Rules for Picking Stocks When Intraday Trading
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Equity | August 09
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Rules for Picking Stocks When Intraday Trading

Introduction

There are hundreds of stocks to select from, and day traders may invest in almost any of them. So, for a regular trader, the first move is to decide what to trade. After identifying a trading opportunity (one stock, many stocks, or exchange-traded funds ETFs, for example), the next stage is to figure out how to benefit from it.

Points to remember:- 

  • Intraday traders use a number of ways to profit from price movements in a particular asset.

  • Day traders should look for equities with plenty of liquidity, moderate to high volatility, and a large number of followers. You can start with your free trading account.

  • Isolating the present market trend from any surrounding noise and then capitalizing on that trend is the key to finding the appropriate stocks for intraday trading.

What Stocks Should You Buy For Day Trading?

Liquidity

The volume of liquid stocks is usually rather high. This enables the acquisition and sale of bigger volumes without having a major influence on the pricing. Because intraday trading techniques rely on speed and precision timing, a high number of transactions makes entering and exiting trades simpler. Depth is also important since it indicates how much liquidity a stock has at different price levels above and below the current market bid and offer. 

Volatility ranges from medium to high

In order to make money, day traders need price movement. Day traders might select equities that move a lot, either in terms of dollars or percentages. Often, the results of these two filters will differ. Stocks that move 3% or more each day have big intraday swings that are easy to trade. Stocks that move more than $1.50 a day are in the same boat.

Followers in a Group

While some traders specialize in contrarian trades, the majority of traders seek stocks that move in lockstep with their sector and index group. This means that if the index or sector rises, so does the price of each individual company. If a trader wants to trade the strongest or weakest stocks every day, this is critical. If a trader chooses to trade the same stock every day, it is best to concentrate on that stock alone; there is no need to worry about correlations.

Exit and Entry Strategies

You may have chosen the world''s sweetest stock, but benefiting from it will need you to follow particular techniques. While there are various intraday techniques, the most important thing is to follow a set of rules. You''ll have a better chance of succeeding if you seek specific intraday trading indications. Meanwhile, you can go for the Demat trading account for the time being.

Only trade with today''s intraday trend

The market moves in waves, and it is the responsibility of the trader to ride those waves. Concentrate on taking long trades during an upswing. Focus on taking short trades during a downturn. Intraday trends do not last forever, although they might last for one or two transactions (or even more) before reversing. Begin trading with the new trend when the main trend switches.

To examine the different degrees of each trend, more trendlines may be established while trading in real-time. Adding multiple trendlines might help you get more indications and have a better understanding of how the market is evolving.

In an uptrend, trade strong stocks, and in a downtrend, trade weak stocks

Most traders will find it useful to look at equities or ETFs that have at least a moderate to high correlation with the S& P 500 or NASDAQ indexes when choosing the best stocks for intraday trading. Then, in comparison to the index, separate the stocks that are particularly weak or strong. This is a trading opportunity for day traders, because a strong stock may rise 2% when the index rises 1%. The stock that moves the most offers greater opportunities.

Traders should try to purchase equities that are rising up more aggressively than the indices and market futures when the indexes and market futures are heading higher. A strong stock will not pull back as far as the futures do (or may not even pull back at all). In an upswing, these are the stocks to trade since they tend to lead the market higher, providing more profit potential.

When the indexes and market futures are down, it might be advantageous to short-sell equities that decline more than the market. When the futures go higher inside the downtrend, a poor stock will not move up as much (or will not move up at all) (or will not move up at all). When the market is dropping, weak stocks provide more profit possibilities. Stocks and ETFs that outperform the market can change on a daily basis, though certain sectors can be relatively strong or weak for weeks at a time.

Wait for the pullback with patience

Trendlines are just a graphic representation of where price waves will start and terminate. As a result, when choosing stocks for intraday trading, traders can utilize a trendline to enter the following price wave in the trend''s direction early.

When starting a long position, but only after the price has moved down to the trendline and then back up again. A price low and subsequently a higher price low are required to create an upward trendline. The line that connects these two locations is then drawn and stretched to the right. The price bounces off the trendline a few times before falling through it for the third time in the chart below.

In a downturn, short selling would be comparable. Wait until the price reaches the downward-sloping trendline before buying. Then, as the stock begins to fall, you utilize this as a trading signal to enter the market.

These two long trades offer a low-risk entrance by being patient. The buy is done at the stop-loss level, which is a few pennies below the trendline or the most recent price lows established right before entering. As previously said, trends do not last forever, thus there will be lost transactions. But, even with the losses, what counts is that a profit is earned overall.

Make Consistent Profits

Day traders have a limited amount of time to make money, therefore they must spend as little time as possible in losing transactions or deals that are heading in the wrong direction. You can also trade in a free demat & trading account for extra profits.

  • Take gains in an uptrend or long position at or just above the previous price high in the recent trend.

  • Take gains in a downtrend or short position at or just below the last price bottom in the recent trend.

Don''t play while the market is down

Switch to a range-bound trading strategy if the price is moving in a range (not trending). Our sketched lines shall be level, not angled, during a range. However, the following general principles apply: When the price goes to the lower horizontal region, support, and then begins to move higher, it is a good time to buy. When the price crosses the top horizontal line, resistance, and begins to go down again, it is a short sell.

When buying, aim to sell around the top of the range, rather than right at the top. When shorting, aim to leave at the lower half of the range, rather than at the very bottom. The possible benefit should outweigh the danger. Before entering on a buy signal, place a stop-loss just below the most recent low, or just above the most recent high before entering on a short signal.

Conclusion 

Successful intraday traders have trained their eyes and instincts to choose the finest intraday stocks every time. To earn money in intraday trading, you must choose the proper stocks; as a result, you must make a technical analysis of your ally. With practice, you will learn how to pick the finest intraday stocks. As they say, ‘Shunya se bani baat’ so make sure you''re making data-driven judgments and avoiding emotional bias.
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