Intraday Volatility: A Guide for Effective Day Trading | Espresso

Navigating Market Volatility in Intraday Trading

The term "intraday volatility" describes the variation in prices of stocks that takes place in a single trading day. It calculates the difference between the high and low price of the stock during a specified time frame. A strong trading mindset is essential for effective intraday trading on the best trading platform because it allows traders to remain on course and make logical decisions. Traders need to control their emotions by putting aside feelings like fear, greed, and panic.

Published on 26 January 2024

Traders  can accomplish this through implementing risk-management techniques into practice and drafting an extensive trading plan with exact entry and exit spots. Setting realistic goals and practicing discipline in trading are essential for traders because they promote a long-term, methodical approach to investing. Novice traders must learn online trading for beginners before initiating their first trade.

Here is how you can navigate intraday volatility:

Market Indicators

Market indicators are quantitative in nature and help to predict market movements by interpreting the movement of stock or their financial index data. Market indicators are a subset of technical indicators and consist predominantly of formulas and ratios. Traders should look for the best trading platform in India to learn more about these indicators. You can understand the market volatility with the help of those indicators. 

Herein some key market indicators:

Moving Averages:

Moving averages are calculated by taking the average price of a security over a specific period of time. They can be used to identify trends, potential support and resistance levels. Traders use simple moving averages (SMA) and exponential moving averages (EMA) to calculate the average price of the security.

Relative strength index (RSI):

The Relative Strength Index is a momentum indicator which is used to identify overbought and oversold stocks and securities in the market.  It is expressed in a number between 0 and 100. It is calculated by comparing the average gains and losses of a security over a specific period of time.

Bollinger Bands:

Bollinger Bands are a volatility indicator that expand when volatility increases and contract when volatility decreases. It consists of a moving average and two standard deviation bands above and below it. 

Market Trends and News

News and events have a huge impact on intraday volatility. Upcoming events, economic reports, earnings announcements, and other major news events could affect the market both positively or negatively. It is important for traders to understand the impact of market trends and news to minimize the effect on their portfolio. 

Impact of news events:

Traders should understand the impact of news on stock prices to understand market volatility. News events create heavy fluctuations in the market. A favorable new event has the potential to stimulate market growth, whereas an unfavorable report can lead to a market decline. The financial statement or balance sheet can fluctuate the stock price of the company and make it rise or fall, depending on whether the result exceeds the expectations or not. 


News calendar:

One useful tool for news and event trading is a news calendar that lists out the upcoming news events and their expected impact on the market. With the help of a news calendar, traders can proactively strategize and maintain a prompt response to ongoing news events.


Market reactions:

A positive economic report can cause the market to rise and a negative economic report can cause the market to fall. In this scenario, traders prefer to buy stocks that are likely to benefit from the positive news to create a profitable portfolio. 

Technical Analysis

Technical analysis helps traders to identify the trends and patterns that can help them to make better trading decisions. It helps traders to minimize their risk and increase their chances of making profitable trades. It is a prevalent method to examine the intraday volatility. Charts and other technical indicators can be used to determine trends and potential price movements. 

You can do technical analysis with the help of these technical indicators:

True range (ATR) -

It measures the average range of price movement over a given period of time 

Bollinger Bands -

It identifies the potential price movements by noticing moving average and standard deviation 

Strength index (RSI) -

It identifies overbought or oversold conditions in the market. 

Risk Management and Tolerance

Traders should clearly understand their risk tolerance and develop a solid risk management plan by setting stop-loss orders to limit potential losses or using hedging strategies to protect against market fluctuations to minimize losses, and maximize their profits.

Here are some risk management strategies that traders can use to navigate intraday volatility:

Put stop-loss orders:

By setting a stop-loss order, traders can limit their losses and protect their capital. 

Risk-Reward ratio:

Traders should aim for a risk-reward ratio of 1:2 or higher. For example, if a trader risks ₹1000 on a trade, the potential profit should be ₹2000 or more. 

Portfolio Diversification:

One of the best ways to manage risk is by diversifying your portfolio by investing in different stocks. 

Tips for Traders

  • Traders should develop a trading plan. It involves creating a set of rules and guidelines to follow while executing trades. It helps to manage risk, avoid emotional decision-making, and increase their chances of success. 


  • Trading psychology is an important element of any trading plan. It involves managing the emotions and avoiding emotional decision-making during trading. You can achieve this by setting realistic expectations, avoiding overtrading, and sticking to your trading plan. 


  • Traders should opt for the best trading platform that allows them to get access to a wide variety of financial instruments that enable them to construct a diversified and comprehensive portfolio. 
Chandresh Khona
Team Espresso

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