best indicator for intraday trading

Which is the Best Indicator for Intraday Trading

People interested in intraday trading has a lot of questions. What is the formula for intraday trading? What is the best indicator for intraday trading? How to make money by intraday trading?

There are certain formulas for intraday trading. We are not going to talk about that here. You can always read the concerned post about it at the above link, written by myself.

We shall find out here what is the best indicator for intraday trading. If you find an appropriate formula and indicator, you can, of course, make money in intraday trading.

There are plenty of technical indicators available in technical analysis. Among them, to find the best indicator for intraday trading is a difficult task.

best indicator for intraday trading

As for as my trading is concerned, I try to keep it as simple as possible. Using too many technical indicators can be very confusing. That will mean that you would never be able to initiate a trade. This is because some indicators give early signal while others give signal after the move has started.

It is very important to keep in mind that no indicator is perfect. You have to use a combination of 2-3 indicators to find a reliable trade signal.

What is the best indicator for intraday trading?

So then what is the best indicator for intraday trading? I shall be sharing my own experience of intraday trading here.

I tried few prominent indicators for intraday trading during the initial years of my trading. They were Relative Strength Index, Stochastics and Bollinger Bands.

Using all these indicators, I was not getting it right. More of the trades were going on the loosing side. I followed all textbook rules about these indicators.

In case Relative Strength Index, they say it is a buy signal when RSI turns upwards after reaching near 30 or lower. I followed it but failed because it used to fall further after turning upwards.

For Bollinger Bands, they say buy when it reaches the lower signal line or shoots out of it. It is a reversal sign. Of course it reversed but only after hitting my stop loss.

For stochastics also, the crossover couldn’t reverse the upside or downside for long or short trades. It was really going frustrating.

My Best Indicator for intraday trading

After applying all these techniques, I followed my own formula for intraday trading. This formula helped me make handsome money in intraday trading.

This formula included three components –

  1. Candlestick Chart – 1hourly chart
  2. Slow Stochastics Oscillator
  3. Volume of trades

You select a stock for intraday trading. Choose a stock as per the trend in the markets. Go for up trending stock in strong markets and for down trending stocks in weaker markets.

Suppose we go for up trending stock while market trend is also bullish.

I used to initiate the trade only after the correction or fall in the stock price is over.

I enter the trade only if it met the two criteria – The stock has made a bullish Candlestick on the hourly technical chart with higher than average volumes. Secondly, the slow stochastics has shown positive crossover, preferably near 30 or below it.

I will let it make first a green Candlestick. I will be buying in the second Candlestick only and that too nearest possible to the stop loss. My stop loss is just below the lowest point of first green Candlestick.

I kept my target or exit price level also reasonable with no traces of greed. I used to exit the trade after I made 1 or 2% of profits without waiting for the bearish Candlestick or negative crossover for slow stochastics.

Following this technique, the loosing trades reduced significantly.

Only drawback with this formula was the waiting period. Sometimes, it takes so long to fulfil both the criteria that the whole day passes just watching the price fluctuations without any trade.

But again, it is always good not to trade than to face the losses. After all, we are there in the markets only to make money. Saving our own capital is equally important.

So, for me, the best indicator for intraday trading is slow stochastics combined with an eye to identify the appropriate Candlestick on hourly Candlestick charts. What is yours? Share it with us in the comments below!

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Bhavin Shah
Bhavin Shah

Nice Article.

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