One of the most important lessons a day trader can learn is to pay attention to the intraday price highs and lows of the instrument they are trading. Far too many new traders are only focused on the one indicator, trading system or trading strategy that they have learned when making their trades. By not paying attention to intraday price highs and lows, a trader risks missing the forest for the trees.
For example, many of the day trading methodologies sold to the public, i.e., the beginning trader that does not have much experience, are strategies they involve scalping. Scalping is a strategy where the trader makes multiple trades in a single market per day with the hope of making small and consistent profits within a short period of time. The idea is that this is supposedly less risky than position trading.
Most scalping strategies attempt to buy a security at a low price and sell a security at a high price. Many timing indicators attempt to predict when a security makes a high price and a low price. Buying low and selling high seems like a logical way to trade as well.
Unfortunately, these timing indicators are wrong when a security starts trending in one direction. In other words, it will make a series of successive highs in price with little pull back, or successive new lows in price without any modest price rises. As a result, the uninformed trader who is blindly following a strategy that sells at high prices and buys at low prices will get run over by the trending move. They will sell a high price, only to get stopped out at a higher price.
A good rule of thumb for most markets, including individual stocks, commodities, stock index futures and exchange traded funds is to monitor the first thirty minutes of trading. If the security breaks above the high price of the first thirty minutes, or below the low price of the first thirty minutes, sometime within an hour or two after the market opens, then it is likely that the security will trade in that direction for the rest of the day. On the other hand, if there is no significant breakout and the market trades within a trading range for a couple hours, then it is likely that trading will be choppy and range bound for the day.
In fact, many successful hedge fund managers and trading professionals will employ strategies that seek to exploit these breakouts. These are called opening range breakout strategies, and mechanical trading systems are often built around this basic concept.
With all this in mind it is a good idea to monitor intraday price highs and lows for any instrument you are trading as a day trader. Also, if you trade individual stocks, or any stock market related instrument, it's a good idea to develop some tape reading skills as well. Monitoring the intraday price highs and lows of the instrument you are trading and other related instruments will help you identify more profitable situations and help put the odds of success in your favor.