Are you looking for the best indicator for Intraday Trading? In this post, I will share the seven best technical indicators for intraday Trading for your technical analysis. However, you must master only one or two indicators for your technical analysis.
What are Technical Indicators?
Technical analysis is the basis of every form of Trading in the stock market. While many traders count entirely on price-action analysis, others use technical indicators to analyze the market. If you aren't too comfortable with price-action analysis, you can undoubtedly use technical indicators. After all, what matters is analyzing the market before taking a position.
Technical indicators are derived from price-action and volume in most cases. The best part is you can create your rule-based trading setup based on one or more technical indicators. Popular technical indicators include Volume, EMA, MACD, RSI, Supertrend, Pivot Points, and Bollinger Bands.
To add an indicator on a stock or index chart on Tradingview, you must click on the indicator symbol and search for the indicator. After it displays, simple click on it and it will get added to your chart.
What time frame should Technical Indicators be used for Intraday Trading?
The next question bound to cross your mind is the timeframe for using technical indicators. The best timeframe for intraday Trading is 15m, 5m, and 1m. You can always start with a 15m analysis using any indicator.
Next, you can switch to a 5m timeframe, analyze the chart with the same indicator, and finally enter a position on the 1m timeframe. The whole point is to understand the market's direction on 15m and determine a level for an entry on the 5m timeframe accordingly.
Best Indicator for Intraday Trading: Volume
Many traders in the Indian stock market enter trading positions based on volume analysis. They sync their trades with the market movers (Institutional traders) with the help of volume. Whenever there is an unusually high or low volume, it's the entry of institutional traders, and retail traders will then look for a small pullback to enter their positions and sync it with the institutional trader.
Besides, there are other ways to use volume for Trading, and one popular method is looking for a gradual increase or decrease in volume. Further, volume is also used for verifying the accuracy of a breakout and breakdown. Volume needs to be high in the direction of a breakout or a breakdown.
Best Indicator for Intraday Trading: EMA
EMA, or Exponential Moving Average, is an extensively used indicator and can help you with reasonable accuracy if appropriately used. While some Intraday traders use a combination of 50 EMA and 200 EMA, others use a combination of 20 EMA, 50 EMA, and 200 EMA. When the price is below 200 EMA, it's considered bearish, and bullish when it is above 200 EMA.
Traders trade using EMA crossovers combined with pullbacks. The popular EMA crossovers in Intraday Trading are 20 EMA and 50 EMA crossovers and 50 EMA and 200 EMA crossovers.
Besides, some traders solely trade based on pullbacks to 50 EMA. The 50 EMA acts like a trendline. When the price is away from the 50 EMA in an uptrend, it's considered overbought, and when it's away from the 50 EMA in a downtrend, it's considered oversold.
Hence, conservative traders will wait for the price to return to the EMA before entering a position with the Trend, while aggressive traders enter a position against the main Trend when the price is overbought or oversold, expecting the price to return to 50 EMA (target).
Best Indicator for Intraday Trading: MACD
MACD stands for Moving Average Convergence Divergence and is a popular indicator among Intraday traders in India. MACD consists of a MACD line (Blue), a Signal line (Red), and a Histogram. Intraday traders enter positions based on the MACD line and Signal line crossovers.
If MACD has a positive crossover, one will consider buying, and on the contrary, if MACD has a negative crossover, one will consider only short selling. Besides, the indicator has a Histogram to display the change in volumes.
Best Indicator for Intraday Trading: RSI
RSI, or the Relative Strength Index, is a momentum indicator many Intraday traders use. RSI is based on two levels; for Intraday Trading, the recommended levels are 60 and 40.
The traditional way of using the RSI was based on overbought and oversold levels. However, to use RSI conventionally, you must tweak its levels to 80 and 20. Whenever the price goes above the 80 mark, breaks it downward, and retests it, you must consider only short selling, assuming it's overbought and can't rise any further. Likewise, when the price goes below the 20 mark, breaks it upward, and retests it, you can buy, assuming it's oversold and can't fall any further.
The modern way of using the RSI indicator assumes that whenever the price breaks the 60 mark, it gains momentum, and one must only consider buying at dips. When the price breaks the 40 mark, it loses momentum with a higher chance of being bearish. Hence, at times like these, one must only consider selling on the rise.
You can also combine the traditional and modern levels and create a custom RSI with 80, 20, and 60, 40 levels.
Best Indicator for Intraday Trading: Supertrend
Supertrend is a simple yet effective trend indicator with an ATR and Factor. Most traders use Supertrend with an ATR of 10 and a factor of 3, while some prefer an ATR of 7 and a factor of 3. One can use Supertrend to identify the trend reversals to plan an entry at a pullback to the Supertrend line.
Another popular way of using the Supertrend in the Indian market is the Double Supertrend method, wherein one uses two Supertrend indicators. Besides using the regular Supertrend, one uses a Supertrend, which is double the value of the regular Supertrend. It's made by multiplying the regular ATR and Factor by 2.
That way, you will have a high and a low Supertrend. To trade using this method, one will wait for both the supertrends to have the same color, red or green. After both have the same color, it will help determine the direction, and entry will be planned at a pullback to the lower Supertrend.
Best Indicator for Intraday Trading: Pivot Points
The Pivot Points indicator is another extensively used indicator in Intraday. Many believe institutional traders use this indicator. While verifying this fact is hard, you can capitalize a lot from using this indicator since many people buy and sell using it. The Pivot Points indicator includes various Support and Resistance Levels and CPR (Central Pivot Point).
The indicator can be perfect for those who struggle with plotting support and resistance. If the price is above the CPR, it's considered bullish and vice-versa. Trading with Pivot Points is like trading with Support and Resistance. First, you get an idea of the Trend from the CPR and the current price level. Next, you can plan an entry at the restest of the CPR itself. If, for some reason, you don't get this trade, you can plan an entry on the next level in the direction of the Trend.
Best Indicator for Intraday Trading: Bollinger Bands
The Bollinger Bands indicator is an excellent technical indicator for Intraday Trading, and many traders count on this indicator for their daily trades. The indicator consists of 3 bands: the upper band, the middle band, and the lower band.
When the price breaks the upper band upside, one can plan on selling on the rise, assuming the price is overbought. One can consider only buying on the dips when the price breaks the lower band.
Intraday Trading is a popular form of Trading, and if you haven't got the hang of price-action yet, you can still do technical analysis using indicators. Indicators work as much as price-action as long as you use them correctly. Most indicators are lagging indicators but if you have good patience, to wait for an indicator to generate the signal, you will certainly get good trades.
However, there are days when an indicator may not work and on such days, your money management will help you. I have walked you through the seven best indicators for Intraday Trading in this post, and you can choose the one that you find most suitable for your trading style. You can also combine two indicators for your technical analysis.
Best Indicator for Intraday Trading: FAQs
What is the best indicator for Intraday trading?
There is no one-size-fits-all answer to this question because the best indicator for Intraday trading can vary depending on your trading strategy and preferences. However, some commonly used indicators for Intraday trading include Moving Averages, Relative Strength Index (RSI), Stochastic Oscillator, and Bollinger Bands.
How do I choose the best indicator for my Intraday trading strategy?
To choose the best indicator, consider your trading style and goals. If you're looking for trend-following signals, Moving Averages can be useful. RSI and Stochastic Oscillator can help identify overbought or oversold conditions, while Bollinger Bands are helpful for volatility analysis. Experiment with different indicators and see which ones align best with your strategy.
Are there any universal best indicators for Intraday trading?
No, there are no universal best indicators for Intraday trading because trading strategies vary. What works well for one trader may not work for another. It's essential to understand your strategy's requirements and choose indicators accordingly.
Can I use multiple indicators for Intraday trading?
Yes, many traders use a combination of indicators to enhance their Intraday trading decisions. Combining indicators can provide more confirmation and reduce false signals. However, avoid using too many indicators, as it can lead to analysis paralysis. It's important to strike a balance.
How should I interpret Intraday trading indicators?
Interpretation of indicators depends on the specific indicator you're using. Generally, look for signals such as crossovers, overbought/oversold conditions, and divergence from price action. Additionally, consider using multiple timeframes to confirm signals and filter out noise.
Should I rely solely on indicators for Intraday trading?
Indicators should be part of your trading toolkit but not your sole reliance. Successful Intraday trading involves considering other factors like market news, volume, and overall market sentiment. Combining indicators with a holistic approach to market analysis can improve your trading strategy.
Are there free resources for learning about Intraday trading indicators?
Yes, there are plenty of free resources available online. You can find articles, video tutorials, and forums where traders discuss and share their experiences with Intraday trading indicators. Additionally, some trading platforms offer educational materials for their users.
Can automated trading systems incorporate Intraday trading indicators?
Yes, many automated trading systems, such as trading bots and algorithmic strategies, can incorporate Intraday trading indicators. These systems can execute trades based on predefined indicator-based rules. However, designing and testing such systems require a good understanding of both indicators and programming.
Is it necessary to change Intraday trading indicators frequently?
Not necessarily. While it's essential to adapt to changing market conditions, frequent changes in your indicators can lead to inconsistency and confusion. It's often better to stick with a set of indicators that align with your trading strategy and make adjustments as needed.
Can I use Intraday trading indicators for long-term investing?
Intraday trading indicators are typically designed for short-term trading. They may not provide the best signals for long-term investing. For long-term investing, fundamental analysis and a different set of indicators may be more appropriate.