What Is The Most Important Quality Of A Successful Intraday Trader?

Intraday trading can be one of the most difficult types of trading type. The reason is the sheer amount of information one has to handle, be it charts, indicators, broker terminals, news, events both scheduled and surprise, own psychology, open positions, looking for new signals and on and on and on...

All this makes intraday trading a difficult beast to master, but the lure of daily profits is what keeps bringing the hordes back to it. So to be able to handle all this and still come out successful you need to have some attributes or qualities if you call them that.

Let's discuss some of them today. This is by no means an exhaustive list, but I am sure it will be helpful, and at the end of the post I will also share the solution I found to be very useful for such high-frequency trading, so read the post till the end...

What is intraday trading?

Lets us start with the basic question first, what is intraday trading? Well, it simply means that the traders have their trade holding periods of less than a day. So they buy and sell on the same day or vice versa. They won't carry the trades over to the next trading day...

But that does not mean only intraday traders trade during the trading day, consider the following scenarios...

• A big mutual fund wants to offload a certain stock on their books for good, they don't find the prospects encouraging so they come in and sell. They won't be buying any of it back on the same day, but still, they placed their orders during the day. So their exit from the stock was an intraday trade...
• Consider big FII traders, they have positions in all segments cash, futures and options. Now they often have trades, with longer horizons than a day, say they feel over the next couple of months the markets are supposed to go up so they buy in cash and use futures and options to strategically hedge their positions. Neither the cash or derivatives positions are going to be squared off during the day, but still, they are taken during the trading day, that is intraday...

I can go on and on with examples but it suffices to say that not all trades initiated during the trading day will be squared off by EOD, but all trades have to be initiated during the trading day. So whenever any trader, investor, mutual fund, hedge fund, FII, DII and what not decide to trade, they are intraday traders on the day they enter or exit their positions.

What does this mean for an intraday trader who plans to enter and exit on the same day?

Well, I may not write them down sequentially in a numbered list, but let's discover as we go along. One thing an intraday trader must do is to remain as unbiased and unhinged as possible. The goal is not to be right the goal is to create a price differential.

Obviously when the big players who have to buy or sell in quantity are active the chances of a price differential is higher, if they are discreet with their buying and selling then surely once their accumulation or distribution is complete we will get a big move.

So an intraday trader needs to be nimble on her feet as often times the signs of this big buying and selling are not clear till the last moment. So if you commit to a direction or a view then it may become very difficult to see the market otherwise, this has a cool scientific name, "the confirmation bias", thanks to Daniel Kahneman and Amos Tversky we are aware of human biases.

So an intraday trader needs to be on the lookout for signs of this big buying and selling. Try to position herself with them...

What an intraday trader can do about the humongous amount of information hitting her?

This is a serious problem. With the advent of technology, cell phones, internet, free wifi, there is no real filter being put on the amount and kind of information that is reaching us. Sometimes this can be really helpful and surprising, but during something as intense as trading this can be a handicap.

News, events (planned and surprising), results, indicators, multiple tickers being tracked, related markets, international markets, and on and on and on... It becomes or rather it is virtually impossible to track all this information, let alone make any sense of it. And then there is the matter of actually finding and executing trades based on all of this...

But don't worry, if you are feeling as overwhelmed as I used to feel with all this, you are not alone and sans help. This is the exact time to introduce your rescuer, the MGI, market-generated information. You can actually use what the market is doing as an input to your trading, in fact, if you get good at it, you have to use only MGI to trade...

Market Generate Information (MGI)

What is it? How can I find it? How can I use it?
I know there are a lot of questions crowding your mind fighting for its place beside the excitement you may be feeling for this one. MGI is market generated so you will find it in the markets themselves and if you have been trading the markets for a while, I don't have to tell you where can you find the truest representation of what is going on in the markets, yes you guessed it right, charts!!!

Price charts are the truest source of MGI. No derived indicators are required, no need to track the news and events, no need to monitor international markets, just focus on what you actually want to trade.

How do I get MGI?

If you are thinking that MGI is something that will just give you trade after trade and help you make money with ease, you are mistaken, there is no free lunch, there are a few cheap lunches available but those will harm you more than they will do good. So the solution is to put in efforts, sincere efforts, the results are worth it...

Now every price change on a chart is MGI, every share bought or sold as reflected in volume is MGI. Actually, the MGI in itself is overwhelming. But there are ways in which you can differentiate between important MGI and not so important MGI easily. For that, you need to add a few words to your vocabulary. The words you were using to describe market action so far will not be enough...

New Vocabulary Of Successful Traders

via GIPHY

You need to start using the vocabulary of successful traders so that you focus on the right information generated by the markets...

• Smart Money - Traders who have better "know how", "know what" and "know when". In other words, they have better ability to trade, better information and better ability to time the trades,
• Amateur Money or Retail Traders - This is the category we are in currently and we want to get into the smart money category as soon as possible.
• Time - By time I mean time spent at different price levels, the more time the traders spend at a particular price level, more is the acceptance of that price level. Less time at a particular price level is suggestive of traders not interested in those prices...
• Value - It is the area where the market spends most of its time. Each day has a value and a trend is confirmed by how well the value is moving in that direction. Just price moving in a direction but not pulling the value with it is not a sign of a healthy trend.
• Trade Facilitation - This is the primary purpose of markets. Markets are always looking for areas where there is two-way trade happens. Buyers don't want the price to move up against their buying and sellers don't want the prices to move down against their selling. They want this to happen once they have accumulated or distributed their positions. To accumulate or distribute big size they need these prolonged sideways movement periods, where they can get hands on their inventory in a series of small trades.
• Innovators -  These are responsible for stopping and reversing big and small trends. They are present in all timeframes.
• Laggards - These are mostly retail traders who chase after the price. Ever had this experience where you bought and that price turned out to be an exact top. I endured this a lot of times, the problem is I was a laggard when I first started out, but now I know better.
• Early Adopters - A retail trader can never really become an innovator, just because of the amount of capital required to actually stop a trend and reverse it. But they can spot the innovators doing their job and once confirmed they jump on as early as possible to capture most of the remaining price move. This is where we are trying to position ourselves...

There are many more words, some very detailed and specific in their meaning and application, but we can't discuss everything in a single post. It takes much more time and space to cover everything. It needs much more structure and use of all modes of communication, text, audio and video.

What should be the trading routine of an intraday trader?

Source: https://bit.ly/2QB6h3v

Well, this is the last thing we are going to discuss today. The importance of a good routine cannot be undermined for an intraday trader. Different times of a trading day emanate different types of information. For instance, the opening period shows what the left out or stuck traders from yesterday are thinking. As the day progresses, the SM activity starts showing up and clears their intention and by the close many early adopters and early majority catch on to what the SM was trying to do or what was the dominant timeframe on that day and try to join them.

All this activity creates specific market behaviours which can be tracked and form an integral part of interpreting the MGI. But for this to happen you need to show up consistently day after day, observing and taking notes and developing your feel of the markets.

These are some of the points you need to focus on...

• Premarket Analysis - When you start your morning preparation before the markets open. I usually get in at 8:45 am about 45 mins before the markets open and do my morning preparation.
• Opening Session - Open is crucial, here I avoid trading, but try to extract as much information as possible about the left out and stuck traders as well as any participation of the big traders.
• Afternoon Session - The afternoon sessions are mostly quiet, but they hold the information of what is likely to happen in the closing session. So it pays to focus on this usually stagnant period of activity.
• Closing Session - Closing, this is where I find many of my trades, during the last few hours of the markets. By this time you have enough information to make a decision or to avoid trading altogether.
• Post-market Analysis - Post close analysis, I do this diligently, trying to find where I misread the markets, any trades I took or missed, my feelings during the trading day, etc. You can get many good posts on journaling in trading, if you want one from me, just type it in the comments window.

Now there are many things that keep happening during the day, a trader executes his strategies, sometimes she has to change her tactics based on how market develop, sometimes everything goes as per plan and you have a great trading day.

All this will emerge if you keep putting in the work daily. And believe me, it is all worth it in the end...

Conclusion

Ok, so that was a long one. Hope you liked it. I am sure if you start thinking on these lines you will start finding your way and become the trader you always meant to become.

To summarise you need to do the following things...

1. Get rid of biases...
2. Build a vocabulary of successful traders...
3. Set and maintain a good trading routine...

Now if you found some of the tidbits in this post useful, it would be only fitting if you share it with others, your friends and colleagues that you care about. Let them know what you are thinking about your trading and how serious you are. Always remember...

Sharing Is Caring 👇👇👇