While maximum investors purchase shares from a long-term perspective, many focus on short-term investing by intraday trading to generate quick profits. Selecting the correct stocks for the correct kind of trading is a crucial step towards wealth generation. Before understanding how to find stocks for intraday trading lets go through the basics first, what is intraday trading and advantages / disadvantages of intraday trading.
What is Intraday Trading?
Buying and selling different shares on the same day is called intraday trading, also known as day trading. Since the price of shares keeps going up and down throughout the day, traders profit from buying these shares at a low cost and selling at a higher cost on the same day. There is no delivery of securities in intraday trading.
Advantages & Disadvantages of Intraday Trading
|Advantages of Intraday Trading
|Disadvantages of Intraday Trading
|Traders need limited capital to trade as payments are made in small margins.
|There are no long-term capital investments.
|Traders can leverage capital to earn maximum profits.
|Leverage in intraday trading can lead to losses as well.
|Traders can make good profits in few intraday trades with right exit positions.
|In a hurry to exit a position traders might lose on long-term opportunity.
|Intraday trading eliminates the uncertainty and overnight risks of the stocks.
|Traders need to give constant attention throughout the open market window for
You can also read – Value Investing vs Intraday Trading – The Exact Difference
How To Find Stocks for Intraday Trading?
1. Find liquid stocks
Ask yourself, 🤔 is this stock trading in high volumes?
You can recognise such stocks by looking at the total number of shares traded in a particular time frame, i.e., the volume of shares bought and sold. This will let you buy and sell large units without disrupting the ongoing trend. As trades happen within the same day, quick execution must avoid losses. Liquid stocks provide ease to the traders in this matter.
2. Shortlist your stocks
There are around 1800 listed companies on NSE and about 6000 on BSE. A trader cannot monitor all the stocks😵. After thorough research, it is essential to analyse and shortlist certain stocks to do successful intraday trading. You can find the right stocks for intraday trading basis charts and technical indicators like:
- Displaced Moving Average (DMA)
- Relative Strength Index (RSI)
- Moving Average Convergence Divergence Trading (MACD)
- Stochastic Oscillator
- Bollinger Bands
- Fibonacci Retracement
- Ichimoku Cloud
3. Filter stocks based on correlation with the market
🧐 Do you keep track of stocks that are going beyond your set resistance and support levels? If the stock is showing a rapid increase daily, it is a strong stock, whereas if it is showing considerable movement daily, it is called a weak stock. Maintaining resistance and support levels will help you identify the pattern of such stocks and make high profits when the chance arises. However, when there is a fall in the market, traders prefer weak stocks to lower their risks.
4. Pick stocks with high rupee value movement
Ask yourself, 🤔 if the stock you are picking shows daily price movements?
As you will buy and sell on the same day, a good price movement is necessary to make profits. You can pick the stocks based on movements either in their rupee value or percentage terms. Stocks that move up at least 3% or stocks that move by at least Rs 150 are considered good.
5. Choose stocks that follow trends and market movements
As a trader, looking to find the right stocks for intraday trading also requires you to keep up with trends and follow the market movements of your shortlisted stocks. For example, suppose a stock is trending in the market for a tremendous increase in its share price and good trading volumes. In that case, you need to analyse if it would be a beneficial opportunity to trade. Similarly, you can keep track of your shortlisted stocks’ positive or negative movements to see their group trend and trade accordingly.
Intraday trading is for traders who can devote a significant amount of time researching and following particular stocks and market movements. The strategies mentioned above give you a broad view to help you find right stocks for intraday trading. Don’t forget to consider your risk appetite and financial goals as you venture into the world of online trading.
As you take a step ahead, here are some more interesting topics on stock trading that you must read:
- What is Trading Psychology – Importance and Ways to Improve
- How to Trade Effectively by Trading Directly from Charts?
- What is Algo-Trading and How Useful Is It for Day Traders?
- What is BTST Trading – Meaning, Advantages & Shortcomings
- Trade 2 Trade Stocks – What are T2T Stocks?
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.