New to intraday trading and all that it entails? Don’t know how to keep up with stocks and the market? Stop stressing over the abundance of information available today, and focus on online share trading indicators instead. These useful tools can help you to understand the market in a better way and maximise your intraday trading returns.
Important indicators to help with intraday trading for beginners
Intraday trading indicators offer a wealth of insights that can help you to formulate a winning online share trading strategy. For instance, you can monitor current and past trends, assess market volatility, examine the momentum (or lack thereof) in the markets, and look closely at trading volumes. Here is a look at some common indicators that could prove valuable.
1. Moving averages
If you look at a stock chart, the moving average is the line that connects average closing prices over a period. Moving averagesaremore reliable if you look at a stock over a longer period. You can then get an impression of how the prices have moved over time. This can help you to assess the underlying trends in the stock price. For instance, if the short-term averages tend to be higher than those over the longterm, the stock may begoing through a bullish phase.
2. Bollinger bands
The Bollinger bands comprise a set of three lines: the moving average,flanked bytheupper and lower limits. These bands represent how far above and below the average the stock prices have moved in a given period. The figures should help you to assess the trading range of a particular stock. Say,the current price of a stock that you are monitoring is above the Bollinger bands. This may indicate that the price is likely tofall in future, which means itmay be a good time to sell the stock. On the other hand, ifthe price is below the bands,a price increase is likely and you could enter into a buy position at this time.
3. Momentum oscillators
This indicator measures how far a stock’s price has changed over a given period. To derivethe momentum oscillator value, simplydivide the current stock price by the stock price at an earlier time and multiply by 100. If the value is less than 100, it signals a decrease in theprice of the stock. A value higher than 100 is indicative of a price increase.
Sometimes, the momentum oscillator values may be extremely high or low.This usually suggests that the current trend will continue. You could expect a price reversal when the oscillator value does not confirm a new high or low in the stock price. Suppose, for instance, that the price reaches a record high. If this high is not reflected by the momentum oscillator, a gradual decrease in demand may be on the cards.
4. Relative strength index
With therelative strength index (RSI), you cancompare any increase or decrease in the price of a stock. The information is transformed into an RSI score between zeroand 100. The RSI rises when stock prices increase anddrops when the prices fall. You can use the changing RSI levels to adapt your trading strategy. Experts suggest that you should sell a stock when the RSI is at 70 and buy when the index drops to 30.
These trading indicators give you a better picture of market trends and the movements of particular stocks. To gain easy access to research material and charting tools that can inform your intraday trading, open a trading account with an established broker like Kotak Securities. When you have all the information in place, modifying your trading plan becomes that much simpler.