What it means
Markets do not move in a straight line during the day. A share may open at one price, swing up and down on news and order flow, and close somewhere else, and all of that movement is described as intraday.
Intraday data records those swings in detail, often as price charts broken into one-minute, five-minute or hourly bars. Each bar shows the opening, highest, lowest and closing price for its period, so traders can see exactly how the price travelled.
Longer-term investors rarely need this level of detail. Intraday traders buy and sell within the same day and normally close all positions before the market closes.
They avoid the risk of overnight news, such as company announcements or events overseas, but they pay trading costs on every transaction and need to react quickly. The word also appears in corporate finance and banking.
A bank may extend intraday credit to a client or to a payment system so that payments can settle during the day, and a treasurer may track intraday cash balances to make sure that large payments do not leave an account overdrawn. Intraday volatility, meaning how much the price moves within the day, affects the cost of trading.
Wide swings make it harder to get a good price on a large order, and a sudden gap can cause stop-loss orders to execute well away from their target. The nuance is that the day's high and low can be very different from the opening and closing prices.
A summary of only the open and close hides how much risk was taken, which is why intraday ranges are important for traders and risk managers.
In practice
Real-world examples.
Example
A day trader buys 1,000 shares at $20.10 in the morning and sells them at $20.35 in the afternoon. The gain is $250 before fees. She sells all positions before the close so no risk is carried overnight. After fees of $10 each way, her net gain is $230.
Example
A corporate treasurer expects a large supplier payment of $5,000,000 to leave the account at noon. She checks the intraday balance and moves funds from a deposit account in the morning. This prevents an overdraft charge and keeps the supplier relationship smooth. Her team now reviews the expected timing of every large payment each morning.
Example
A bank grants a brokerage an intraday credit line so it can settle trades before its clients' payments arrive. The credit is repaid by the end of the day, so the bank charges only a small fee. The risk team monitors the usage in real time, and any balance left overnight is charged at a much higher rate.
Formula
Calculation
Intraday return = (Closing price - Opening price) / Opening price
Intraday range = Highest price - Lowest price
Suppose a share opens at $50.00, falls to a low of $49.00, climbs to a high of $52.00 and closes at $51.50. The intraday return is (51.50 - 50.00) / 50.00 = 1.50 / 50.00 = 3.0%. The intraday range is 52.00 - 49.00 = $3.00, which is 3.00 / 49.00, or about 6.1%, of the low price. A trader who bought at the low and sold at the high would have earned $3.00 per share, though this is only possible in hindsight.Case study
Seen in the real world.
This is an illustrative story about a fictional importer, Harbour Lane Foods, that bought currency every morning to pay overseas suppliers. The treasurer noticed that the exchange rate often moved sharply in the first hour of trading and settled later in the day.
She reviewed intraday rate data for three months and found that rates around midday were, on average, 0.3% better than at the open. The company moved its daily purchase from 9 a.m. to 12:30 p.m., after testing the change on a small amount for a month.
On annual purchases of $12,000,000, a 0.3% improvement saved about $36,000. The illustrative case shows how paying attention to intraday patterns can produce real savings, though past patterns may not continue. The treasurer reviews the data each quarter and stays ready to change the timing again.
Watch out
Common mistakes.
- Assuming the closing price tells the whole story. The price may have moved widely during the day, and the close hides that.
- Ignoring trading costs in intraday strategies. Frequent trading can erase small gains through fees and spreads, so costs must be counted on every trade.
- Treating intraday patterns as guarantees. Patterns that appeared in the past can disappear when more traders act on them.
Questions
People also ask.
What does intraday mean?
It means within one trading day, from the open to the close of the market.
What is intraday trading?
It is buying and selling the same security within the same day, with positions closed before the market closes.
Why do banks mention intraday liquidity?
Because banks need cash available throughout the day to settle payments, even if their balance looks healthy at the end of the day, and regulators ask them to monitor it.
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