Intraday Price Change and Trading Volume Relations in the Stock Market

Intraday trading is defined as the trading style where a day trader buys and sells securities in the same trading session. It is mandatory to square off all the positions a trader takes, otherwise, it will be closed automatically at the closing price of the security. Timeframe for a trade can be seconds, minutes or hours depending on the trader’s strategy. There are different technical indicators that are used to place a successful intraday trade. Trading volume and price change in a trading account session for a particular stock are the foremost indicators.

The relationship between trading volume and intraday price change can lead to many insights. However, most of the theories show trading volume is positively linked to the absolute value of price changes. Look at these few aspects on how to start trading in share market.

Trading Volume

There are various factors that cause a change in stock price. One of the important factors that determine prices is the volume traded in a trading session. It is the total number of trades (transactions) that take place for a particular stock.  Trading volume is measured in different ways. Many theories define it as the monetary value of total traded shares. The trading volume of a security fluctuates every day.

Intraday Price Change

To identify the intraday price change for a stock, there is the need for previous day trading data of a particular stock. It requires the previous day closing price, the previous day high price it touched and the previous low price it touched. All for a particular stock. 

Let us discuss the use of intraday trading meaning price change and trading volume to make trading strategies.

Intraday Trading Technique – Pivot Point

It is very well known that day trading is based on strategies and different formulas. One of those formulas is the Pivot Point. It is one of the most preferred techniques to identify the trend in the stock market. Basically, it is used to find out the stop-loss levels using trading volume and intraday price change of a particular stock.

  • The pivot point is based on the change in the trading price of a stock. 
  • It is the average of the high price, low price and closing price of a particular stock from the previous trading session.
  • Using the past day’s trading prices of a stock, the support and resistance levels can be identified for the next day for that particular stock. 
  • A resistance level is used as the stop-loss level and a support level is used as the target profit. 

Pivot Point= (Previous High+Previous Low+Previous Close)/3

Previous high – previous day intraday high price it touched (H) 

Previous Low – previous day intraday low price it touched (L) 

Previous Close – previous day closing price (C). 

Thus, the Pivot Point technique helps to predict the intraday stock movement for the next Trading Day. There are other intraday trading indicators also with great success like moving averages, Commodity Channel Index, Relative Strength Index (RSI) and other momentum indicators that will help you to determine:

  • the direction of the market trend
  • the existing or missing momentum in the stock market
  • the popularity of a stock using volume measurements 
  • the potential to make profits in a volatile market

 Looking at multiple indicators while taking a position in the stock market would be proved a good practice. However, you can use the technical indicators you are clearer about to develop trading strategies. There are hundreds of indicators provided by stockbrokers at their trading platforms. It is better to use a few efficiently.

Askari Siddiqui

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