In intraday trading, the investor buys or sells shares within a day. There is no delivery, rather the position is squared off before the market closes. Its target is to earn money from the smallest price movement of the share. But the main task of intraday trading is to select the right stock. If the wrong stock is selected, then no strategy you apply will be of any use.
We will understand the stock selection process in simple steps – how to select stocks for trading, which indicator to use, what is the role of volume, how to manage your risk and which mistakes beginners should avoid.
Features of Intraday Trading
- Short-Term Trading
- High Risk & High Reward
- Focus on Technical Analysis
- Discipline and Speed Required
The role of stock selection in intraday trading.
Not every stock is suitable for intraday trading. Some may not be suitable at times, while others may be more suitable. Disadvantages of Choosing the Wrong Stock Low volatility reduces the chances of profit. Stocks with low liquidity face a problem when selling after a small loss, as they cannot find buyers.
The problem with low volume selling is that there is a large difference between the current price and the selling price. Stocks with sudden spikes should be avoided, as they can lead to heavy losses. This stock selection is the foundation of intraday trading.
10 Ways to Select Stocks for Intraday Trading
High Liquidity
This means that the stock can be bought and sold easily. If a stock is liquid, we can easily sell it, whether it makes a profit or a loss. Benefits of High Liquidity Stocks Fast Entry and Fast Exit Slippage is Reduced. High Volume Volume is the most important factor in intraday trading.
High volume
means there is greater interest in buying or selling the stock. This leads to better price movement. As a rule of thumb, volume should be at least 1.5x or 2x the average volume.
Volatility
Intraday trading is impossible without volatility. A stock’s volatility will only allow it to make significant moves, yielding significant profits.
Gap-Up or Gap-Down Stocks
Stocks with gap-up or gap-down prices are favorites among intraday traders. Because people are already interested in buying or selling these stocks, a good move can be captured with the movement.
News-Based Stocks
Many events occur in the market, such as company result announcements, mergers, government policies, and election results. By understanding these news, you can take advantage of the news and earn money. Avoid Fake News
Sector-Wise
Some sectors perform well daily. You can choose the best-performing stocks in that sector and do intraday trading. Explain: If the Bank Nifty is strong, you can buy banking stocks. If it is a sector week, you can short that stock.
Technical Analysis
Intraday trading is impossible without technical analysis. Important Indicators Moving Average RSI, MACD, & VWA,
Support & Resistance Support and resistance are the backbone of intraday trading. These are points where the market stabilizes. You can plan your entry or exit from these points.
Avoid Panny Stocks
Beginners often lose money by trading chip stocks. Because they have low liquidity and are operator-driven, they can suddenly lock up circuits. These stocks are not suitable for intraday trading.
Pre Market Analysis
It is the habit of professional traders to do analysis before the market opens. Pre Market Checklist Track Global Market Trend, SGX Nifty, News & Events, or Gap Up & Gap Down Stocks List
