Many people say, "The hardest thing in trading is to wait patiently." In fact, waiting is not difficult; waiting for an uncertain outcome is what's truly challenging.

What frustrates traders the most is the period after placing an order, when they have to hold the position, not knowing whether it will result in a win or a loss. They always want to know the outcome as soon as possible, but they can only endure bit by bit, waiting.

Therefore, according to online voting statistics, more than 70% of all traders engage in intraday or short-term trading.

Why do so many people prefer intraday trading? It's because intraday trading allows for closing positions on the same day, quickly revealing the results of gains or losses, with a short waiting time, which is more in line with human nature.

Since so many people are fond of intraday trading, let's discuss today how to do intraday trading properly.

Regarding intraday trading, I will cover the following five points, which essentially include the entire content of intraday trading, and I hope it will be helpful to everyone.

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First: Which instruments should you trade, and how to address the issue of their interconnectivity?

Second: How to choose the time frame?

Third: How to handle data-driven market situations?

Fourth: I will discuss two of the most common intraday trading methods.Fifthly: Key Points to Note for Intraday Trading

1. Which instruments to trade intraday?

Let's start with the instruments:

Based on the volatility of products in the foreign exchange market, I categorize all instruments into 5 classes. Here, I will briefly discuss the classification of some instruments, their ranking in terms of fluctuation, and the selection of a few instruments. For more detailed classification and how to choose instruments based on different market conditions, you can visit my public account (Eight-Digit Garden), where I have written extensively on this topic before.

Ranking 1st in fluctuation: Stock index futures.

For example, the Dow Jones Index, the NASDAQ Index, France's CAC 40, the Hang Seng Index, the Nikkei 225, the Singapore FTSE Index (A50), and so on.

Moreover, stock index futures often have gaps at the opening of the next day, and holding positions overnight carries the uncontrollable risk of market gaps. Therefore, intraday trading is a good choice.

Ranking 2nd in fluctuation: Gold, Crude oil.

These two instruments are relatively mainstream commodities in the foreign exchange market. Due to the pandemic, the daily fluctuation of these two instruments has also become very large. For instance, crude oil fell by 7.03% in one day last Tuesday.

Ranking 3rd in fluctuation: Some cross rates.Focusing primarily on cross-currency pairs involving the pound, such as GBP/JPY and GBP/AUD, it is normal for the intraday fluctuation of GBP/JPY to exceed 200 pips.

Ranking 4th in volatility: Mainstream cross-currency pairs.

For instance, pairs like EUR/USD, GBP/USD, and USD/JPY are considered to have a significant movement if they fluctuate by around 100 pips in a day.

Ranking 5th in volatility: Less common cross-currency pairs.

Pairs like EUR/CHF and EUR/GBP, which are more niche, may experience fluctuations of 40 to 50 pips in a day.

Traders, of course, need volatility to generate profits. Ideally, the greater the volatility, the more suitable it is for intraday trading. However, it is also important to consider the characteristics of the volatility and the cost of trading.

Apart from the products ranked 5th, which are not suitable for intraday trading due to their low volatility, the others ranked 1st to 4th are all viable for intraday trading, but they each have their unique aspects.

Stock index futures have rapid fluctuations and frequent shifts between long and short positions within a day, demanding a high level of trading skill and mental fortitude from traders. Moreover, the trading costs are relatively high, making them unsuitable for the majority of ordinary traders. It's like your dream girl, who has high emotional intelligence, high IQ, a great figure, and is beautiful, embodying all sorts of virtues, but is just too difficult to win over.

The cross-currency pairs ranked 3rd tend to have a more "tricky" movement, often taking advantage of data releases to create market movements, but without reasonable entry points, making them difficult to trade.

I recommend the gold and crude oil in the 2nd rank and the mainstream cross-currency pairs in the 4th rank.Reasons for recommendation:

These varieties are mainstream forex currencies with smooth trends, more in line with technical levels, and the spread costs are well-coordinated with intraday movements and amplitude ratios. It's like being with someone you mutually admire; they're not perfect but understand tolerance, making the relationship effortless and potentially very happy with some effort.

How many varieties to choose?

For a trader doing intraday trading, 2 to 3 varieties are sufficient. With limited energy, too many varieties can be overwhelming and lead to missed opportunities, while focusing on just one variety may result in too few trading opportunities and excessive waiting times.

It is suggested to choose one from gold and crude oil, and add two mainstream majors, such as a combination of gold, EUR/USD, and GBP/USD.

Addressing the issue of variety correlation:

There is no need to consider correlation at all.

Non-US dollar currencies, which are other major currency varieties besides the US dollar, should be familiar to everyone. We have chosen to trade non-US dollar currencies, including gold. When the US dollar is strong, other currencies are weak, and vice versa.

What if these varieties move in sync?

Indeed, this can happen, especially when influenced by news, such as non-farm payroll data, or when the US dollar is particularly weak or strong, causing the market trends to move in sync.However, the euro has its own fundamentals, the British pound has its own fundamentals, and gold also has its own fundamentals. Most of the time, their trends are not completely synchronized, especially in the short-term intraday movements.

In practice, when trading each currency pair individually, one will often find that situations where the euro is bought and the pound is sold frequently occur.

The chart below shows the recent 1-hour trend of the euro against the US dollar and the pound against the US dollar, with a significant difference.

Comparison of 1-hour GBP/USD and EUR/USD charts

EUR/USD has been fluctuating within a range of about 60 points, while GBP/USD has fallen by 200 points and then risen by 200 points. Trading within a 60-point range intraday is not easy, but there is room for profit in a 200-point intraday trade.

2. How to choose the time frame?

The selection of the time frame is relatively straightforward. Forex trading fluctuates 24 hours a day but is divided into three time frames: the Asian session, the European session, and the American session. Among them, the European and American sessions have the largest volatility.

The filtering principle is to choose 2 out of 3.

For example, choosing the Asian and European sessions means trading in the morning and afternoon in the local time zone. Choosing the American and European sessions means trading in the afternoon and evening. It is not recommended to select all three time frames and trade from morning till night.

(1) Intraday trading is a very intense mental labor that requires a very strong self-control to maintain a clear mind, and the brain consumes a lot of energy. Trading from morning till night, one's energy may not keep up, which can lead to mistakes. It is important to combine work and rest.(2) The three plates have different fluctuation ranges and rhythm of changes; grasping the rhythm you are most familiar with is easier to make a profit.

3. How to handle data-driven market situations?

General principle: Avoid major data releases, trade on minor data releases.

For instance, the monthly non-farm payrolls should be avoided, as should interest rate decisions from various central banks; other data such as PMI, GDP, unemployment rate, and employment rate can be traded without avoidance.

This selection is made from a risk perspective; to put it bluntly, non-farm data and interest rate decisions are the most impactful fundamental data on foreign exchange trends.

After the data is released, the market often experiences rapid rises and falls with significant amplitude, and trades can result in gaps, making the risk uncontrollable. However, after the release of other data, although it may sometimes push the market, the amplitude is limited, and the risk is relatively controllable. With stricter money management, it is entirely possible to trade through these minor data releases without avoidance.

Additionally, different currency pairs react differently to data.

For example, the Euro against the US Dollar is hardly affected by economic data other than non-farm payrolls, interest rate decisions, and central bank chair speeches. The US Dollar against the Japanese Yen also has similar characteristics.

However, the British Pound against the US Dollar, as well as the Pound-cross currency pairs, show a strong reaction to various UK PMI, GDP, and unemployment data. The Australian Dollar against the US Dollar and the US Dollar against the Canadian Dollar also exhibit a strong reaction to their respective countries' economic data.

Another reason not to avoid minor data releases is that there are only about 20 trading days per month; if all data releases are avoided, at least a quarter of the time would be untradeable, significantly reducing the trading frequency, which would be unreasonable.4. Two Intraday Trading Methods

The first method: Identify key support and resistance levels to enter trades, aiming for reversals or rebounds. This is a "position-taking" trade, with the core focus on "finding positions" and "waiting for opportunities."

Trading logic: When the market tests key support and resistance levels, there is a possibility of a reversal or rebound. We trade on this potential. For example, in intraday trading, use a 15-minute chart as the primary trading timeframe and identify key support and resistance levels on a 1-hour chart. After finding these levels, wait for the market to test them before entering the trade.

Aggressive traders may choose to enter directly, setting stop-losses for short positions at the previous high and for long positions at the previous low. Conservative traders may opt to enter after a reversal candlestick pattern has formed.

Precautions:

(1) When not holding a position, identify one key level above and one below. Once a trade is closed at a key level, do not look for positions during the session, as traders are more objective and accurate when not holding a position.

(2) Do not enter the market unless it tests the key levels; wait patiently.

The second method: Trend-following trading based on the breakdown of intraday consolidation patterns.

This method involves identifying and trading the breakout of intraday consolidation patterns, which can indicate a continuation of the prevailing trend. Traders look for clear patterns such as triangles, rectangles, or flags that have formed during the day and then enter trades in the direction of the breakout once it occurs.

Key points to consider:

(1) Analyze the intraday chart to identify consolidation patterns.

(2) Wait for a clear breakout from the pattern before entering a trade.

(3) Use stop-loss orders to manage risk, placing them just outside the consolidation pattern to avoid being stopped out by normal price fluctuations within the pattern.

(4) Look for confirmation of the breakout with additional technical indicators or volume analysis to increase the probability of a successful trade.Foreign exchange trading has a very regular characteristic: the market becomes thin after 12 a.m. Beijing time, and the candlestick lines begin to consolidate and contract horizontally. Typically, the Asian market is also relatively small until the European market in the morning or even the afternoon of the following day, when the market gradually expands.

So, from 12 a.m. Beijing time to the next day, there is about a 10-hour consolidation range, and traders can rely on the consolidation pattern in this range to conduct breakout trades.

The time frame can be chosen at 5 minutes or 15 minutes.

Tradeable patterns include: trend line breakouts, rectangle consolidation, triangle consolidation, and so on.

Precautions:

(1) Choose standard consolidation patterns for trading; do not force entry if the pattern is not standard.

(2) One-time trading opportunities, trade once at a position. Patterns and lines should be drawn when the position is empty, without constantly adjusting the lines and entry positions as the market changes. Otherwise, you may be carried away by the market, leading to irrational trading.

5. Precautions for intraday trading

(1) Intraday trading does not mean trading every day.

Traders often misunderstand intraday trading as trading every day, which is not the case. Any trading logic emphasizes waiting for opportunities, and it is normal not to have opportunities for intraday trading in a day.(2) One can attempt to seize trends.

Once a position is taken in a particular instrument, intraday trading of that instrument should be halted until the trend ends and the position is closed.

Engaging in intraday trading does not mean focusing solely on the intraday timeframe. Opportunities in larger timeframes can also justify extending the holding period.

For instance, if one enters a position in the British pound intraday and it aligns with a significant daily trend, it is possible to hold the position for a longer period, thereby amplifying profits. However, during the holding period, intraday trading in the pound should be suspended to avoid confusion, as the intraday direction might conflict with the trend direction.

Having discussed the details related to intraday trading, let me share a small piece of advice beyond trading for you to ponder upon.

"Do not confuse trading with life." Trading is, in fact, a job. Many companies emphasize the balance between work and life. When trading, focus intently on the details and give it your all; outside of trading hours, let go of trading and live your life well.

"Do not make trading your entire life, and you will be able to trade better." This is especially important for intraday traders.