10 Best Intraday Trading Indicators Every Trader Should Know

intraday trading indicators

The intraday trading indicators come in handy since they help us understand the market while intraday trading. This article will shed light on different intraday trading indicators & how you can use them. 

As a trader, you might have come across different trading strategies. One of the most common yet challenging trading strategies is intraday trading. It is a type of trading where you buy or sell stocks, currency pairs, or any other instrument on the same day. 

Not only do traders have to make the right decisions at the right time, but they also stay alert to the current market trends. Thus, traders have to do their best to minimize risk and make informed trading decisions.

What are Intraday Trading Indicators?

Intraday trading indicators are technical analysis tools that can gauge stock market sentiments. Traders commonly use intraday trading indicators to identify trends and can be found on charts that track price movements over a short period of time.

Intraday trading indicators provide traders with critical information about the current sentiment of a specific stock, currency pair, or commodity. Besides trends, technical indicators also have other types. Some indicators are based on volume, momentum, and volatility parameters.  

What is the use of Intraday Trading Indicators? 

Technical intraday trading indicators help gather information about the market so that traders can make more informed trading decisions. As stated earlier, there are four types of trading indicators. Let us find out what each of them depicts about the market. 

Trend

A trend indicates the direction in which the stock market is moving. Generally, there are three types of trends- uptrend, downtrend, and sideways. When the market price continuously forms a series of highs, it is an uptrend. When the market price steadily makes a series of lows, it is a downtrend. The sideways trend doesn’t indicate the market’s direction. 

Trend trading indicators measure the strength and direction trends using a baseline, the average of prices over a period. If the price is above that line, it will likely form a bullish market. On the other hand, if the price is below the line, it is likely to be a bearish market. Moving Averages is one of the most popular trend indicators.

Volume 

Volume indicators have two purposes. They can help us identify the trend’s strength and identify the market’s direction by taking an average of the volume.

When the volume is at its highest, strong trends appear. You can say that price movement is directly proportional to volume. On Balance Volume indicator and Chaikin Oscillator are some of the types of volume indicators. 

Volatility 

Volatility indicators measure the speed of the price movements, no matter which direction it is moving. With their help, traders can identify the price range for which stocks are bought and sold, which could them locate the entry point where the market may change its direction. Bollinger Bands and Average True Range (ATR) are two of the most widely used volatility indicators. 

Momentum  

Momentum indicators help measure the speed of the price movement by comparing recent closing pice to previous ones. It tells us whether the price is moving upward or downward and at what rate. Traders can also use momentum indicators to analyze the volume. The stochastic oscillator and Commodity Channel Index are two of the most important momentum indicators.

List of 10 Intraday Trading Indicators

Below are the top intraday trading indicators that all intraday traders must know about: 

Stochastics 

Stochastics intraday indicators are among the most widely used in technical analysis. They are momentum oscillators that calculate the position of a security’s closing price relative to its range over a given time period.

The stochastic indicator is calculated by subtracting the number of periods with prices in the upper half from the total number of periods and dividing the result by the total number of periods.

There are two types of stochastics intraday indicators: fast and slow. The fast stochastic indicator is used to detect overbought and oversold levels, whereas the slow stochastic indicator is used to detect market trends by calculating a trailing average.

It can assist intraday traders in identifying an entry point and entering the trend at its inception. If the stochastic lines are above 80, the market is overbought, indicating a downtrend.

Volume Weighted Average Price (VWAP)

VWAP stands for Volume Weighted Average Price. It is a popular indicator used in the stock market to measure the performance of an investment over time and with respect to its peers.

VWAP is calculated by taking the total volume of shares traded over a given period and dividing it by the number of shares traded during the same period. VWAP can also measure how well an investor performed in the market or how well a portfolio did. 

With the help of the VWAP indicator, traders might get an idea about the market’s liquidity and the price where bulls and bears are trading at a period.

When buying mutual funds or buying a large number of shares of a particular stock, portfolio managers use the VWAP. While calculating VWAP, you can consider both the price and volume of the stocks. Here’s how you can calculate VWAP: 

Cumulative (Price * Volume) ÷ (Cumulative Volume). 

Super Trend

The Super Trend intraday trading indicator is a technical analysis tool used to determine the trend direction of a security. It’s called SuperTrend because it uses three indicators usually used in trend trading.

They are Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), and Exponential Moving Average (EMA). The Moving Average Convergence Divergence (MACD) and RSI are the most common tools for determining the momentum of securities in an upward or downward direction.  

The default parameter for the SuperTrend is periods of 10 and 3. This indicator is free of use and is available mostly on all platforms. It gives accurate signals at the right time. However, the SuperTrend indicator doesn’t work for all market indicators. It gives optimal results, especially when the market is trending. You can calculate SuperTrend with the below formula. 

Upperband = (high + low / 2 + multiplier x ATR

Loweband = (high + low) / 2 – multiplier x ATR

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a momentum oscillator indicator that calculates the speed and change of the price movements. Thus, we majorly use it to identify the overbought and oversold situations in the market.

The indicator oscillates between zero and 100. When it oscillates above 70, it represents an overbought condition, and when it oscillates below 30, it indicates an oversold condition.  

RSI can also help in identifying a trend in the market. In a bull market, the RSI tends to oscillate in the range of 40 to 90, while the RSI Oscillates in the range between 10 to 60.

However, like other indicators, this indicator, too, doesn’t guarantee the market’s movements. Thus, you always use it with other tools and indicators to verify your predictions regarding the market for intraday trading. 

You can calculate RSI with a simple formula

RSI = 100 — [100/(1+RS)]

Where RS= Average of Upward Price Change/ Average of Downward Price Change

Moving Averages

One of the most frequently used intraday indicators in intraday trading is Moving Averages. It helps traders ride and confirm the trend by calculating an average set of numbers.

Intraday traders also use Moving Averages to calculate the market’s momentum, stop losses, and trend reversals. Specifically, this technical indicator aids in the identification of trading opportunities in the current market’s direction. 

You can also calculate support and resistance levels and targets. To calculate MA, add the value of observations and divide it by the total number of observations. However, MAs are not perfect. They lag and don’t respond quickly to swift movements. 

Average True Range

The Average True Range (ATR) intraday trading indicator is useful for determining market volatility. This indicator was introduced in 1978 by Welles Wilder, a developer and analyst. Its sole purpose is to measure market volatility and does not indicate the market’s trend, direction, or momentum.

ATR is calculated by averaging true ranges over a given time period and accounting for any price movement gaps.

 The market’s volatility can be calculated for both the long and short term, and the ATR calculation is based on 14 periods.

A short average range of 2 to 10 periods is used to calculate volatility for a short time period, while a range of 20 to 50 periods is used to calculate volatility for a longer time period. Due to the fact that ATR is not a direction indicator, it indicates the selling and buying pressure. ATR can signal changes in volatility and serve as a stop or entry trigger.

Use the below formula to calculate ATR-

TR = (Previous ATR * (n – 1) + TR)

Where:

ATR stands for Average True Range.

‘n’ denotes the number of periods or bars.

TR stands for True Range.

On-Balance Volume

The On Balance Volume is a measure of the cumulative volume of trading activity on one side of the market over a specified period. It is calculated by adding up the total volume of up-trades and down-trades that have occurred during the specified time frame.

This indicator shows whether the current market sentiment is bullish or bearish. When there are more trades on one side, it indicates that traders are bullish about that particular security or index. If there are more trades on both sides, traders are bearish about that particular security or index.  

On Balance indicator value above zero indicates that more trades are being executed on one side than on the other. In contrast, a value below zero indicates that more trades are being executed on the other side.

To calculate when the security’s price closes up, add the day’s volume to a cumulative total, and subtract the day’s volume when the security’s price closes down.

If today’s close exceeds yesterday’s close, then OBV = Yesterday’s OBV + Today’s Volume.

If today’s close is less than yesterday’s close, the following formula is used: 

OBV = Yesterday’s OBV – Today’s Volume

If today’s close is the same as yesterday’s, OBV = Yesterday’s OBV.

Commodity Channel Index

Commodity Channel Index is a trend indicator that tells us whether the market is going uptrend or downtrend. CCI has values of 0, +100, and -100.

When the value is positive, it signifies an uptrend. It also means that it is the right time to buy. But when the value is negative, it implies a downtrend, indicating it is the right time to sell. CCI is also helpful in identifying oversold and overbought levels when paired with the RSI indicator. 

Also, while looking for overbought and oversold levels, check the value of CCI. Overbought levels are above +100, while oversold levels are below -100. You can confirm this with the help of trending indicators or other technical analysis methods.

Remember, CCI is an unbound oscillator with no upside and downside limits, making identifying overbought and oversold conditions subjective. So always use CCI with additional indicators. 

Bollinger Bands

Bollinger bands can be used to identify overbought and oversold market conditions and determine the entry and exit points. They are made up of three lines, a centre band and two outer bands.

The middle line is called the “band” or “trading band,” representing a simple moving average of prices. The upper band is placed at a distance from the middle line, usually set to two standard deviations above the middle line.

The lower band is placed at a distance from the middle line, which is usually set to two standard deviations below the middle line. The bands widen when prices are volatile, meaning there’s more uncertainty in future prices. Bollinger Bands are not just used for stocks or currencies but also for other financial assets like commodities, indices, and cryptocurrencies.

Average Directional Index (ADX)

The ADX is a widely used indicator in technical analysis. It is used to assess the strength of a trend by comparing the number of periods up to the number of periods down. The ADX indicator is calculated by dividing a series of numbers by the average. As a result, an index ranging from 0 to 100 is produced, with higher values indicating a stronger trend.

 It operates on a scale of 0 to 100, with higher values indicating a more pronounced trend. To compute this indicator, divide the total number of “up” periods in your data set by the total number of data points. When ADX is above 25, there is a strong trend, and if ADX is below 20, there is no trend. Moreover, if the AXD is declining, it could indicate the market is becoming non-directional, indicating the weakness of the current trend. 

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