Intraday trading is considered the most fiercely competitive battleground and requires a ton of risk averseness. The reward involved in intraday trading is also high, but the key to it lies in finding the right stock to trade.
Finding the right stock for intraday trading is one of the most critical questions every intraday trader faces every day. After all, proper stock selection is the key to successful trading. When it comes to stock selection, there are several factors to consider. And, some of these factors are:
- Prefer Trading in Liquid Stocks:
The most crucial intraday trading tip when selecting the right stocks to trade is liquidity. Liquid stocks have high trading volumes, allowing for more extensive buying and selling without significantly affecting the price. Less liquid stocks, in general, do not allow traders to buy and sell in larger quantities due to a lack of buyers. Some traders may argue that illiquid stocks provide more opportunities due to rapid price changes. However, data shows that volatile stocks experience greater volatility in a short period. As a result, the majority of the potential gains have dissipated while the downside risk remains. Nonetheless, the liquidity of stocks is determined by the quality of trades executed by traders.
- Avoid Volatile Stocks:
Whenever there is significant news on the bulletin or expectation of such news, we can witness a low trade volume on such days due to uncertainty. But, stocks that remain volatile even on such days are the stocks one must avoid as maximum as possible.
- Trade-in Good Correlation Stocks:
An intraday tip for selecting the right stock is to look for those with a higher correlation with major sectors and indices. This means that when the index or sector rises, the stock price increases as well. Stocks that move in response to group sentiment are dependable and frequently track the sector’s expected movement.
- Keep up with the Trend:
One of the most important intraday trading tips is to remember that following the trend is always advantageous. During a stock market bull run, traders must try to identify stocks that may emerge. On the other hand, it is prudent to seek out stocks that are likely to fall during a bear market.
- Do the Research:
One of the essential intraday tips that traders must never forget is to conduct quality research. Unfortunately, the majority of day traders avoid conducting research. It is recommended that you first identify the index and then look for sectors of interest. The next step is to compile a list of several stocks that fall into these categories. Traders should focus on identifying liquid stocks rather than sector leaders. Technical analysis, determining support and resistance levels, and studying the fundamentals of these stocks will assist traders in locating the best stocks to profit from intraday/day trading.
- Check the ownership pattern of the stocks:
You can find details about the stock’s ownership pattern available on the exchange’s websites. You can also take cues from the stock’s trading pattern. Stocks that are not widely held are more volatile and are more likely to trip circuit filters. This is because if these stocks are not widely traded, a small group of market participants will be able to corner them quickly. This is because if these stocks are not widely held, a small group of market participants will be able to corner them quickly. As an intraday trader, you should always favor stocks that are liquid and widely held. This significantly reduces your risk.
- Ensure the stocks Show Clear and Decipherable Chart Patterns:
It would be best if you relied heavily on technical charts as an intraday trader. Of course, you’ll need to practice reading charts on your own. Above all, make sure the stock has distinct chart patterns. It is impossible to trade in a stock that lacks good history or does not exhibit a clear pattern. Only with a long history can patterns be deciphered and then traded for a repeat of these patterns.
- Keep an eye on Price Sensitivity to News Flows:
Intraday traders typically trade based on two factors: chart patterns and sensitivity to news flows. You can’t trade a stock intraday if it doesn’t react to the news. Essentially, you’re looking at stocks that are highly sensitive to news. That is why your buying strategy based on expectations and selling based on announcements can work in practice.
While all the factors mentioned above play a considerable role in ensuring a good day at Intraday trading, most of them would not think about the extra cost associated with it. The main extra cost one would incur while doing intraday trading is the brokerage fee. We at Tradeplus understand this and have come up with a flat brokerage fee plan. When you opt for this plan, you don’t need to worry about paying brokerage fees for every executed trade, instead pay a flat fee starting at Rs 99* pm and carry out unlimited trades. To trade with us, open a Demat account right today!