Intraday: Definition, Intraday Trading, and Intraday Strategies

What Is Intraday?

Intraday means "within the day." In the financial world, the term is shorthand used to describe securities that trade on the markets during regular business hours. These securities include stocks and exchange-traded funds (ETFs).

Intraday also signifies the highs and lows that the asset price crossed throughout the day. Intraday price movements are particularly significant to short-term or day traders looking to make multiple trades over the course of a single trading session. These busy traders will settle all their positions when the market closes.

The Basics of Intraday Trading

Intraday is often used to refer to the new highs and lows of any particular security. For example, "a new intraday high" means the security reached a new high relative to all other prices during a trading session. In some cases, an intraday high can be equal to the closing price.

Traders pay close attention to intraday price movements by using real-time charts in an attempt to benefit from short-term price fluctuations. Short-term traders typically use one-, five-, 15-, 30- and 60-minute intraday charts when trading within the market day. Typically, intraday scalping uses one- and five-minute charts for high-speed trading. Other intraday trading strategies may use 30- and 60-minute charts for trades that have hold times of several hours. The intraday trader may hold their positions for a longer period but still operate under high risks.

Volume weighted average price (VWAP) orders are often used on an intraday basis to increase trade execution efficiency by giving an order exposure to a variety of prices throughout the trading day. VWAP gives an averaged price that particular securities trade at throughout the trading day.

Intraday Trading Strategies

Traders use numerous intraday strategies. These strategies include:

• Scalping: Making numerous small profits on small price changes throughout the day
• Range trading: Using support and resistance levels to determine buy and sell decisions
• News-based trading: Seizing trading opportunities from the heightened volatility around news events
• High-frequency trading: Strategies that use sophisticated algorithms to exploit small or short-term market inefficiencies

All these strategies depend on timing your trades based on price fluctuations that occur within a single day, sometimes within minutes of each other.

Advantages and Disadvantages of Intraday Trading

The most significant benefit of intraday trading is that positions are not affected by negative overnight news that materially impacts the price of securities. Such news includes vital economic and earnings reports, as well as broker upgrades and downgrades that occur either before the market opens or after the market closes.

Trading on an intraday basis offers several other key advantages. One advantage is the ability to use tight stop-loss orders, which is the act of raising a stop price to minimize losses from a long position. Another includes the increased access to margin and hence, greater leverage. Intraday trading also provides traders with more learning opportunities because so many trades are executed so quickly. 

However, there are also drawbacks to intraday trading strategies. Intraday trading may provide insufficient time for a position to see increases in profit or, in some cases, any profit at all. If a trader experiences losses instead of profits, these can mount quickly. Some assets are off-limits for intraday trading, including mutual funds. Finally, intraday trading strategies also come with increased commission costs due to trading more frequently. These costs can eat away at the profit margins a trader can expect.

Intraday Pricing and Mutual Funds

Mutual funds are off-limits for intraday trading. The design of these funds is for the long-term investor, and they can only be bought and sold through a broker or the fund's investment company. Also, a mutual fund's price posts only once, at the close of the trading day. This price is known as the net asset value (NAV) and reflects all of the intraday movement of the fund's assets, less its liabilities, calculated on a per-share basis.

So, mutual funds do not offer intraday pricing, as their assets fluctuate in market value and their managers make buy and sell decisions all day. However, ETFs—their passively managed cousins—are priced according to their intraday market value within a trading session.

Real-World Example of Intraday

The price movements of any stock are posted throughout the trading day and summarized at the end of the trading day. For example, April 4, 2022, shares of Apple Inc. (AAPL) opened at $174.57 and closed at $178.44. During the day, as indicated in the "day's range" listed to the right of the closing price, shares dropped as low as $174.44—the intraday low—and hit a peak of $178.49—the intraday high.

Day traders and technical analysts who follow Apple would study the shares' moves, to see if they could discern any pattern or uncover any significant gap—that is, a sudden jump in the price with no trading in-between.

The Bottom Line

Intraday refers to securities that trade during regular business hours, as well as to the movement in their prices over the course of a day. Intraday traders use these price fluctuations to execute trades, trying to make a profit on small changes in price.

Intraday trading strategies include scalping, range trading, and news-based trading. As with any trading strategy, these come with benefits and drawbacks. Intraday traders can use tight stop-loss orders to protect their positions, and they often have increased access to leverage. Their positions aren't impacted by overnight news that can affect price changes. However, their losses can easily mount, especially if they use margin to finance their positions, and high commission costs from frequent trading can eat into any potential profits.