Select stocks for Intraday trading is the practise of buying and selling a security on the same day in order to benefit. It is a market order in which you do not intend to take delivery to demat or fulfil it.
In other words, if you place an intraday order to buy shares, you don’t want to buy them but are expecting for the share price to rise so that you can sell them before the trading day ends. These orders also allow you to sell shares even if you don’t possess them first and then buy them later in the day to complete the transaction.
Because you only have a few hours before closing your position, success in intraday trading is strongly reliant on selecting the appropriate stocks. As a result, selecting the right stock is critical.
This blog will teach you about Stock Selection for Intraday Trading.
Let’s go over some ideas to assist you fine-tune your stock selection strategy.
Please keep in mind that each person has their own profile and investing goals. You can use this blog as a starting point to further build your strategies. Before selecting a stock, please examine your risk tolerance and complete the appropriate due research.
Before we get into how to choose a company for intraday trading, it’s crucial to remember that as a day trader, you don’t have the luxury of holding on to the stock, so one bad pick can lead to big losses. If you wish to buy and sell a commodity in one day, it should have specific characteristics.
In high demand (liquidity)
Price changes allow you to buy low and sell high (volatility)
Trends in the industry
Stocks on the rise
Here’s an example to help you understand:
Assume you wish to buy and sell onions for a profit. You will succeed if there is continuous trading in onions throughout the day, with prices fluctuating according to supply and demand (onions).
Furthermore, there should be sufficient facts to support the claim that the general market is doing well, that business and the onion sector are thriving. Furthermore, current trend should favour onion trade.
If these conditions are met, you will be in a strong position to benefit. The similar method is used to select intraday stocks for trading.
How to Select Right Stocks for Intraday Trading
Here are some things to think about before picking stocks for intraday trading and figuring out how to pick stocks for intraday trading the day before.
As stated in the preceding example, the liquidity of the said liquid stock should be high to ensure that you can buy and sell stocks at any time. Another essential component of purchasing high liquidity stocks is that they typically have large volumes. As a result, you can buy and sell big amounts without affecting the stock price.
When selecting highly liquid equities, make careful to consider liquidity at various price levels. While some stocks may have significant liquidity at low prices, high volumes can drop dramatically once a particular level is reached. Understanding this can assist you in purchasing them at the appropriate moment.
Day traders profit only when the price moves in the direction they expect. Traders may incur losses if the price moves contrary to expectations. If the stock price is erratic, they can place more intraday orders and profit from price fluctuations. However, buying highly volatile stocks can be detrimental if the drop/rise is too rapid.
While there are no hard and fast rules, most intraday traders prefer stocks that move between 3-5% on either side.
Markets tend to move higher or downward based on economic, political, social, and other reasons. Stocks and markets have a positive or negative association. This means that if the markets rise, stock prices will rise or fall. As a result, keeping this correlation in mind is critical when purchasing stocks for intraday trading.
Trends in the Industry
The market is separated into industries such as technology, pharmaceuticals, automobiles, oil and gas, FMCG, and banking.
As an intraday trader, you must be aware of the performance of all areas of the economy. If you discover a sector or sectors that have been consolidating for months and are about to break out, you can hunt for companies in that area to invest in.
In addition, if you identify any stocks that have achieved significant gains but you did not capitalize on the surge, you can look for peer stocks in the same sector that are in the possible-breakout zone.
The stock’s price movement is defined as the rate at which its price changes over time. This might assist you in determining the strength of an upward or negative trend in the stock’s price.
If the stock price swings in tandem with the strength of the momentum, the stock is referred to be a momentum stock. These stocks are used by day traders to benefit by going long (upward trend) or short (downward trend).
Aside from stock momentum, there are several methodologies that can assist you in conducting technical analysis of stocks to find buy or sell signals. You might look for equities that have price gaps in either way.
These gaps might be profitable for day traders. Technical analysis can also be used to identify equities that are breaching their support and resistance levels.
Your Take to Choose Stock For Day Trading
Remember that buying the appropriate stocks is critical to making money in intraday trading. While the following trading strategy can assist you in locating them, you will eventually learn how stock selection works best for you.
To make money through intraday trading, stay objective and data-driven. Avoid making emotional decisions.
Good luck with your investments!