Intraday Trading Time Analysis

Intraday Trading Time Analysis

Intraday trading involves opening and closing positions within the same trading day to profit from short-term price movements. The aim is to exit the position before the Intraday exit time, typically before the market closes for the day.

Day traders keep an eye on the market all day long, evaluating charts and indicators and placing several transactions. Because intraday trading may be quite volatile, traders must constantly monitor price changes. Intraday trading chart patterns, Technical analysis, news events, and other techniques are some of the tools traders might use to find possible short-term opportunities.

What is Intraday Time Analysis?

The secret to successful intraday trading is making the right move at the right time. Before looking at specific intraday trading strategies, you must have a firm grasp of intraday time analysis. 

If you want to get into any sort of short-term trading, your main source of reference for time analysis is the price charts. Price movement from the start of the day to the end is displayed on a daily price chart. An experienced intraday trader examines such charts to predict future share market movements. 

The analysis of market behaviour during particular trading day time periods is known as intraday trading time analysis, which is conducted by referring to the price charts. By applying time analysis, traders can find and evaluate trends and patterns to make informed trading decisions.

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Table of Content

  1. What is Intraday Time Analysis?
  2. Should You Trade in the First 15 Minutes?
  3. Types of Intraday Trading Charts
  4. Intraday Hourly Charts
  5. Significance of Intraday Trading Charts
  6. What is the Best Time Frame for Intraday Traders?

Should You Trade in the First 15 Minutes?

Trading during the opening fifteen minutes of a session offers swift price changes and potential profit from emerging market trends, but it may be dangerous and not suitable for everyone.

  1. Volatility: As the market responds to overnight news, economic statistics, or business announcements, the first few minutes of the trading day may see increased volatility. Volatility raises the possibility of abrupt and erratic price movements, but it can also bring trading opportunities.
  2. Lack of Direction: As traders and investors are still processing information and making their first deals, the market may not have a distinct direction during the first fifteen minutes. This lack of direction can make it difficult to identify trustworthy patterns, which can cause choppy and unpredictable price fluctuations.
  3. Liquidity: Compared to later in the trading session, liquidity is often lower in the initial few minutes of trade. Reduced liquidity may result in larger bid-ask spreads and make it more difficult to execute deals at the prices that you want, which might affect your total profitability and trading expenses.
  4. False Signals: Traders may see more false signals and noise in the price action during the early hours of trading due to the higher volatility and decreased liquidity. This may cause rash and ignorant judgements.
  5. Market Open Order Imbalance: When several buy or sell orders are executed concurrently at the opening bell, there may be an order imbalance. This mismatch might result in sharp price movements that do not accurately represent the underlying fundamentals.

Types of Intraday Trading Charts

Here are some of the most commonly referred charts for intraday trading:

  • Tick charts: Based on the volume of trades, tick charts show a security's price changes. Instead of representing a defined time period, each candle or bar on a tick chart indicates a fixed number of deals (for instance, 100 or 1,000 trades). Tick charts can be used to analyse recent price changes and spot market patterns.
  • Minute candlestick charts: Minute charts show price changes over a predetermined amount of time, like 1-minute, 5-minute, or 15-minute. On a minute chart, each candle or bar shows a price movement that took place during that time frame. Minute charts, like the 5-minute candlestick chart, are popular among intraday traders for short- to medium-term trend and pattern detection. However, at times, long-term traders also use these charts to find precise entry points.
  • Hourly candlestick charts: Like minute charts, hourly charts also show price changes over a predetermined amount of time—but in the case of hourly charts, each candlestick spans for a specific time period in hours; for example, one hour, two hours, or three hours. On an hourly chart, each candle or bar reflects a price movement that took place during that time frame. For spotting patterns and trends over longer time periods, hourly charts are helpful.
  • Daily charts: Daily charts show price changes over a predetermined time frame of one day. On a daily chart, each candle or bar reflects a day's worth of price changes. Daily charts can be used to spot patterns and long-term trends.

Intraday Hourly Charts

Hourly charts provide detailed information on stock price movements, making them useful for short-term trades. They show opening, closing, high, and low prices for a specific time period.

15-Minute Charts

15-minute charts display stock price opening, closing, high, and low every 15 minutes, ideal for short-term trades lasting an hour to a few sessions.

5-Minute Charts

5-minute intraday charts display stock prices at every 5-minute interval, used by short-term and long-term traders for quick scalps and optimal entry/exit points. They are highly recommended for long-term investments in the share market, as they provide a detailed overview of stock prices.

2-Minute Charts

2-minute charts display stock price action for 3 hours, favoured by short-term traders for day trades and scalping, covering opening, closing, high, and low prices at every 2-minute interval.

Tick-Trade Charts

Tick-trade charts represent all trades in the stock market, with illiquid markets showing a flat line and highly liquid markets showing movement. They are used for scalping and tracking out-of-money trades. Tick-trade charts represent all trades in the stock market, with illiquid markets showing a flat line and highly liquid markets showing movement. They are used for scalping and tracking out-of-money trades.

Significance of Intraday Trading Charts

Charts are a good tool to analyse price data—trends and patterns—in a short as well as long time frame. So, both long-term and short-term investments can be made by looking at price charts. However, they are mainly employed by short-term or intraday traders who are more focused on the price action than the company fundamentals. Charts are critical in helping day traders assess market trends and seek insights into the market behaviour of a specific stock.

What is the Best Time Frame for Intraday Traders?

Stock market professionals claim that the best time frame for intraday trading is between 10.15 and 2.31. This is because the morning stock volatility decreases by 10.00-10.15 am. It is therefore the perfect time to make an intraday trade. This argument suggests that traders exit their intraday positions by 2.30 p.m., which is much before the closing bell rings. They can avoid getting excessively caught in situations of high volatility in this way.

Conclusion
Traders perform intraday time analysis to examine how the market behaves during particular times of the trading day. By spotting trends and patterns in the market, they can improve their trading decisions. Charts serve as the main point of reference for traders while analysing intraday trading time; intraday traders can use tick charts, minute charts, hourly charts, and daily charts provided by a stock market app.

FAQs on Intraday Trading Time Analysis

The opening range, the pre-market hours, the market hours, the lunch hour, and the afternoon session are the typical intraday time periods that traders study.

Yes, you can definitely refer to multiple time frames to perform intraday time analysis.

Traders can utilise time analysis to pinpoint support and resistance levels, ascertain the market's direction, and modify their trading approach in response to shifts in momentum or trend.

There is no right answer here, as it depends on your strategies. That said, you can always have a flexible approach and do not have to restrict yourself to either charts. 

Yes, intraday time analysis can help with risk management, as it helps you identify key levels and help you time your entry and exit into trades.