There is a variety of intraday traders called scalpers. This type of trading has high risk but potentially can bring extremely high returns on investment (ROI). Intraday scalping is most often based on technical analysis and on indicators such as moving averages, convergence/divergence of moving averages (MACD), oscillators, Fibonacci sequences, etc. Transactions usually open for a few minutes or seconds.
Intraday traders typically buy and sell financial instruments throughout the day. This type of trading is not limited to stocks. Traders can buy and sell options, currencies, futures. Usually, a position opens for a few minutes or seconds, and the same stock can be bought and sold several times a day.
By definition, an intraday trade opens and closes in one day. Therefore, all positions are usually liquidated before the end of the auction, in order to avoid unexpected night market movements and an increase in margin requirements. Thus, traders avoid the risks typical of a long-term buy and hold approach.
Institutional traders work for financial institutions and have a number of advantages due to access to resources, equipment, funds and financial leverage, the inflow of fresh money (they allow you to constantly trade in the markets), high-speed communication with exchanges and data centers, expensive trading and analytical software, support, etc. All this gives them a certain advantage over individual traders.
Individual intraday traders work for themselves or in partnership with friends. Usually, they risk their own money, although sometimes they use others. Laws limit the amount of other people’s money that an individual trader can manage. Although this is not required, almost all traders use the services of direct access brokers, as they offer the fastest access to stock exchanges and excellent trading platforms.
Intraday trading requires a significant amount of time. For traders of this type, it is the main occupation – they spend the whole day at the computer, buying and selling stocks. Such frequent trading is justified only for intraday traders – in their trading decisions they rely on analysis, not on emotions.
The goal of a day trader is to make money on small movements in the price of highly liquid stocks or indices. Volatile markets are more interesting for speculators of this type, regardless of the long-term trend or direction. Some stock managers and investors open positions for a long time and avoid short sales. In contrast, intraday traders are not tied to positions and can adapt to any market condition.
To succeed, the intraday trader needs to combine the relevant knowledge, equipment, tools, understanding of the markets with the experience of using the electronic trading platform. In addition, he should decide which papers to trade, when to open and close a position, how to find stocks with sufficient liquidity and volatility.