Intraday refers to the time period within a trading day, from when the market opens to when it closes. Intraday statistics are often used by day traders, who buy and sell the same securities within the same day.
Definition and Examples of Intraday
Intraday means “within the day” and is a term commonly used by traders to refer to the time between the market’s open and close. The stock market’s core trading hours start at 9:30 a.m. ET and end at 4 p.m. on weekdays (with the exception of holidays).
In trading, the term “intraday” can be shorthand for securities like stocks or exchange-traded funds (ETFs) that are traded during market hours of the same day.
In other financial shorthand, intraday is used when referring to the movements or trends of a security that happened within the trading day.
Day trading strategies can include scalping, momentum trading, range trading, and technical analysis, all of which we'll review in more detail below. The day trader then typically exits the position before the day is over for intraday trades. Intraday trading is the opposite of “interday” trading, which is when you trade a stock over a period of two trading days or more.
For example, a trader might buy a high-momentum stock at 10 a.m. for $25 per share. By 1 p.m., the trader sees the price has risen to $26, so they sell. Because the position went round-trip, meaning it was bought and sold on the same day, it is considered an intraday trade.
How Does Intraday Trading Work?
Intraday trading works the same way buying and selling securities works, only they are bought and sold within one day. Traders making these short-term moves analyze the patterns of the price movements and try to gauge when to buy and sell them to maximize their profits.
Most brokerages and other trading platforms offer live stock price quotes to show intraday prices that are constantly updated. Traders can use the platforms to analyze an endless array of intraday technicals as well.
Intraday trading requires significant experience with trading and is considered a high-risk investing strategy. Some examples of intraday trading strategies include scalping, momentum trading, range trading, and technical analysis.
Scalpers try to quickly get in and out of positions with small profits on high volumes of trades. The idea is that the large number of trades have the potential to add up to significant gains. Scalpers typically do not hold the same position beyond the trading day because overnight trading can affect their profits. Instead they tend to buy and sell securities quickly, within the same day to target their price points.
Momentum traders identify whether a security is trending up or down, then try to take advantage of that momentum. Momentum traders can hold stocks for longer than a day, but momentum trading can be done intraday as well.
If a stock is increasing in price, a momentum trader may buy it and then sell it at an even higher price for a profit. If a stock is trending lower, the trader would short it and sell it to benefit from the losses. Momentum traders often trade on stock price movements driven by news.
Fading is the opposite of momentum trading. Traders buy a stock that they think has gone down too much or short a stock that they think has gone up too much.
Range traders take advantage of stocks that trade within a certain range, not going above a certain price (level of resistance) or below a certain price (level of support) for a period of time. Range traders, for example, will aim to buy at the low end of the range and sell high.
With technical analysis, traders analyze past price movements and try to identify patterns that can help them predict future price movements. They use that data to help them decide when to buy and sell.
Traders can use technical indicators with other strategies like scalping, momentum trading, range trading, and others.
Pros and Cons of Intraday Trading
Intraday trading has a number of advantages, but it also has downsides to consider. Here are a few pros and cons of intraday trading:
- Profits: Traders who find reliable strategies for day trading can make significant profits, however, day trading is also highly risky.
- Speed: With intraday trading, you’re getting in and out of positions quickly, which can be an advantage for traders aiming for short-term returns.
- Technology: Advances in technology, including through brokerages and trading platforms, are making day trading and analysis increasingly accessible.
- Risk: Day trading is notoriously risky and is not ideal for new traders. Unexpected market movements could result in sudden and significant losses.
- Smaller earnings: Gains from one intraday trade can be small. So, most day traders make intraday trades regularly. Some traders use leverage to try to boost their earnings.
- Restrictions: The U.S. Securities and Exchange Commission (SEC) has restrictions for day traders. If you make four round-trip trades (meaning you buy and sell the same security multiple times in the same day) within a week and you have under $25,000 in your account, you might be prevented from making more trades.
- Intraday means “within the day” and refers to when a security is traded from the market’s open to close.
- Intraday trading strategies include scalping, momentum trading, range trading, technical analysis, and more.
- Intraday trading has the potential to provide profits, but the strategy is considered high-risk, especially for inexperienced traders.