How to Choose Stocks for Intraday Trading

How to Choose Stocks for Intraday Trading

Buying and selling a security on the same day to book a return is known as intraday trading. It's similar to a market order in which you don't intend to accept or complete delivery.

Starting with how to select stocks for intraday trading is a most asked question, put differently, an intraday order for shares indicates that you intend to sell them before the end of the trading day, but you don't wish to acquire them. To complete the deal, these orders also let you acquire shares during the day and sell shares beforehand, even if you don't hold them.

Choosing the appropriate stocks is crucial to the success of intraday trading since you have a limited number of hours to square off your position

8 Rules for Selecting Stocks in Intraday Trading

Here are some practical tips for choosing stocks for intraday trading:

Choose Stocks with High Liquidity

The most significant thing to look at when choosing an intraday trading stock is liquidity. Stocks that are highly liquid are the best intraday picks. Because, with liquid stocks, you can buy and sell bigger quantities without affecting the price much.

Make sure to check liquidity at various price levels when picking liquid stocks. Also, at lower prices, you may see some stocks are highly liquid. However, after a certain price zone, the volume drops off drastically. Overall, once you understand how liquidity varies at different price levels, you'll know when to buy these stocks.

Avoid Highly Volatility Stocks

For intraday trading stocks, volatility is just as important as liquidity. High volatility means there are many movements during the day, so there are many trading opportunities. Less volatility means fewer trading opportunities.

But when it comes to entry and exit, liquidity is crucial. You shouldn't sacrifice liquidity for volatility. So, stay away from stocks that are highly volatile or thinly traded.

Moreover, low daily volumes of traded stocks or those with major news can move unpredictably. You might still see volatility after the big news is announced. Yet, these stocks aren't good for intraday trading.

Invest in stocks with good correlations

When choosing stocks for intraday trading, opt for those that have a higher correlation with major sectors and indices. So, when the index or sector increases, the stock price will also rise.

Usually, when stocks move in accordance with the sentiment of the group, they tend to follow the sector's expected movement. For example, the strengthening of the Indian Rupee against the Dollar will affect all US-based information technology companies. 

Make Sure you Follow the Trend

Whenever you're trading intraday, remember that going with the trend always pays off. When the stock market is bullish, try to spot stocks that are likely to rise. In a bear run, find stocks that will decline.

Trends can be further divided into Market trends and Sector trends:

  • Market Trends

The market moves up or down depending on economic, political, and social factors. And stock's performance is correlated with the market's performance. So if the markets rise, the stock prices can too.

  • Sector Trends

In terms of sector, you can divide the market into technology, pharmaceuticals, automobiles, oil & gas, FMCG, and banking.

You need to keep up with all sectors' performance. If you find a sector or sectors that have been growing over months and are ready to break out, then you can invest there.

Additionally, if you have identified stocks that have made substantial gains, but you missed out on taking advantage of the rise, you can look at peers in the same sector.

Conduct Technical Analysis

To figure out when to buy and sell stocks, use a variety of technical analysis strategies. If stock prices show gaps in one direction or the other, analyse them. In intraday trading, these gaps present earning opportunities. 

Momentum of Stocks

An essential aspect of intraday trading is evaluating stock momentum. Seek for equities that have substantial trading volumes and robust price changes. Find equities that have daily patterns that are consistently rising or falling. Stock momentum may be measured using technical indicators such as Moving Averages, MACD, and Relative Strength Index (RSI). Pay attention to equities that exhibit consistent momentum and volatility, as they might present chances for successful short-term trading. 

Trade Stocks that are Newsworthy

Stocks that are prone to being impacted by news events are known as news-sensitive stocks. Trading opportunities may arise from this, but caution is advised because these equities may be more volatile.

Pick After Doing Quality Research

The most important intraday trading stocks tip is to do quality research. The first thing you should do is find the index and then find sectors you're interested in. Next, make a list of several stocks that belong to these sectors.

You don't have to include sector leaders, but should look for liquid stocks. Also, by studying fundamentals and technical analysis, you can find the right intraday trading stocks to profit by determining support and resistance levels.

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Table of Content

  1. 8 Rules for Selecting Stocks in Intraday Trading
  2. The Best Type of Stocks for Intraday Trading

The Best Type of Stocks for Intraday Trading

Now let's look at some types of stocks that are good for intraday trading. Here are they:

  • Trend Stocks: There are trend stocks, which can be analysed and predicted based on distinct trends. You are good to trade intraday once you grasp this trend.
  • Upper breakout stocks: The upper breakout is also good intraday trading stocks. Invest after they decisively break above the resistance level and keep your stop loss below the level.

Check out the breakout stocks here.

  • Lower breakdowns: You can also choose intraday trading stocks with lower breakdowns. Sell them when they break below the support and keep your stop loss above it.
  • Herd Stocks: Investing in herd stocks is an easy way to make money intraday. Take the chemicals market, for example, if it's doing well, you can pick up any liquid chemical intraday trading stock and multiply your profits.
  • Momentum: Another best way is to trade intraday on momentum. The stocks that are making new highs or 52-week highs and have momentum are good intraday picks.

There are many factors to consider when choosing the right intraday trading stocks. Firstly, choose stocks with high liquidity in order to make larger trades without significant price impact.

For better trading opportunities, avoid highly volatile stocks. Also, take advantage of market trends by investing in stocks that have good correlations with major sectors and indices.

When picking intraday trading stocks, follow the overall trend, whether it's bullish or bearish. Analyse technical data to find gaps, support, and resistance. Last but not least, do quality research to find fundamentally strong stocks.

Intraday trading stocks FAQs

Here's how to pick intraday trading stocks in 1 minute:

  • Choose high-demand (liquidity) stock
  • Take advantage of price fluctuations (volatility) to buy low and sell high
  • Follow market and sector trends.
  • Analyze technical aspects.

Stock market analysts recommend intraday trading between 10.15 a.m. and 2.30 p.m. It's because morning stock volatility is down. Due to this, it's an ideal time to trade intraday.

To understand the intraday trend, use multiple trading indicators and charts. Also, you will need to conduct detailed research into the market if you are a new trader trying to develop a sound trading strategy.

No. All stocks aren't suitable for intraday trading. For a stock to be suitable for day trading, it needs to meet certain criteria. Look for: High liquidity: This means that the stock is easy to buy and sell.

On the exchange's websites, you can check out the ownership pattern for the stock. It's also a good idea to look at the stock's trading pattern. Normally, unpopular stocks are more volatile and also hit circuit filters more frequently.