Stock selection is a crucial step for intraday stocks trading. There are many ways to select stocks for intraday trading. Normally, traders are unable to gain good returns because of not selecting the proper intraday stocks for their portfolio.
As an intraday trader, you can have a good profit, per hour, if you trade for 2 to 4 hours. For example, you may get Rs 3000 trading for 2 hours, and Rs 3900 trading for 4 hours. You can earn more money by trading all day, but your income per hour is likely to be less. Here’s an extensive guide on how to select stocks for intraday trading
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Trade Only in Liquid Stocks
Market liquidity is the most crucial factor when selecting intraday stocks. Usually, liquid shares are mostly traded during the day. So traders can easily buy and sell the stocks fast without having a significant change in the stock price.
Lesser liquid stocks do not allow traders to buy and sell higher volumes due to the shortage of too many buyers. The stocks that you follow should perform well. As intraday stocks trading depends on exact timing, avoiding any delay in performance is influential to success.
One of the primary rules of liquidity is to observe daily volumes as a proportion of market capitalization.
Liquidity = Average daily volumes / Market capitalization
Chose medium to high volatility Stocks
To take long moves in intraday stocks, you have to assure that the stock you pick should be medium to high in volatility. If the trading direction is correct, also you cannot get good returns if you are trading in low volatile stocks.
Intraday trading profit depends on regular share price movements. If you prefer trading shares that dont have volatile movements , you will not get a chance to trade them profitably. You can separate the stocks according to the chart.
You can use Indicator called ATR to measure volatility . You can arrange the data from high to low volatility and pick the stocks having stocks that perform 3-4% higher per day can have a large move to trade. It is always better to pick the stocks from Nifty 50 because you can find high liquid stocks.
Have, at least, a handful of stocks with high correlation
Highly correlated stocks are the stock that moves one another. Usually, when you build a portfolio, You should concentrate on stocks that have a low correlation because of that you can get diversification benefits. But in intraday trading, you have to concentrate on high correlation because it enables you can reproduce a trade for multiple stocks. You should always see short tr=erm correlation in intraday trading
Follow the Market Trend before deciding the Right Stock
Select the stocks that have a high correlation with sectors and indices. This indicates when the sector or the index recognizes an upward movement, the share price also moves upwards. By using the below steps traders can select stocks for intraday trading
- Analyze the current market price of NSE and BSE
- If the current market price of NSE is more than BSEShort term trend is upwards then the share price will move increase until NSE is higher then BSE
- f the current market price of NSE is less than BSE Short term trend is downward then the share price decreases until NSE is lower than BSE
- If the current market price of NSE is equal to BSE short term trend is neutral, then the share price assumed to move up and down.
Pick the Stock you are most confident in after Research
Quality research is one of the most important advice before selecting stocks for intraday trading. But, many traders avoid doing their research. You need to study and recognize liquid stocks after research.
Further, it is helpful to conduct technical as well as fundamental analysis of the stocks that you are planning to trade. These analyses will assist traders in finding the best stocks for trading. In addition, fixing the support and resistance levels can be helpful for intraday trading. Intraday trading is very risky but Earning profits within small price variations in trading hours is a tough task. Selecting the stocks after extensive research can help you to get good returns
The tips mentioned above will assist you in selecting the stocks for intraday trading. For more information on intraday trading, visit intradayscreener.com, you can find the screeners to select the stocks.
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