with more learning opportunities. 

However, with every silver lining, there are also storm clouds. Disadvantages of intraday trading include insufficient time for a position to see increases in profit, in some cases any profit at all, and increased commission costs due to trading more frequently which eats away at the profit margins a trader can expect.

  • Positions are unaffected by risk from overnight news or off-hours broker moves.

  • Tight stop-loss orders can protect positions.

  • Regular traders have access to increased leverage.

  • Numerous trades increase hands-on learning experience.

  • Frequent trades mean multiple commission costs.

  • Some assets are off-limits, like mutual funds.

  • There may not be sufficient time for a position to realize a profit before it has to be closed out.

  • Losses can mount quickly, especially if margin is used to finance purchases.

Intraday Pricing and Mutual Funds

Mutual funds are off-limits for intraday trading. The design of these funds is for the long-term investor, and they can only be bought and sold through a broker or the fund's investment company. Also, a mutual fund's price posts only once, at the close of the trading day. This price is known as the net asset value (NAV) and reflects all of the intraday movement of the fund's assets, less its liabilities, calculated on a per-share basis.

So, mutual funds do not offer intraday pricing, as their assets fluctuate in market value and their managers make buy and sell decisions all day. However, ETFs—their passively managed cousins—are priced according to their intraday market value within a trading session.

Real World Example of Intraday

The price movements of any stock are posted throughout the trading day and summarized at the end of the trading day. For example, April 4, 2022, shares of Apple Inc. (AAPL) opened at $174.57 and closed at $178.44. During the day, as indicated in the "day's range" listed to the right of the closing price, shares dropped as low as $174.44—the intraday low—and hit a peak of $178.49—the intraday high.

Day traders and technical analysts who follow Apple would study the shares' moves, to see if they could discern any pattern or uncover any significant gap—that is, a sudden jump in the price with no trading in-between.

Article Sources
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  1. Yahoo Finance. "Apple Inc. (AAPL)-Historical Data," Time Period Mar 25, 2022-Apr 05, 2022.

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