12 Most Accurate Intraday Trading Indicator for Option Trading in 2023

Technical indicators are technical tools that assist in studying the movement in the stock prices and whether the current trend will persist or reverse. It helps the traders to make decisions about the entry and exit of a particular stock. Moreover, with literally thousands of different options, traders must choose the indicators that inculcate the best outcomes for them and acquaint themselves with their working process.

Similarly, when the %k line cuts above the %d line in an oversold region and both the lines exit the oversold region, a crude buy signal is generated, especially if confirmed by price action. Being one of the best indicators, the Stochastic indicator measures the ongoing price relative to the price range over a number of periods. It focuses on the most recent closing prices as a percentage of the price range. It oscillates from values where above 70 is considered an overbought zone and under 30 is considered the oversold zone.

Types of Sentiment Indicators used in the Derivatives Market

The left-hand side prices in blue are the buyers with the call premium prices indicated and the right hand are the sellers with the indicative call premium prices. On the left-hand top, you have the search option, where you can type the option name. For example, you can type BHEL JUL 45 for the stock option of BHEL shares. Next, you need to create a watchlist where you can keep track of the option that you have selected for day trading. Find the most liquid options that you want to trade using the NSE India or MoneyControl website as mentioned earlier.

However, what is noteworthy here is that the breakout in the OBC line occurred a few days before the breakout in price . Usually, but not always, volume leads the price and gives an idea where the price might head. The earlier breakout in the OBC line hinted that the price will also follow the volume breakout soon, and that is what happened a few days later. Such patterns are applicable not only to upside breakouts, but also to downside breaks.

How do I utilize the Supertrend indicator for intraday trading?

For example, “X” may increase more or less than “Y” in a rising market, or “X” may fall more or less as compared to “Y” in a falling market. The Relative Strength Index is another popular momentum indicator that acts as a metric for price changes and the speed at which they change for a particular period. The Put-Call Bias Indicator provides a visual representation of the relative bias towards put options using CBOE data. This script calculates the Put/All ratio, displaying the difference as compared to an even 50% ratio as columns on the chart.

You have charting tools and indicators to help you do technical analysis and trade as per your strategies. The price movement in a range-bound market is not strong in any direction. The prices move close to the old highs and then drop to prior lows. The range-bound movement trend breaks when a significant move has ended the existing support and resistance level. At this time, the bears and the bulls try to dominate the direction of the next movement. An easy way to learn everything about stocks, investments, and trading.

The total loss related to this approach is restricted to the net premium paid, and the maximum profit is infinite. Let’s look at some of the best option trading strategies that a novice trader may employ using calls or puts to reduce risk. Pivot can be helpful but is quite subjective depending on the formula one uses to calculate it. For instance, some use plain pivots that just involve OHLC data and then calculate resistances and supports based on that. A few other combine OHLC with volatility tools such as ATR so that the supports and resistances take volatility into consideration, and so on.

#1. Keep Target Price in Mind

1st – Regarding Strike Price – There is no restriction on buying/selling of securities having any strike price. The platform is dedicated to options trading and helps in quickly creating strategies just by entering your views on the option you want to trade. When the price moves outside of the bands, then the option is ready for a potential reversal. So, if the breakout is above the top band, you may initiate a long put or a short call position.

Of course, these default values can be adjusted, but in our discussion, we will stick to the default values. The upper band is plotted 2 standard deviations above the moving average, while the lower band is plotted 2 standard deviations below the moving average. Notice in the above chart the behaviour of the stochastics indicator in a trending market.

Notice that as the intensity of the downtrend slowed down , price failed to touch the lower band and started moving above the middle band while even touching the upper band. Such a development is a warning that the downtrend could be nearing an end. As already stated, when the bands flatten out and shrink markedly, a pickup in volatility can be expected in either direction. Notice that near the end of the consolidation phase, price moved higher and touched the upper band.

Supertrend closely resembles MACD and Moving Averages indicators in its functioning. It makes use of the placement of prices to know the current market trends. MACD is an oscillator, that is, its appearance on the chart can be visualised as two lines oscillating without being curtailed by any boundaries. It is of main use for trading trends and is sparsely used for overbought and oversold conditions. We have researched over 100 accurate intraday indicators and shortlisted only the best indicator for bank nifty intraday trading that will surely increase your profits. Overlays have multiple applications and are used by traders and stockbrokers.

This indicator delivers a total of an asset’s trading volume and helps define if this volume flows in or out of stock. Since the recent prices carry more importance than the price movement, more weightage should be assigned to them. The default period is 14, yet the trader can alter it according to his trading setup. Bullish divergence is formed when OBV forms a higher high and higher low, while price forms a lower low. On the other hand, Bearish divergence is formed when OBV forms lower high and lower low whereas price forms higher high as shown in the above chart.

Support level refers to a price level from which an asset does not fall below over a period. Resistance level refers to the price at which an asset meets pressure while rising. It is short-lived and caused by an increasing number of sellers desiring to sell the security at that price. The upside potential of trading in a range-bound market may not be exciting for a trader looking to ride on a trend. But the relative predictability of these highs and lows indicates the opportunity of earning money, though in smaller quantities. The altering percentages of the stock price trends represent a specific stock’s relative supply or demand.

• The key phenomena to look at are divergences or failure swings to trade the market.
• Trading options are not a suitable place for beginners to start.
• Moving averages indicator is a simple to understand yet comprehensive trend for studying the stock market.
• When the CCI reaches an extreme level (either above 100 or below -100), it is considered to be in overbought/oversold territory.
• During an uptrend, it is common for the price to close in the upper half of the range, causing stochastics to move between 50 and 100.

Later in the chart, also notice the breakdown from the triangle was again accompanied by the ADX line rising above 25 and the -DMI surging above the +DMI. During an uptrend, it is common for the price to close in the upper half of the range, causing stochastics to move between 50 and 100. As the uptrend gathers steam, the price tends to close near the upper extremes of the high-low range, causing stochastics to move closer towards 100. However, the turning point arrives when the uptrend begins to lose momentum. As the intensity of the uptrend begins to fade, there is a tendency for the price to retreat from the upper extremes, causing stochastics to retreat too. Stochastics turns before a turn in the price itself and as such, before the uptrend reverses, stochastics will already warn the chartist about the impending weakening of bullish momentum.

The information mentioned herein above is only for consumption by the client and such material should not be redistributed. In statistics, correlation is the version of covariance measuring if the parameters are positively or conversely related. The upper one means the highest security price, whereas the lower one means the lowest security price over a tenure. Each level shows a percentage showing us how much of a previous move the price has already been retraced long back. Fibonacci retracement levels are horizontal lines defining support and resistance levels and are based upon Fibonacci numbers. This indicator is identical to the on-balance volume indicator, which scales cumulative volume.

As discussed above, these technical indicators can be used for intraday trading but one should also remember that they should not trade based on only one intraday technical indicator. One should set up their intraday trading strategy and use a combination of these indicators. For example, one can combine a momentum indicator with volatility and volume indicators.

MACD Indicator is used by traders to evaluate the market trend within a time interval. Traders use this to understand the relationship between trends and the momentum of the stock prices. You should note that common gaps are not placed in the patterns of prices.

Similarly, during a downtrend, it is common for indicators to frequently venture into the oversold zone but barely reach the overbought zone. When the downtrend is nearing an end, technical indicators will warn about changing market dynamics. The supertrend indicator can be used to identify both short-term and long-term trends in a security.

It can help them best indicator for option trading trend reversals, support and resistance levels, and divergence patterns. When used correctly, volume can give traders an edge over other traders in the market. However, volume should not be relied on 100% and should be used in conjunction with other technical analysis tools. Another successful intraday trading strategy in India is the moving average crossover strategy. When the prices of stocks or any other financial instrument move above/below the moving average, it serves as an indication that there is a change in momentum. Every indicator has been designed in a way to identify the underlying trends.

• Hence offering an appropriate range for intraday traders by showing oversold and overbought levels.
• Traders can calculate the correlation coefficient to find the relationship between any two parameters, whether market indicators or stock which can be traced numerically.
• TradingView offers a powerful platform that allows you to seamlessly trade derivative instruments such as futures directly from charts.
• Read this article to know more about the types of indicators and the significance of each indicator.

If the share price has reached a historical high, and the level of the oscillator is not the same as the price, it is indicative of slowly decreasing demand. Mentioned below are some of the vital indicators used by professional traders- Moving Average, Stochastic Oscillator, Exponential Moving Average, and Relative Strength Index. On the contrary, if the Accumulation/distribution line is going down, it shows the downtrend with negative volume. CCI is a useful tool for traders as it not only tells them whether they should buy or sell any stock, but also if they should refrain from a trade altogether. Commodity Channel Index oscillator makes use of a momentum basis to judge whether a stock is approaching the condition of being overbought or oversold.