'Intraday' is explained in detail and with examples in the Trading edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
Intraday refers to trades that occur during the normal course of the day. These price movements are especially important for traders who practice short term trading. They attempt to earn profits trading repeatedly throughout the one day trading session. Sometimes the term is utilized to refer to securities which engage in normal trading on the stock exchanges throughout the regular hours’ session. This would include ETFs exchange traded funds and company stocks.
On the other hand, investors must purchase mutual funds from dealers directly. Their transactions typically occur after the stock market exchanges close for the day. This happens because the mutual funds must calculate their closing NAV Net Asset Value before they can lock in the buying and selling prices for their fund shares each market day.
Intraday also can be employed to explain a new low or high for a given security. It is always illuminating to consider a real example of such concepts. When dealers or analysts refer to a new Intraday low, they signify that the security touched a new low as compared to its other price points throughout the day in a single trading session. There are many cases where such an intraday low or high is the same as the final closing price for the given security.
Short term traders are always interested in these single day price movements. They watch them carefully with computer power-generated real time charts. This helps them to ascertain the right points to trade in and out in an effort to make money on the short term volatility and movements in the underlying issue stock prices. These shorter term time frame traders generally deploy 60, 30, 15, five, and one minute charts as they are trading in a single session and day. They might employ the five and one minute charts for scalping, while they would utilize the 60 and 30 minute charts for holding periods of a longer several hours.
There are a range of advantages and disadvantages to such Intraday trading. The greatest benefit to it lies in the fact that any unforeseen after market news can not impact the prices of the securities themselves. As an example, consider a surprise earnings report or important economic data release. There are also broker downgrades and upgrades which might happen after the market has closed or before it even opens. By only trading stocks on a throughout the day basis, short term and scalping traders avoid these pitfalls which can cause dramatic price swings and shocks. Intraday trading also permits tighter stop loss orders, greater opportunities for learning, and higher leverage limitations.
Disadvantages in such trading are that there is not always enough time for various stock prices to gain sufficiently in profit. Commission costs are also significantly higher as the traders on a short term basis are often in and out of positions repeatedly throughout he day, raising the costs of trading.
Short term traders are not without their effective strategies that help them to realize profits on an intraday basis. Some of them are range trading in which they work off of resistance and support levels in order to decide sell and buy entry and exit points. There are also scalping trades that seek to earn a large number of profits on minute changes in the price of the securities in question. News-based trading seeks to gain advantage on the increased volatility levels surrounding announced news which may make for interesting and exciting trading opportunities on an intraday basis. Finally, there are high frequency trading strategies. These employ expensive and complicated computer algorithms to take advantage of tiny inefficiencies in the single day trading markets.
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