When it comes to intraday trading, it is quite the opposite of regular long-term investment. In intraday trading, one must use a practical approach regarding the trades. Thus, it is not suitable for everyone, according to market experts. Many people live under the assumption that day trading can actually help them in becoming rich overnight. The result, people tend to look for the free intraday trading tips and strategies to make money in the shortest possible time. Nobody can become rich in just one good trade! Traders must learn things, adapt to new techniques, and commit themselves to it. And when it comes to intraday techniques, the very first thing come to cross our mind is,
How to choose right stocks for intraday trading?
And why is that?
It is because “if you are careless in picking the stocks for intraday trading then it is highly possible that you can wipe out your whole investment in no time”.
That’s why you have to be extra careful and smart while picking the stocks for intraday trading.
Tips to Pick Right Intraday Trading Stocks
Have you ever wondered, there are around thousands of companies at NSE and BSE and all the listed shares do qualify for day trading or not?
Well, whether you believe it or not. It is TRUE!
Say ‘YES’ to Liquid Stocks
You must know by now that in intraday trading, you’ve to square off open position toward the end of the exchanging position.
Liquid stocks are best for intraday trading. Since these stocks are extremely fluid and have huge trading volumes whereby the large quantities can be bought or sold without affecting the price. Nonetheless, the liquidity also depends upon the quality of the trades. Thus, we would recommend you to go for large-cap shares due to its high trading volumes and high liquidity instead of mid-cap and small-cap. A lot of volumes makes possible to get into and out of trade a whole lot easier.
Say ‘NO’ to Volatility Stocks
If you hadn’t noticed but some traders argued that volatile or illiquid stocks provide better and bigger opportunities than liquid stocks. But, these are just words. According to statistics, the liquid stocks show greater movements in a short period of time. Doing intraday trading in volatile stocks considered highly chaotic since these stocks have a low daily volume and show volatility even after the announcement of the big news.
Another important intraday trading tip is to opt for the stock that has a higher correlation with major sector and indices. It is because when the sector or index sees an upward movement, the stock price also increases. And we all should look for such equities which follow the sentiment of the group and often follow the expected movement of the sector.
To best describe this, the depreciation of the dollar against rupee generally affects the IT companies dependent on the US markets. A strong rupee implies lower earnings for the information technology (IT) companies and weakening rupee will result in higher export incomes for these companies.
Follow the Market Trend
It is considered smart to follow the current market trend while doing intraday trading. Means, the market always moves in waves, and it is now your job to ride those waves.
And how you can do that?
By sticking to certain guidelines in keeping up with the current market trend such as –
- It is wise to take long positions during an uptrend and short positions in a downtrend.
- In earlier, we discussed the correlation of stocks with the sectors and indices. In choosing the best stocks for intraday trading, the most traders go for equities or ETFs that have at least moderate to high correlation with the indices. Then they isolate those stocks that are comparatively weak or strong compared to the index and trade strong stocks in an uptrend and weak in a downtrend.
- Gather profits slightly above the former price high and slightly below the former price in an uptrend and downtrend respectively.
Research & Watchlist
Most traders avoid doing research and only limited to the identifying the index and then finding sectors. However, it is one of the most vital intraday trading tips which all traders must remember. However, identifying the index and finding sectors is just a step, the next thing which all traders must do while choosing stocks for intraday trading is creating a watchlist of several stocks with the sectors. In doing this, you don’t need to add sector leaders, instead identify that stocks are liquid. Next in the line is determining the support and resistance levels and do a technical analysis of these stocks which will help you in finding the right stocks for day trading.
If it doesn’t work out the way it should be then it means you need professional help. And by professional help, we mean the stock market advisory. In these days, plenty of online stock market and financial platforms are available to give guidance in investments and intraday trading. But, don’t make a fool out of yourself by thinking that any stock market platform or advisory portal can help you in choosing the right stocks for intraday trading.
What you need is an expert who has skills and knowledge to give you the proper guidance at the right time. And it can only possible when you have the right stock market research analyst by your side.
Infographics: How to Choose Stocks for Intraday Trading?
Final Thoughts: –
No doubt, picking the right stocks for intraday trading is a complicated task and it involves insolation of current market trend from external noise and then capitalizing on that trend. Liquidity, Volatility, and Correction are certain characteristics which best describe the intraday trading stocks. But, it is also important to study trendlines and apply the best entry and exit strategies.
So, if you plan to do the same then don’t forget any of it.
[Note: All information provided in this section is for educational purpose only. Views & opinions expressed in the article don’t affect any official policy or position of any other agency, organization.]