Intraday trading, also known as day trading, implies the purchase and sale of stock on the same day before the closure of the stock market. In intraday trading, you have to square off your stock position by the end of the day, though no change in ownership of shares occurs.
However, market volatility and related trends mean that as a trader you will have to always be on the move and have a disciplined strategic approach to ensure gains or minimise losses.
One such intraday trading strategy relates to the selection of the right stocks, as you have only a certain time during intraday trading to square off your position.
How to select right Stocks for Intraday Trading?
Experts who do intraday trading are known to rely on these factors when picking trades.
Here are 6 factors basis which you can select the right stock for intraday trading.
1. Liquidity 💸
Stock liquidity is the key aspect to be considered when picking a stock for intraday trading. A liquid stock ensures that you easily buy and sell the stock during the day. Also, liquid stocks tend to trade in large volumes.
This helps you buy and sell large volumes of the stock without impacting the trend or the stock price. Undertaking intraday trading in liquid stocks thus increases your chances of faster execution of your trade.
2. Medium to High Volatile Movement 📈
Generally, traders are known to pick a stock that shows daily price movements, as it will help access opportunities for profitable trading. Volatile stock prices could bring more intraday orders and thus positive stock price movements.
However, if the stock price movements are too fluctuating, then it could even bring in counterproductive impact. So, as a thumb rule, day trading experts prefer trading in stocks that show 3% – 5% movement either way.
3. Follow Market Trends 📉
A stock market shows a downward or upward trend based on macro environmental factors. Likewise, a stock price movement has a direct correlation with market trends. That’s why stocks that move along the market trend are preferred. For example, in case of an upward market trend, select a stock giving opportunities for buy positions.
4. Keep Track of Sector 🔎
For intraday trading success, you need to keep an accurate track of short-term stock price movements. Most traders prefer to pick stocks that show an indication for following sectoral/group trends.
5. Follow Stock Momentum 📊
Stock momentum relates to the relative change in stock price over time. The stock momentum is useful as it helps identify the stock price movement trend effectively. Expert intraday traders gain by choosing momentum stocks for going long or going short, as per market trends.
6. Conduct Trading Analysis 🖥️
Now, with online stock trading platforms, you can easily conduct intraday trading analysis to identify stock and market trends. For instance, you can easily determine stock price gaps by capitalising on these gaps to earn profits.
To Sum Up
The right stock can help you reap profits in intraday trading. The above 6 factors can be useful in helping you evaluate whether a stock is good enough or not for intraday trading.
Know that it’s important to learn and understand a few things before you start trading in the stock market. For more information on Trading, read these blogs:
- Top 5 Essential Skills to Become a Successful Trader
- What is Trading Psychology – Importance and Ways to Improve
- How To Find Stocks for Intraday Trading?
- How to Pick a Good Penny Stock When Stock Trading?
- Stock Picking – How to Pick Stocks for Long-Term Investing?
Happy Trading 📈
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.