One popular type of market speculation involves traders opening and closing all deals within one day. This is known as intraday trading. Intraday traders are those that enter and leave the market repeatedly over a single day. It’s crucial to understand how to choose stocks for intraday trading if you want to be successful as a day trader. People frequently fail to make money because they choose the wrong stocks to trade during the day.
Six factors can be used to choose the best intraday stocks. What they are? See that in this blog
Factors to Pick Stocks for Intraday Trading
Here are some factors to think about while choosing stocks for intraday and how to choose stocks for intraday one day in advance.
Liquidity
As seen in the aforementioned example, a stock’s liquidity must be strong in order for you to be able to purchase and sell it at any time. The fact that high liquidity equities typically trade in huge quantities is another crucial consideration when purchasing them. As a result, you can purchase and sell in huge amounts without the stock price being affected.
Consider the liquidity at various price levels while selecting highly liquid equities. Even while certain stocks can trade at cheap prices with significant liquidity, volumes might quickly go off beyond a certain point. You can purchase them at the appropriate moment by being aware of this.
High to Medium Volatility
Only when the price changes according to their expectations can day traders gain. If the price changes contrary to expectations, traders could occasionally register losses. They might make more intraday orders and take advantage of positive price swings if the stock price is erratic. But keep in mind that investing in highly volatile companies might backfire if the gain or fall is too sharp.
Although there is no set guideline, the majority of intraday traders like equities that move an average of 3-5% each way.
Industry Trends
Markets often go upward or downward based on economic, political, social, and other variables. Stocks and markets can be positively or negatively correlated. This implies that stock values can increase or decrease depending on how well the markets perform. Therefore, it’s crucial to keep this correlation in mind while purchasing stocks for intraday trading.
Sector Trends
The market can be classified into a number of categories, including banking, FMCG, oil & gas, pharmaceuticals, automotive, and technology.
It is crucial for intraday traders to stay up to date on the health of the economy as a whole. You might hunt for firms in the identified sector(s) to invest in if you notice any that have been consolidating for several months and are about to break out.
Additionally, you can look at peer stocks from the same sector that are in the potential breakout area if you see any stocks that have had significant increases, but you were unable to profit from the surge.
Momentum of Stocks
The momentum of a stock is the rate of change in a stock’s price over time. You can use this to assess the strength of an upward or negative trend in the stock price.
A stock is referred to as a momentum stock if its price moves strongly in line with the momentum. Day traders utilize these stocks to go long (upward trend) or short (downward trend) and make money.
Technical Assessment
In addition to stock momentum, there are a number of techniques you can use to conduct a technical analysis of stocks and find buy or sell signals. You can examine equities that have price gaps in either direction.
Day traders can be able to profit from these gaps. Finding equities that are breaching their support and resistance levels can also be done through technical analysis.
Conclusion
The greatest shares for intraday trading are always selected by successful intraday traders since they have honed their senses and sight. Making a profit in intraday trading requires picking the appropriate stocks, thus technical analysis must be your ally. You will eventually learn how to choose the greatest intraday stocks. Make sure your judgements are supported by evidence and free of emotional bias.