How to Do Technical Analysis in Intraday Trading? | Espresso

How to Use Technical Analysis for Intraday Trading?

Technical analysis enables traders to make rational trading decisions and provides them with insights to understand the appropriate time to jump on the bandwagon. Technical analysis is one of the time-tested methods to make market anticipation. Trading in the market is challenging, and traders often face dilemmas and bouts of indecision.

Published on 03 July 2023

Contingency, the most recognisable quality of the market, confuses even well-seasoned traders and investors. Placing your stakes in the market requires well-reasoned anticipation that is conducted by using technical and fundamental analysis techniques. In intraday trading, technical analysis has been tested and has emerged empirical, and traders can use technical analysis to trade in several market segments.

Brief Introduction

Traders may gather information about the trading activities, such as price movement and volume. With the help of technical analysis, traders can evaluate and determine the trading opportunities available in the market or a segment. Technical analysis is based on the concept that price-changing activities and trends imply the future price movement of a security. History plays a vital role in conducting this market analysis. With the help of technical indicators and chart patterns, a trader attempts to make reasonable speculation about price movements.

Conceptual Framework of Technical Analysis in Intraday Trading

Intraday trading indicators and share market charts are the basis of the procedural paradigm involved in technical analysis. It enables traders to scrutinize the ways of supply and demand and identify future opportunities. With appropriate trading rules, traders can make rational speculation based on past trading activities.

Intraday traders mostly employ this analysis technique to improve the evaluation process regarding the strength and weaknesses of security. Traders and investors use this analysis technique for specific reasons that suit their trading strategy. Market segments such as Equity, Commodity, Forex, Futures, Options, etc., are ideal for technical analysis methodology.

Technical analysis is prevalent among traders looking to place stakes in the market with intraday trading. This analysis is done by reading the chart patterns and identifying the market's momentum using trading signals.

Chart Patterns

After going through the aspects of the defined trading instrument, traders can shortlist the script they find suitable per their trading strategy. Entering and closing a trade with the perfect timing is what traders need to do to have a successful trading experience. Traders can use 5 minutes, 10 minutes, 15-minute, etc., charts to map the price movements that prevail in the market. A 15-minute chart is the most common preference and has greater significance in technical analysis. Traders can also use line charts and candlestick charts to fulfill specific reasons behind their use.

Pattern Analysis

Candle sticks follow specific patterns that signify the arrival of trends like uptrend, down-trend, or trend reversal. There are four types of candles: bullish engulfing, bearish engulfing, hammer, and doji. The arrival or combination of these candle sticks provides specific implications of uptrend, downtrend, or trend reversal. Hammer candle sticks usually signify a reversal of the trend. Bullish or bearish engulfing candles imply an up-trend or down-trend, respectively. A pattern of a bearish candle, hammer, and bullish candle formed after a downtrend is called a morning star candle and signifies an uptrend. The converse of the same is the evening star candle pattern formed after a long uptrend.

Technical Indicators

Most common technical indicators are MACD, Bollinger band, RSI, Fibonacci Retreat, etc. These all are used for having a specific idea about the market. Technical indicators play an essential role in intraday trading. Traders and investors are willing to speculate in intraday trading and rely on these indicators to make reasonable market anticipation. Technical indicators provide traders with an idea about available and coming opportunities. Relative Strength Index or RSI is a momentum indicator and provides a trader with the idea of being bullish or bearish about the market. Moving Average Convergence Divergence is a common indicator used by intraday traders. It follows the trend and provides appropriate consideration about being bullish or bearish at a specific moment. It has two MACD lines and a signal line. When the MACD line crosses the signal line from below, it provides a buying signal. The converse situation where the MACD signal crosses the signal line from above is a signal of selling.

Significant Perks of Employing Technical Analysis

These are some of the advantages that make technical analysis a popular choice among intraday traders:-

  • Trend Analysis: With technical analysis, traders can effortlessly spot the trends and can proceed to make trading decisions. It enables traders to be on the winning side and have a profitable trading experience.
  • Momentum Analysis: With technical analysis, traders know the perfect timing to enter and exit the trades placed in the market. It increases their chances of making smarter trading decisions from stakes placed in the market.

Bottom Line

Technical analysis is one of the most reliable methods to make conjunctions in intraday trading. Indicators and chart pattern analysis are two distinct sections of technical analysis that traders and investors employ to fulfill their objectives.



Chandresh Khona
Team Espresso

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