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Best Indicators for Intraday Trading

Intraday trading is a form of trading where the investor trades stocks or other securities within the same day, a more popular way to call it is day trading. In this case, traders use technical analysis to get an understanding of how prices are moving, and then use that information to decide when to buy or sell a stock. One of the most helpful things a trader can use are indicators! That’s why I decided to put up a list of the best indicators for intraday trading.

Of course, this doesn’t mean that you should be using all of them at once. The best way to approach this as a beginner is to test all of them, practice a lot and decide which one of them works best for you since most intraday indicators use time periods and prices to give you the data.

man using a laptop for intraday trading with indicators

Are indicators important for Intraday Trading?

Yes, despite many people saying that there is nothing better than a naked chart. intraday indicators are useful, they give you a lot of data and insights on financial assets and what people are doing. There’s nothing more precious than this when it comes to trading and investing.

By using indicators, it will be easier to follow trends, as the name says they indicate or help you indicate the next possible move a price will be doing. Usually, intraday indicators will provide you with the next information:

Momentum

Those types of indicators will show the strength of a trend and are helpful to spot if there’s going to be a price reversal. An awesome and famous example is the RSI, the relative strength indicator is widely used to spot the price top and bottom.

Volume

Volume indicators are super important of all indicators, at least that’s what many people say. They indicate the volume of asset and their changes over time, also they indicate to the trader how many shares of a stock are being sold or bought.

Trend

You probably have heard the trading tip: “Trade following the trend, never against it”. Those indicators are here to help you identify the trend or the direction a financial asset is moving. Most of them are oscillators since the price will move between a price range.

Volatility

Another of the most important indicators for intraday trading. Since a trader will be trading from the price swings, you’ll need to find a stock that’s volatile enough for that. The volatility intraday indicator shows how many much the price is changing over a period of time.

Best Indicators for Intraday Trading

There are a whole lot of indicators that can be used to trade stocks on an intraday basis. The best ones vary based on the trader’s individual preferences and trading system, but you can find are some general indicators that tend to work well across most markets. In this post, we will explore three popular intraday trading indicators: MACD, RSI, stochastic and more.

Moving Averages

Moving averages are one of the most used technical indicators in intraday trading, almost everyone uses them. They are simple to understand and can be used to identify a trend, as well as potential areas of support and resistance. By plotting a series of moving averages on a chart, traders can get a clear picture of the overall trend and then determine their next move.

MACD

MACD is one of the most loved indicators in use by traders today. Developed by Gerald Appel in the late 1970s, it is used to identify and track changes in the strength, direction, and momentum of a security’s price. MACD can be used to generate buy and sell signals, identify divergences and confirm trend reversals. It is also a useful tool for gauging the overall market sentiment.

The MACD indicator is packed with two exponential moving averages, typically the 12-day and 26-day, which are used to identify the trend and its strength.

VWAP

The VWAP (Volume-Weighted Average Price) indicator is another famous technical analysis tool that’s used by huge amount of traders to measure the price at which a security has traded over a time period. It is essentially a volume-moving average. The VWAP indicator can be used to measure the intensity of buying or selling pressure at any given time.

It takes into account not only the volume of shares traded, but also the respective share prices.

Bollinger Bands

Bollinger bands are an indicator that some traders use to identify when security is overbought or oversold. The bands are plotted two standard deviations away from one of the most common simple moving average, and consist of an upper, lower, and middle band.

When the security price reaches the upper band, it is considered overbought and may be due to becoming oversold.

Stochastic

A stochastic indicator is a technical analysis indicator that helps measure the probability a trend has to do a reversal. There are many different types of stochastic indicators, but all share the same goal of trying to determine the likelihood of a future price change. They are used extensively by traders in all financial markets, and can be helpful in determining when to enter or exit a trade.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a leading indicator created by Welles Wilder that helps to identify the momentum of a financial asset. The indicator is based on the premise that, when an asset is becoming overbought or oversold, the forces of supply and demand are in balance and a change in direction is likely to occur. The RSI moves between 0 and 100 with values above 70 indicating overbought conditions and values below 30 indicating oversold.

Conclusion

There is no one best indicator for intraday trading; rather, a variety of indicators can be useful depending on the trader’s strategy and technical analysis. So, now you know the best indicators for intraday trading, is your decision to choose the right one for you.

As I said earlier, test them all, individually, or combined, and see what works best for you. Indicators aren’t here to make you profits magically, they are here to help you make better trading decisions based on data.

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