While many hedge fund traders are bemoaning the recent volatility in the markets, and August's stock-market and Australian Dollar sell-off in particular, intraday traders are enjoying the ride. A little known fact about volatility and trends, according to IBTrade.com Chief Market Strategist Jay Norris, is that "the more volatile a market becomes, the better behaved technically it becomes", meaning the more that market respects the technician's tools: trendlines and retracements. Given markets typify fractal geometry, where what happens on the higher time frames is replicated on the lower time frames, intraday price movement need be heeded as each session's price movement can be a microcosm of the week or even month's price action. While price action during the Tokyo and European sessions may be bearish, this does not mean price can't rally sharply during the U.S. session. For traders with the appropriate methodology, and the nerve to execute them, larger intraday price movements are a boon.
With CFTC statistics pointing out that nearly 90% of the volume in financial futures markets on an average day is day-traders, it's no secret that intraday or micro trends are influential. And while professional short-term traders often get the blame for big market sell-offs, by virtue of their experience, and mystique -- most who try to succeed in this niche fail - they are on average bulls, heading the age old adage that "pessimists don't make money on Wall Street" One look at a historic stock index chart, or Australian Dollar, chart will confirm that advice, as asset class markets do indeed "climb stairs and fall out windows", pointing out that as an intraday trader there are far more days where price rises than falls On this day, 9-19-11, the largest price movement in stock indices on this 15-minute chart was a rally in the U.S. afternoon session once a short-term resistance line gave way, after an intermediate-term support line held - see chart below.
E-Mini S&P 500
While figuring out short-term price action is still mostly the playing field of private traders, there are services that provide online "trading rooms" where analyst / moderators guide clients through the maze of intraday price movement. One such service, which is free for clients, is called Live Market Exercise, and hosted by the firm IBTrade.com . While it is certainly not without risk, and only for those who have the time, focus, and most important money to risk, day-trading today is more than just a fad, and likely to be around as long as there are liquid markets to trade.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.