Intraday Trading Flashcards
What is the motivation behind intraday trading
Intraday price ranges tend to be wider than open-close ranges. Intraday captures more volatility. Especially profitable on highly volatile days.
Explain the main issue regarding microstructure of markets
Assets have multiple prices: bid, trade ask.
Name the 2 different types of orders
Limit orders and market orders
What is a limit order
An order that guarantees price but not execution
What is a market order
An order that guarantees execution but not price
Name factors that affect bid-ask spreads
Liquidity, market conditions, asset value and ticket size
What is the bid-ask bounce?
As orders arrive, the price bounces between the bid and the ask, creating fake volatility, and the illusion of mean-reversion
Main issues with intraday strategy development:
Assets have multiple prices: bid, trade, ask
Different types of orders: LMT and MKT
Timebar: Open/Close/High/Low
Frequency: 1m/10m/1h
Name strategies that can be applied intraday
Mean reversion, TF, Patterns, Event Trading, ML
Keep in mind regarding intraday:
Information Lags
Define entry/exit rules accurately
Use LMT and not MKT orders, to avoid large bid-ask spreads
Explicit costs (brokerage) and implicit costs (bid/ask and bounce) can break strategies
Can one price per minute be enough for intraday trading?
It can, but can be better to use highs and lows
Historical evolution of intraday
Are becoming as crowded as day trading strategies. Best executed by machines.
