Intraday CFDs Trading strategy

Taking advantage of intraday price movements, and closing all positions before the market close.

Timeframe: a Few Minutes to a few Hours

Risk Level: High

Asset Classes: All asset classes (tight spreads required)

Trading Leverage: 30:1 and up to 100:1

Charts: M5, M30, H1

Technical Analysis: Wave Theory (Highs & Lows), RSI (14), ATR, Chart Patters, Japanese Candlesticks, Support & Resistance, Daily Pivots

Trading Orders: Pending Orders, Stop-Loss, Take-Profit, Trailing Stop

 

Intraday trading is a risky business and it is not suitable for all types of traders, especially for beginners. Trading intraday requires a very competitive broker and a good understanding of position sizing. CFD trading can be a useful tool for trading intraday.

 

Basic Requirements for Applying an Intraday Strategy

These are the basic requirements for applying successfully any intraday strategy:

-1- Paying Tight Spreads / No Re-Quotes

-2- Fast Execution / No Delays

-3- Trading Discipline

-4- Very good Understanding of Position Sizing

-5- Effective Money Management, in overall

-6- Participating a Forex Rebate Plan for Reducing Costs (more on www.Forex-Rebates.com)

 

Four (4) Main Categories of Intraday Strategies

There are four main intraday strategies:

(1) Trend Riding

Riding the trend using highs & lows and maintaining positions until the take-profit target or stop-loss level is hit. The main tools to identify trend continuation include the Wave Theory (Highs & Lows), chart patterns, and candlestick formations. Many other technical analysis tools can be used as well.

(2) Price Breakouts

According to the breakout strategy, when the price reaches a key level, you buy or sell the market immediately. Several technical analysis tools can be used such as Support & Resistance, Trendlines, Chart Patterns, etc. The two keys for applying successfully the breakout strategy are:

(i) avoid trading when you don't have clear signals about the direction of the market

(ii) use pending orders where it is possible (you will optimize your entrance, and save a lot of time)

Chart: Going Long on NZDUSD as an important trendline resistance has been breached

According to the breakout strategy, when the price reaches a key level, you buy or sell the market immediatelly. In this example, you buy the market as an important trendline resistance has been breached.

(3) Price Reversals

Trading the price reversals isn't as easy as it seems. Most of the times the market continues to trend in the same direction, and it doesn't reverse. Therefore, your trades need to have an excellent Reward/Risk ratio, in order to be successful in the long-run. The minimum Reward/Risk ratio should be 3:1, but we suggest 6:1, using trailing stops.

(4) News-Trading

News-Trading involves trading key news releases using an economic calendar. Requires a pure and very fast ECN broker and extremely advanced PC technology.

 

Intraday Strategies and Technical Analysis

The technical analysis when trading intraday includes a wide variety of tools and theories:

(i) Trend Riding

The wave theory (Highs & Lows), Chart Patterns, Candlestick Formations, Daily Pivots, and several more tools

(ii) Price Breakouts

Breaking a key Support or Resistance level, breaking of key Trendlines (see chart), MACD signals on M30 and H1 charts. Also, divergences between the slope of the MACD Histogram and the slope of the Price Chart. Keep an eye on RSI (14) on M5 chart.

(iii) Price Reversals

MACD signals on M30 and H1 charts. Divergences between the slope of the MACD Histogram and the slope of the Price Chart. In addition, RSI (14) on M5 chart.  Keep an eye on potential divergences between the RSI slope and the price chart slope. Chart Patterns and Candlestick Formations are also important. More advanced traders may use the Fibonacci Retracement tool and Harmonic Patterns to confirm potential price reversals.

 

Intraday Strategies Pros & Cons

These are the main advantages and disadvantages when trading intraday:

 

(↑) Intraday Strategy Advantages

High-volume trading (taking advantage of Rebate Plans)

No overnight financing (Swap charges)

Great variety of intraday strategies

Can Avoid news releases

Can generate sufficient volumes for releasing a credit bonus or other similar trading promotions

 

(↓) Intraday Strategy Disadvantages

x High-risk trading

x Paying high trading cost (trading spreads and commissions)

x Requires a lot of time

 

Intraday CFDs Trading strategy

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