Top 5 Best Technical Indicators for Intraday or Day Trading

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Intraday trading can give you returns in one day, with no hassle of taking the share deliveries in your account, just close your position end of the day and enjoy the profit. But losses are also not away when you trade intraday, be prepared for that also.

The losses can be minimized, and profits can be maximised if you use the technical indicators, tools and techniques to know the right buying and selling position. Pick the best tool and technical indicators and perform the technical analysis to find the stocks having the potential to move, and not only long but you can also use these tools for creating a short position.

Traders playing BTST or STBT and day trading use the technical indicators that help them pick the right stock for trading. If you are looking to trade intraday, you can also use these useful indicators.

Though there is no guarantee, the indicator will give you an accurate prediction or forecasting of profits in any individual stock. But it will help you to choose the best one having the highest potential and can give the best returns in day trading. Let's find out which technical indicators are best for intraday trading or suitable for day trading.

What are the Technical Indicators Used for Day Trading?

In technical analysis, traders used various technical indicators for intraday trading, short-term delivery-based trading and also for medium to long-term investment. These technical indicators are very useful in identifying the stocks, that have the potential to give returns. Traders use other tools and techniques on chart patterns to know where to buy, sell or book profits.



List of Technical Indicators for Trading:

  • Swings
  • Overlays
  • Volatility
  • Volumes
  • Oscillators
  • Trend Line
  • Breakouts
  • Momentums
  • Moving Averages

These are the most popular or you can say most widely used, technical indicators globally by traders in financial markets. Few of them can give the indication to buy, or few of them show the trend or tell where to buy and how much can go up or down.

You can use these indicators for day trading, short-term trading and investing for long-term perspective. A combination of various indicators can give an accurate idea to decide which stock, when and where to buy or sell to generate the best profits. However, some of these indicators are the best indicators for intraday trading, so let’s find out what are they.

Top 5 Indicators for Intraday Trading:

#1 Relative Strength Index (RSI)

RSI or Relative Strength Index is considered one of the best indicators for intraday trading. For intraday trading, you can use the RSI to find out if a stock is overbought or oversold zone. RSI oscillates in the range of 0 to 100 and when RSI is trailing below 30, it means the stock is trading in the oversold zone, while when RSI is above 70, it is considered that the stock is trading in the overbought zone.

RSI is directly proportionate to the stock price indicates if RSI decreases means price also decreases. When RSI increases, it means the stock price also increases. Using the RSI, you can modify your trading strategies during intraday trading.

#2 Moving Averages & (MACD)

Moving Averages are also one of the best technical indicators for day trading used by traders while performing technical analysis. Moving averages help to identify the market or stock trends and potential reversals. You can use it to know whether the price trend is above or below the average price, which can be interpreted to gauge a bullish or bearish trend.

There are various types of moving averages - Simple moving average (SMA), weighted moving average (WMA), exponential moving average (EMA) and Moving Average Convergence Divergence (MACD) that are individually or in combination with each other. The best-moving average for intraday trading indicates the right trade positions. Using the crossover, between the MACD line and the signal line you can decide whether to buy or sell.

#3 Bollinger Bands

It is one of the very useful technical analysis tools for intraday trading that follows the stock price movement and uses the standard deviation to know the volatility of the stock.  Three bands show support and resistance to the range of stock volatility. And when the Bollinger Bands inflate or move away from each other, it means the market or stock is highly volatile during that period.

Conversely, when Bollinger Bands contract or move closer to each other it means the volatility is low. However, the volatility is measured using the standard deviation that also moves when volatility falls or rises. This dynamic behaviour of Bollinger bands can be used for potential trading opportunities like picking the right stocks for intraday trading.

#4 Stochastic Oscillator

It is a kind of momentum indicator, best suitable for swing trading and intraday trading. And while doing day trading, knowing the momentum of the stock is also very important to make your trade successful. A stochastic Oscillator is used to compare the closing price of a stock to a range of prices over some time.

When the stock price moves at a historical high, and the oscillator levels do not remain the same as the price, it indicates the demand is decreasing slowly. From an intraday perspective, it also indicates the possibility of a fall in the price of stock.

The stochastic Oscillators plotted between 0 to 100, and when the trend is up, the price also makes a new high. Conversely, in a downtrend, when the price inclines to make new lows, the stochastic tracks whether this. You can use the stochastic as an overbought and oversold indicator, levels below 20 are considered oversold, while above 80 are considered overbought.

#5 Commodity Channel Index

CCI is another versatile momentum oscillator that measures the deviation of stock from its average price. It also helps find out whether the stock is in the overbought or oversold zone with how much potential for trend reversals. Traders during intraday trading, evaluate the price levels and estimate the potential changes in the market trend for trading.

The commodity channel index consists the values like 0, +100, and -100, the positive value means, there is uptrend, while a negative value signifies there is downtrend in the market. And the combination of CCI& RSI together is more useful in knowing whether the stock is trading in the overbought or oversold zone. CCI indicates the divergence from the normal trend by using the deviation of the stock's moving average price and is also useful for identifying new trends in the market.

Other Most Accurate Intraday Trading Indicators

Apart from these top five technical indicators, there are various other indicators that are also useful for intraday trading. You can these tools also for short-term trading in the options market or delivery-based medium-term trading or picking the stocks at the lowest levels for long-term investments. Let's find out what are the other best indicator for short-term trading or you can also use for day trading.

#6 Accumulation/Distribution Line

The Accumulation/Distribution Line (A/D line) is also one of the most useful indicators for intraday trading. It helps to identify the flow of money in the stock. A/D line is similar to OBV, but instead of considering only the closing price of the stock, it also takes into account the trading range for the period and where the stock closes with that range.

If the A/D line is trending up, it means, there is buying interest, as the stock is closing above the middle point of the range confirming the uptrend. Conversely, if A/D is dropping, it means the price is closing at the lower portion of its daily range, hence the volume is considered negative confirming a downtrend. It can be also used for divergence, as A/D starts falling while the price is rising, giving a signal of the trend is in trouble and could reverse. Likewise, when the price is trending lower and A/D starts increasing, it could be a signal of higher prices are likely to arrive.

#7 Supertrend

Supertrend indicators can be also used for intraday trading. This indicator is plotted on the stock price chart and the current trend can be determined by its placement in front of the price. This indicator can be constructed simply using the two parameters- period and multiplier.

While constructing the Supertrend indicator, we have to use the default parameters-10 for Average True Range (ATR) and 3 for its multiplier. The ATR plays a key role in ‘Supertrend’ as it uses ATR for computing its value and indicates the degree of price volatility.

#8 On-Balance Volume

Balance Volume (OBV) is also a popular indicator used for intraday trading. OBV tracks the absolute change in volume for speculating price movement. And as per the traders, the volume also drives the price, and this happens mostly when institutional investors aggressively trade in the market. OBV helps to track the money flowing in the market and also gives the signal of the future price direction of a stock.

If OBV value changes higher than a change in price during a gibe period, then it can be considered in the near future a sharp upside or downside in price can be seen. You can use the OBV Divergences for trading, as bullish divergence is when OBV forms a higher high and higher low. Conversely, a bearish divergence is formed when OBV forms a lower high and lower low, while price forms a higher high.

#9 Volume Weighted Average Price

VWAP or Volume Weighted Average Price is another useful indicator for intraday trading. When traders pick the stocks, traders need to check the volume of the stock. And VWAP is a volume-based indicator – showing the ratio of stock value traded in a specific time to the total volume traded at that stock for a particular stock.

And when the stock is above VWAP, it indicates a bullish trend, which means the price is above the average volume and the trend is positive. At this point, you can enter into the stock where the retracement to VWAP is in the direction of the trend. Similarly, when the stock price moves below the VWAP line, means there is a bearish trend and you can sell or create a short-selling position in the stock when the VWAP is in the direction of such a trend.

#10 Donchian Channel

While doing intraday trading, you also need to check and analyse the volatility indicators that help to analyse the volatility levels of a stock, and how much it is volatile. And for this purpose here we can use the Donchian channel that is constructed by calculating Highest High and Lowest Low for a pre-defined period.

While analyzing, check if there is a breakout of the Donchian channel from the upper or lower band, then it is considered as the starting of a new trend. The Donchian channel is also helpful in analyzing the volatility of the price. If the price remains stable, then the Donchian channel will become narrow, while if the price fluctuates then the channel will be wider.

#11 Average Directional Index

Average Directional Index or ADX is also considered one the best indicator for intraday trading that helps to determine the strength of the trend or to continue going up or down. ADX value oscillates between 0 to 100 and you should remember that the higher the value higher will be the strength of the trend. The default value of ADX is 14 periods that you can change according to the volatility of the stock or index.

However, the ADX value below 25 indicates a weak trend, while the value above 75 indicates a very strong trend. ADX is typically not used alone, instead, it is used along with other trend signalling indicators like Super trend to confirm the false signals.

Benefits of Using Technical Indicators

These are the best indicators for intraday trading you can use for day trading. Using technical indicators is not only beneficial from the trading point of view, but such indicators also provide useful insights about the market and individual stocks.

While performing the technical analysis you can use these indicators, to find out the market, trend, stock trend and the right levels to buy and sell the stocks. Moreover, a few trends also help to find out the volatility in stocks, the strength of a trend, and how much it can give or how much there is potential in stock in moving in such a direction.

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