Most Accurate Intraday Trading Indicators

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Intraday is a popular form of trading today. With the growing popularity of intraday trading indicators, it is important to simplify our understanding of them and learn how we can effectively use them to our advantage. Intraday traders use Technical Analysis to identify patterns in price movements on the charts in various timeframes and take positions accordingly.

Understanding Indicators for intraday trading does not require an in-depth knowledge of mathematics. It simply needs understanding the concepts, identifying the patterns, and interpreting the charts.

Traders use various indicators to improve their chances of returns on the trade. Some best indicators for intraday trading are certainly more popular among traders than others.

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Intraday Indicators Importance

Indicators are a trader’s best ally that empowers them to identify the suitable time to enter and exit the trade. Indicators analyse the important attributes of a stock price like momentum in the price trend, underlying volume, etc.

Primarily, intraday trading indicators are categorised based on the below attributes:

  • Trend: Trend helps identify the direction in which the share prices are moving. Share prices are plotted on a chart and the points are joined on the chart to create a trendline. This trendline indicates the upward or downward trend of the share prices.

  • Momentum: The rate of change of a stock’s price is defined as momentum. Depending on the rate of increase or decrease of the share price, bullish or bearish momentum is determined. If the share prices are constantly increasing, then bullish momentum is established, and vice versa.

  • Volume: Volume is another key attribute that traders check before making a buy or sell decision. It is measured by identifying the number of stocks bought or sold during a particular interval. A stock being traded frequently is identified by its volume. If the volume is high for a specific timeframe, this means that the share was bought or sold a significant number of times in that timeframe.

  • Volatility: Volatility is an intraday indicator of market unpredictability. A highly volatile stock means that there is a sharp change in share prices in short intervals. Volatility is not restricted to the fall in share prices, even when the share prices rise abruptly, it is volatile.

  • Overlays: Such intraday indicators are overlaid directly on the price movement instead of being shown separately. They are multi-purpose, and some traders tend to use multiple of them too. Some of the popular types are: Parabolic SAR, Bollinger Bands and Moving Averages.

  • Oscillators: This group of intraday indicators is identified by their upward and downward movement between upper and lower bound. Relative Strength Indicator (RSI), Stochastics, Commodity Channel Index (CCI) are examples of this type of indicator.

Useful Intraday Trading Indicators

Intraday Indicators are an important resource in a trader’s journey, and it is difficult to point at a specific indicator as the best intraday indicator, as they may be useful in identifying different attributes. Let us look at the most popular indicators that traders use to understand a share’s trend, volume, momentum, and volatility.

Please note that these are just for information purposes & do not constitute advice/recommendation. Investors must do their research before using such indicators.

  • Moving Averages

    Moving average is calculated to get a simplified view of the changing prices and get an updated average price at regular intervals. The objective of identifying moving averages is to establish whether the current price trend is below or above the average price, which further indicates a bullish or a bearish trend. Moving averages are also used to identify support and resistance levels on the chart. This intraday tip can help traders create strategies in intraday trading.
  • There are two different types of Moving Averages:

    • Simple Moving Average (SMA): Simple Moving Average is a technical intraday trading indicator that is used to measure the average price of the share for a specified timeframe.
    • Exponential Moving Average (EMA): Exponential moving average is the average price of the share, evaluated in a more recent timeframe. EMA is usually calculated for a 10, 50, and 200-day timeframe.

  • Bollinger Bands

    This is another popular intraday trading indicator used to evaluate the price range for stock and convey the probable buying and selling instances. Bollinger Bands comprises three lines. One represents the moving average and the other two represent the upper and the lower limit of the band. These lines are determined basis the standard deviation of the stock prices. Standard Deviation measures the increase or decrease in prices compared to the average prices.

  • Momentum Oscillators

    Momentum oscillators measure the magnitude of change in a share’s price over a specified timeframe. The momentum oscillator’s value is derived by dividing the current price of the share by the price in the previous time frame. The result is then multiplied by 100 to reach the indicator’s value.

  • Relative Strength Index (RSI)

    Relative Strength Index (RSI) is another extensively used intraday trading indicator. RSI is used to establish overbought and oversold territories for a share by evaluating the magnitude of recent price changes. Indicator readings are within 0-100.

    RSI is a momentum-based indicator. It identifies the momentum of price changes for a share. Momentum indicates the strength in a particular price movement (upwards or downwards). RSI value of 70 or above is considered as overbought and readings of below 30 are considered oversold.

  • Moving Average Convergence Divergence (MACD)

    MACD Indicator is used by traders to evaluate the market trend within a time interval. Traders use this to understand the relationship between trends and the momentum of the stock prices.

    MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day exponential moving average. MACD establishes the relationship between two moving averages of a share’s price. A 9-day EMA of the MACD Line is plotted and is used as a “signal line”. This generates buying and selling signals for traders. These are popular MACD timeframe settings used across the trading community; however, a trader can replace them with their preferred setting.

  • Stochastic Oscillator

    It is one of the momentum indicators and helps in comparing the closing price of a stock to a variety of prices over time.

  • Commodity Channel Index

    They are useful for identifying new trends in the market. It comprises values such as 0, +100, and -100. A positive value indicates an uptrend while a negative value denotes a downward trend in the market. RSI & CCI coupled together gives information about overbought and oversold stocks.

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