How to Use Intraday Volatility in Trading

Traders who use intraday prices look at stock prices at different times within the same day. Common intraday price levels are the open (price at which a stock opens the day), close (price at which trading closes on the stock) and the mid-price (the median price for the day). Volatility is another way to gauge the strength of intraday price movements in the market.

Instructions

1. Go to Yahoo! Finance, the top-rated investment research website, and look up your stock.

2. Click on "Basic Tech Analysis" under "Charts" in the left pane. Next to "Range," click on "1d" for one day. In the same portion of the screen, go down to "Overlays" (just under "Indicators") and click "Volume."

3. Note strong movements on the price chart. One day-trading technique is "scalping." Scalping is when day traders make profits from small price changes, and "fading" is when a trader sells when a price is rising and buys when it's falling. Volume can be used to improve insights with both techniques.

4. Interpret volume changes. A strong volume move reinforces buying interest. This does not support a fading strategy; however, weak volume on buying or an increase in price does support a fading strategy. Perhaps the price has gone up because of block trading or some other short-lived market anomaly.

References

• Investopedia: Scalping
• Investopedia: Fading

Resources

• Yahoo! Finance