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Warrior Trading Blog

Intraday Definition: Day Trading Terminology

intraday photo

Intraday refers to any market activity that takes place within one day’s trading session.

Intraday is most often used with respect to intraday trading, where securities are bought and sold within one trading session.

Intraday and Investing

The concept of intraday is important in investing because most investors take a long term view based on weeks, months or even years. Investors generally tend to ignore intraday price movements, which they simply write off as ‘noise’.

However, there is a class of traders, known as day traders, who focus specifically on intraday price movements, looking to profit from known psychological patterns in the short term volatility of prices as they move from one point to another in daily or weekly terms.

Chart Time Frames and Intraday Price Action

Charts are generated using a data point for each set time period.

A 5 minute chart will show one point of data for the price of a security after every 5 minute period, and this holds for 30 minute charts, hourly charts, daily charts and so on.

Therefore, while a daily chart may show a smooth transition between prices from one day to the next, within each day (the ‘intraday period’) there can be a high degree of volatility as the price moves from one daily close to the next.

This hold true as well for even smaller intraday periods. A chart with an hourly time frame will miss much of the price action that happens during the day on volatile securities, particularly securities that are affected by heavy volumes and a barrage of relevant news, such as currencies and petroleum commodities.

The lowest common time frame chart setting for most trading platforms is 5 minutes, though the rise of computing power has led to trading strategies that are focused on time frames measured in as little as milliseconds.

Intraday and Trading

For day traders the vast majority of the trading and analysis done will be performed using intraday charts.

Time frames greater than one day may be used when performing analysis to prepare for potential trades, but actual trade execution will be performed using a 5 minute or less chart setting.

This means that day traders are trading on intraday price action factors, such as volume, option expiries, news and events, correlations to other securities and economic or financial data, and more.

Intraday price action has a different character and set of patterns than what is observed in longer time periods, and investors who wish to become day traders must become accustomed to the particularities of intraday day price action.

Final Thoughts

Intraday price action offers unique trading opportunities that most investors overlook and which day traders strategies are specifically tuned to exploit.

Day traders need to learn to think in intraday price terms, as they are often taking advantage of long term investors making much larger trades with long term price action in mind.

This allows day traders to exploit their specialization in short term price action to capture the potential profits that long term investors tend to ignore.