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What is 'Intraday'

Intraday is another way of saying "within the day." Intraday price movements are particularly important to short-term traders looking to make many trades over the course of a single trading session. The term intraday is occasionally used to describe securities that trade on the markets during regular business hours, such as stocks and exchanged-traded funds (ETF), as opposed to mutual funds, which must be bought from a dealer.

BREAKING DOWN 'Intraday'

Intraday is often used to refer to the new highs and lows of a security. For example, "a new intraday high" means a 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 movement by using real-time charts in an attempt to benefit from the short-term price fluctuations. Short-term traders typically use one-, five-, 15-, 30- and 60-minute intraday charts when trading within the day. Typically, one- and five-minute charts are used for scalping, and 30- and 60-minute charts are used for intraday trading hold times of several hours. 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.

Advantages and Disadvantages of Intraday Trading

The biggest advantage of intraday trading is that positions are not affected by the possibility of negative overnight news that has the potential to materially impact the price of a security. Examples are key 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 that include the ability to use tight stop-loss orders, access to increased leverage and provides traders with more learning opportunities. Disadvantages of intraday trading include insufficient time for a position to increases in profit and increased commission costs due to trades being taken more frequently.

Intraday Strategies

There are numerous intraday strategies that can be utilized by traders. These strategies include scalping, which attempts to make numerous profits on small prices changes; range trading, which essentially uses support and resistance levels to determine buy and sell decisions; and news-based trading, which typically uses heightened volatility around news events that may create possible intraday trading opportunities. High-frequency trading strategies that use complex algorithms to exploit small intraday market inefficiencies typically operate on an intraday basis.

Intraday Pricing and Mutual Funds

Intraday trading is essentially off limits for mutual funds, which are designed for the long-term investor. Mutual fund prices only come out at the close of business. 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. Mutual funds do not offer intraday pricing, as their assets fluctuate in market value and their managers make buy and sell decisions all day. Their passively managed cousins, ETFs, are priced according to their intraday market value. 

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