Intraday trading (also called day trading) refers to the opening and closing of trades within the same day. It’s a blanket term that encompasses all trading styles that meet this criteria.
So it doesn’t matter what type of trader you are: a swing trader, a trend trader, a breakout trader, or a price action trader. As long as you enter and exit your trades within the same day, you are an intraday trader.
The Benefit of Intraday Trading
There is only one real benefit of trading this way, and that is the avoidance of overnight risk.
Since all trades are closed by the end of the day, you’ll never have to worry about negative market developments while you’re away from the computer.
The 2019 Yen flash crash is a recent example that affected almost all currency traders with open positions.
In the opening hour of January 3rd, the Japanese Yen suddenly surged hundreds of pips within minutes, for no apparent reason. This was when most Forex traders were still fast asleep in bed.
Many traders with open Yen positions got wiped out that day.
As an intraday trader, you would have been safely out of the market, and unaffected by the incident.
But this is not why most people want to be day traders
The ugly truth is that people tend to day trade for no other reason than because it seems like a way to make fast money.
Thanks to a myriad of Hollywood movies, most people today think that intraday trading goes something like this:
Flashing prices, intense concentration, quick reactions and rapid button clicking.
It’s all about the thrill and excitement of making large sums of money in a matter of minutes… right?
Not even close.
This is NOT how intraday trading works at the retail level.
In fact, the more often (or quickly) you trade, the more likely you are to lose money.
Because with intraday trading,
- You pay up to 10x more trading costs in spread/commission fees
- Short-term price moves are subject to a much higher degree of randomness
- You face immense psychological and emotional pressures
Among all the different forms of trading, day trading has the highest failure rate and should be avoided by beginners entirely.
But of course, no one will tell you this. The internet is filled with faux traders who talk a good game but lose money behind closed doors. (See this post)
Now this being said, there ARE profitable intraday traders out there. They do exist.
The only thing is, they are exceptionally rare.
I’ve never known a successful intraday trader with less than 10 years of trading experience. They are the Navy SEALS of the trading world. The elite of the elite.
This is why intraday trading should only be seriously attempted by those who are already profitable trading the higher timeframes… Or at least, under the guidance of an experienced trader who can demonstrate competence with some sort of verified track record.
The trading battlefield is littered with the bodies of wannabe day traders, and those who attempt it on their own are treading on thin, thin ice.