# Intraday Trading Explained: Strategies, Benefits, and Risks

> **Definition**
>
> Intraday refers to assets traded within regular market hours, emphasizing daily price movements. Day traders aim to leverage these fluctuations for swift profits, using varied strategies to enter and exit positions before the market closes.

## 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)](https://www.investopedia.com/terms/e/etf.asp).

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](https://www.investopedia.com/articles/trading/05/011705.asp) 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.

### Key Takeaways

*   Intraday refers to securities that trade within regular business hours and are closely monitored by day traders for quick profits.  
    
*   Day traders use intraday price fluctuations to execute trades, relying on strategies like scalping, range trading, and news-based trading.  
    
*   Intraday trading allows positions to avoid the impact of negative overnight news, offering potential benefits like tight stop-loss orders and increased leverage.  
    
*   The main risk of intraday trading comes from the possibility of rapid losses, especially with frequent trades leading to high commission costs.  
    
*   Mutual funds are not suitable for intraday trading due to their end-of-day pricing structure, unlike ETFs that allow for intraday price movements.

![Intraday: Ocurring during the course of a day.](https://www.investopedia.com/thmb/WJlY06YLgToYpaaE7XwuBM_y7Ac=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/intraday.asp-final-3093697bb942489d90b3a144952cb607.png)

*— Investopedia / Julie Bang*

## Understanding Intraday Trading Fundamentals

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](https://www.investopedia.com/terms/c/closingprice.asp).

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](https://www.investopedia.com/terms/s/scalping.asp) 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.

> **Fast Fact**
>
> Scalping is a strategy of transacting many trades per day with the intent of profiting from small movements in a stock's price.

[Volume weighted average price (VWAP)](https://www.investopedia.com/terms/v/vwap.asp) 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.

## Exploring Key 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](https://www.investopedia.com/terms/a/algorithm.asp) 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.

## Pros and Cons of Intraday Trading 

The key benefit of intraday trading is that positions avoid negative impacts from overnight news. 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.

Intraday trading offers several other advantages. One advantage is using tight stop-loss orders to minimize losses from long positions. Another includes the increased access to margin and hence, greater leverage. Intraday trading offers more learning opportunities due to fast, frequent trades.

However, intraday trading has its drawbacks. Intraday trading might not allow enough time for positions to grow in profit. Losses can add up quickly if trading isn't profitable. Some assets, like mutual funds, aren't available for intraday trading. Frequent trading in intraday strategies increases commission costs. These costs can eat away at the profit margins a trader can expect.

Pros

*   Positions are unaffected by risk from overnight news or off-hours broker moves.
    
*   Tight stop-loss orders can protect positions.
    
*   Regular traders have access to increased leverage.
    
*   Numerous trades increase hands-on learning experience.
    

Cons

*   Frequent trades mean multiple commission costs.
    
*   Some assets are off-limits, like mutual funds.
    
*   There may not be sufficient time for a position to realize a profit before it has to be closed out.
    
*   Losses can mount quickly, especially if margin is used to finance purchases.
    

## Understanding Mutual Funds vs. Intraday Pricing

Mutual funds aren't for intraday trading; they're designed for long-term investing and require broker transactions. A mutual fund's price, known as the [net asset value (NAV)](https://www.investopedia.com/terms/n/nav.asp), posts once daily at market close, reflecting asset movements minus liabilities.

Thus, mutual funds lack intraday pricing because their value fluctuates and managers trade throughout the day. However, ETFs, which are passively managed, are priced based on their intraday market value.

## Real-Life Example of Intraday Trading 

Stock prices are updated all day and summarized at the market's close. For example, April 4, 2022, shares of Apple Inc. ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=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](https://www.investopedia.com/terms/t/todayshigh.asp).

Traders and analysts study Apple's share movements for patterns or gaps, which are sudden price jumps without trades in-between.

## How Do Day Traders Make Money?

Day traders make money by trading assets based on small price fluctuations throughout the day. They often use high amounts of leverage to make these trades. It involves high levels of risk and can be highly lucrative or lead to large losses, depending on the traders' positions and the amount of leverage used.

## What Are the Risks of Intraday Trading?

The largest risk of intraday trading is the risk of losing large amounts of money. Day trading comes with high levels of risk as prices fluctuate. It can be difficult to earn any level of long-term profit, especially for new or inexperienced traders.

## Why Can't Day Traders Trade Mutual Funds?

The price of a mutual fund only posts at the end of the day, so there are no intraday price fluctuations for a day trader to make use of. Mutual funds are designed for long-term investors and can only be bought or sold through a broker or the fund's investment company.

## The Bottom Line

Intraday trading focuses on the price movements of securities within a single day, allowing traders to capitalize on short-term fluctuations. Strategies such as scalping, range trading, and news-based trading are commonly employed to exploit these intraday dynamics. Traders benefit from the flexibility of tight stop-loss orders and the protection from overnight news that could sway prices. However, the frequent trades required in intraday strategies can lead to high commission costs, and using margin can quickly escalate losses. As a result, understanding both the opportunities and risks is essential for those engaging in intraday trading.

> **Article Sources**
>
> 1.  Robinhood. "[What is Intraday?](https://learn.robinhood.com/articles/18pJZyN8UHjFiQZCBJjHgx/what-is-intraday/)"
>     
> 2.  Yahoo Finance. "[Apple Inc. (AAPL)-Historical Data](https://finance.yahoo.com/quote/AAPL/history?period1=1648252800&period2=1649203200&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true)."