There is money to be made in the world of day trading. Unfortunately, far too many who try their hand at day trading do so with middling to poor results. The intraday trading secrets that a day trader needs to learn include not just profitable techniques but trading discipline applied to each and every trade. No matter if one day trades commodity futures, stocks, or foreign currencies, learning these intraday trading secrets will unlock potential trading profits.

Technical Analysis

There are two basic ways to predict the future prices of commodities, currencies, or stocks. One is by studying fundamentals that affect supply and demand. The other is technical analysis. Technical analysis is used for intraday trading as it is much more sensitive to short term market fluctuations. The fact is that markets routinely repeat their price patterns. By analyzing trading volume and price changes in a market, the astute day trader can reliably profit when they recognize specific technical signals.

News-Based Trading

Major market events are reported in the news. And, in turn, news releases drive markets up and down. There is a recurring tendency for a market to overreact to the news or “hype” that leads up to an actual event. Thus smart traders commonly “buy on the rumor” and “sell on the news.” That is, reporting leading up to a news release, such as agricultural export numbers, may drive commodity futures up or down. When the actual report is released the market typically corrects to account for the difference between prior expectations and current reality. News-based trading with a healthy dose of skepticism can be routinely profitable.

Reacting to Market-moving Events

Having a news feed available as one trades allows the day trader to keep abreast of fast-moving market news. Things that happen on the other side of the world like Russia invading Ukraine can have dramatic effects on prices of commodities like wheat, corn, and sunflower oil. A disciplined day trader knows that prices will eventually be driven by supply and demand fundamentals. They also know that immediate market sentiment may cause prices to overshoot their eventual levels either up or down. In a fast-moving market with market-moving events, the disciplined day trader will be careful to set their stop-loss and take profit targets and update them as the market moves.

Liquidity and Volume

Although a market is open throughout the trading day, trading volume and liquidity are not evenly distributed across all trading hours. Thus a day trader may choose to limit their trading during periods of low liquidity. Focusing on trading when volume is highest commonly offers greater profit potential and greater liquidity, which typically means lower risk. Trading activity varies according to the market. For example, crude oil typically trades at high volume from 9am to 2:30pm while gold is more active around the openings of the London and New York Markets. Volume in agricultural commodity trading is highly dependent on the release of world agriculture supply and demand estimates.

Order Types

One of the most important intra-day trading secrets has little to do with what you trade or when you trade it. It has to do with the types of orders that you use. Many new day traders only use market orders. This ensures that their orders are filled but does not ensure an optimal price. On the other hand, limit orders are to buy or sell at a specified price. Buy orders are for purchasing at the limit price or lower and sell orders are for selling at the limit price or higher. This guarantees that you will buy or sell at the price that you want or even better. However, it may also mean that your order is not executed. Stop-loss orders are placed as an asset is purchased and is designed to limit losses when the asset price falls unexpectedly.

Backtesting Strategies

Markets for commodity futures, foreign currencies, and stocks all tend to repeat themselves. Thus, a day trader who wants to test a new strategy can backtest it on historic market data. Novice traders should always practice with simulation trading before risking their own money. Likewise, experienced day traders should always backtest on historic data when trying out a new approach. The same applies when one is experiencing losses in their trading. Going back to simulation trading will give the day trader the chance to find out if their problem lies in how they are reading technical cues or if the problem has to do with the current market.