Intraday Trading Styles
Intraday Trading is a demanding trading style that requires research and a well-defined strategy. If you’re just starting to learn about day trading, it’s important to know that all intraday trading demands the discipline to change set-ups on a daily basis. Where position traders may see a trend develop over the course of a month, intraday trading is based on trends lasting less than an hour. A trading pattern usually lasts between 5 and 15 minutes, and traders could be pulling the trigger on trades as often as every thirty seconds. All intraday trading has the same commission structure, which is characterized by low minimum tickets and high trader payout. Here are some intraday trading concepts that all new traders should know:
Relative Strength Trading
An intraday trading style that looks to go after big or immediate trending moves. The objective is to carry positions. Carrying essentially means to hedge by taking two offsetting positions and pocketing the difference between the two.
Directional Day Trading
The objective is to aim for low risk, high odds technical trades. A technical trade is based on your research, and stems from the belief that by looking at historical prices and volume data you can predict future performance. The size of moves is generally dependent on what type of stock you’re trading with online trading site and what the charts suggest.
Gap Trading and Fading
When using this intraday trading style, the objective is to capture gap fades and gap and go’s. A gap occurs when there’s a sudden movement in price, with no trading in between. When you fade the gap, you’re betting against the gap: if the gap is up, you short the stock; if the gap is down, you buy the stock. A “gap and go” day occurs when there’s a strong continuous trend and the gap never fills up. Depending on how strong the trend is, the size of the move can vary greatly and success hinges on how well a trader executes the gap set-up and chooses the gap to trade.
When rebating, the objective is to trade at a high volume to collect rebates. Once the stock has gone up a cent or even stayed flat, day traders will short sell and collect their modest profit in addition to the rebate offered by the Nasdaq. The key is to remain disciplined and patient…waiting around for larger profits is how new traders rack up huge losses.
NYSE Scalping and Rebating
Similar to Nasdaq rebating, except the objective is to trade after the stock rises 1 to 3 cents. Like other rebating, NYSE scalping and rebating should be done at a high volume and discipline is a prerequisite to success.