The 7 Best Indicators for Intraday Trading

Intraday trading can be tricky for beginners. Traders need to keep an eye on several different variables to get an edge over others. These variables include chart patterns, technical indicators, open interest, market news, etc. In this article, we’ll focus on the best indicators for intraday trading. These indicators would help you to maintain a constantly good success rate and risk-reward ratio.

The 7 Best Indicators for Intraday Trading

There are 100+ technical indicators defined in classic technical analysis, but not all of them would be suited for intraday trading. We did analyze each of these indicators and filtered the ones which are best suited for day trading.

For example, indicators like “RSI (Relative Strength Index)” may work wonders for positional trading but may not carry much relevance in day trading.

Check out the below list which contains the 7 best indicators for intraday trading:

VWAP (Volume Weighted Average Price)

VWAP or Volume weighted average price is an indispensable tool for intraday traders to forecast the price movement of stocks. As the name suggests, VWAP is the weighted average of the stock price over a specified time period. The stock price is weighted based on the volume for that specified price candle. 

It helps in Buying low and Selling High. If the price is below VWAP, it is considered undervalued, while a price above VWAP is considered overvalued. Crossing of prices above/below the VWAP line in the chart indicates momentum shift or change of trend.

How to pick stocks for Intraday Trading?

EMA (Exponential Moving Average)

Moving averages are probably the most popular technical indicators used by traders across the globe. There are many different types of moving averages and among them, exponential moving average (EMA) is what we suggest for intraday trading.

Moving averages represent the average price of the stock for a predefined lookback period. In the case of EMA, all the price points are not given equal weightage while calculating the average, the nearest ones are given more weight than the far ones.

The best intraday trading strategy based on EMA is to look at crossovers. When a short period EMA crosses above the long period EMA take a BUY position, and when a short period EMA crosses below the long period EMA take a SELL position. The ideal values of short and long periods are 5 and 20 respectively.

See below chart example with BUY and SELL signals based on EMA indicator on a 5-minute chart:

Supertrend Indicator

Supertrend is a popular trend-following indicator that works particularly well in the Intraday timeframe. It is also a trend-following indicator known for its preciseness and accuracy. 

ADX (Average Directional Index)

We strongly believe that “trend” is the best friend of every intraday trader and the ADX indicator aids in determining the strength of the trend.

Why Open Interest matters in Trading?

OBV (On Balance Volume)

On Balance Volume (OBV) is a very popular momentum indicator that tracks the absolute volume change to speculate price movement. It’s a mass belief that volume drives price due to aggressive trades from institutional investors. On Balance Volume indicator essentially tracks this smart money flow into the market and signals future price direction.

OBV can be interpreted in the following ways:

1. If a change in OBV value is relatively higher than a change in price for a given time period, then there may be a sharp upside or downside in the price in near future. 
2. OBV Divergences can be quite handy and reliable too. Bullish divergence is formed when OBV forms a higher high and higher low, while price forms lower low. Similarly, Bearish divergence is formed when OBV forms lower high and lower low while price forms higher high.

Donchian Channel

Donchian Channel is a powerful indicator trend following indicator that works in both Intraday and Daily timeframe. It is derived by calculating Highest High and Lowest Low for a pre-defined period. 

this link

CPR (Central Pivot Range)

CPR is a versatile technical indicator used for intraday trading. It is composed of 3 levels – a central pivot point (pivot), top central level (TC), and bottom central level (BC). The previous day’s high, low, and close prices are used to calculate the CPR levels for the current day. And these levels remain constant throughout the day.

Any breakout above or below the TC and BC lines indicates a high probability that the movement will continue. And if the breakout candle has a higher volume than the preceding candles, then it gives an extra confirmation.

this link.

Those were the 7 best indicators for intraday trading that works for all the financial instruments across all markets. We would recommend to start looking at these one at a time. Don’t wait for confirmation from all the indicators to initiate a trade, also don’t rely on just one indicator while designing your systems. 

As always, let us know in the comments section if you have any questions.