Intraday trading is entirely different from long-term investing. This is why the approach to selecting stocks for day trading is also different. Intraday trading involves buying and selling stocks on the same day. The traders should select high-volatility stocks that offer the opportunity to profit from several trades made throughout the day. Once you have a thorough understanding of how intraday trading works, you can begin selecting the stocks. Here are some strategies for choosing the ideal stocks.
1. Find Liquid Stocks
The majority of novice traders think that they need a very small amount of money for intraday trading. They aim for stocks with low prices. However, cheap stocks are extremely risky and have little liquidity. This frequently results in significant losses for the traders. Stocks that are traded in large quantities without significantly affecting their price are considered liquid stocks. Traders may trade such stocks in large quantities and potentially benefit from even a small change in the stock price.
A stock’s liquidity is crucial for the following two reasons:
- A liquid stock may be purchased or sold without affecting the current trend. It may be an upward or downward trend.
- Trades involving liquid stocks can be completed quickly. For an intraday trader, the exact moment of trade execution is critical. A transaction execution delay may cost a lot of money.
2. Look for Volatile Stocks
Choosing stocks with strong price movements becomes crucial when it comes to obtaining profits from intraday trading. However, strong stock volatility can occasionally make analysis challenging. This can result in trading losses. Therefore, it is usually advised to choose stocks with a volatility of about 3%. You may use additional intraday trading indicators and volatility to choose intraday stocks for today.
3. Trade Correlated Stocks
Certain stocks are directly affected by changes in the index or the sector. These stocks will react similarly if the index is setting new highs or lows. Thus, one may search for stocks and sectors that reflect the index’s rise. Then, the trader can take long positions to execute their trades if the index starts to rise.
4. Define the Entry or Exit Price
Traders have difficulties not only in entering the correct position but also in exiting the one they are in. Greed, a lack of time for research, and other variables might occasionally cause an individual to make poor trading decisions. It is crucial to enter into trades as per the prevailing trend. This makes it a bit easier.
Thus, in a bull market, you may take a long position. Conversely, in a bearish market, you may opt for a short position. You may observe a trend line to properly understand the state of the market right and use it to identify the trend.
5. Pick Strong Stocks in Uptrends and Weak Stocks in Downtrends
By classifying the stocks as strong and weak, you may further specify your entry or exit strategy.
Stocks that closely track the market’s trajectory are considered strong stocks. For instance, a 1% increase in the market will result in a 2% or 3% increase in the strong stock. In contrast, weak stocks often follow the trend of the market and rise or fall slowly.
6. Wait for a Pullback
Traders may attempt to invest during rising prices. However, the market instability might lead to a negative swing. As a result, a trader need not be alarmed in such a circumstance. During day trading, it is advisable to take a long position and wait for a downturn. It may occur at any time. You must observe price fluctuations. Trendlines are a useful tool for predicting the start and finish of a price wave. To choose stocks for intraday trading you may utilise a trendline to enter the upcoming price wave early and in the direction of the trend.
If you’re thinking about going long, purchase when the price approaches the trend line. The rising bottoms (higher highs) of the chart are joined in a straight line to form an uptrend line.
Conclusion
Skill, training and experience are essential for intraday traders to select suitable stocks consistently. Technical analysis is very important when it comes to intraday trading since selecting the appropriate stocks is crucial to getting profits. Make sure your selections are based on facts and avoid emotional bias. So, you must trade on a trading account that offers comprehensive market data in real-time. You may go for trusted platforms like BlinkX. It gives access to a wide range of indicators, trading tools and instant market updates. You can stay updated all the time. This will help you to adjust your trading strategy as per existing market conditions.
