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Intraday Trading: The Complete Guide


The advent of online trading available to anyone with a smartphone or tablet has opened up financial markets like never before. Modern technology, 24-hour news, and minimum commissions have levelled the field for anyone wanting to trade. Intraday trading, or day trading, has grown hugely over the past several years on the back of this technological shift.

This style of trading is one of the most popular ways of buying and selling CFDs on currencies, stocks and different financial assets. By trading during the day, traders hope to create opportunities on sharp movements in price action. Various strategies can be used to take advantage of market mispricing, with positions always closed out at the end of the trading day.

What is intraday trading?

Intraday trading involves the buying and selling of financial instruments within a single trading day. This means a trader will never hold an open position overnight. They will close out their positions at the close of each day and start over the following day. The purpose is not to invest over the long term. But instead, it is to trade in and out of positions, sometimes at high frequency, for quick gains. Changes in markets are tracked closely to analyse price action. Small market movements help guide traders in their decision making.

One of the key prerequisites to successful intraday trading is the implementation of a prudent risk management plan which helps cut down losses and prevent losses from getting out of control Strategies such as the use of stop loss and take profit orders would enable traders to understand what price they are willing to pay and at what price they are willing to sell.  On the contrary, without having a risk management mindset, traders may be more prone to let emotions impact their decision-making, which is often disastrous when it comes to intraday trading.

How does intraday trading work?

Intraday trading often involves executing a large number of trades in a short space of time. There may be a relatively small profit (or loss) for each trade. This will potentially build up throughout the day depending on the frequency of buying and selling, and the strategy involved. It is important to remember that intraday trades will require a trader to square off open positions at the end of the day.  If the trader is using margin, then the trader’s long or short position will need to be offset with the corresponding opposite trade. This means the trader’s book is then “flat” with no open positions and no overnight risk.

For CFDs on stock trading, this implies there is no transfer of ownership of shares with the usual settlement of trades over a period of time. By closing out positions at the end of the day, “gapping risk” is avoided. This is when overnight news can cause a price to open considerably higher or lower than the previous day’s close.

Why do intraday trading?

Who should consider intraday trading?

Intraday trading basics generally involve time, focus and a distinct mindset. A decisive personality and someone who makes quick decisions may suit the high-octane life of a day trader. This is especially the case if your strategy entails a high volume of trades in a short period of time. Day trading contrasts with traditional long-term investment strategies where investors seek to create opportunities from price moves over the extended life of a trade.

Strategies of intraday trading

There are numerous styles and strategies of trading to use as a day trader. The most common are:

How to start intraday trading

Intraday trading takes time and commitment to achieve consistency. Determine your ambitions, a risk management plan and enjoy the intraday trading journey!

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