How To Pick The Right Stocks For Intraday Trading?
Intraday trading is quite common these days, and many people are exclusively opting for intraday trading only. This is not as speculative as many people would want you to believe. There are a lot of things to know and understand before you can start day trading confidently.
One of the vital steps is choosing the right stock to trade. There are thousands of equities that you can choose to trade.
However, most are not suited for intraday every day.
It is a trained mind that excels in selecting the right stocks for any given day. You may wonder, should I buy amazon stock? You may want to trade in the equity on a given day but not on another. So here are the ways that will help you to choose the right stocks for intraday trading.
- The first and foremost thing that you need to understand is that intraday trading is a game of volume. High-volume equities are suited for intraday. By high-volume, we mean that many people are buying and selling the stock every day. With such equities, you will not be left wanting to buy or sell when you need to. There will be many people in the market who will help you in completing the transaction. If you can make the transactions at the moment you want, you will be able to either make handsome profits or cut your losses depending on the situation.
- The next thing to look out for when selecting your stocks for intraday trading is medium to high volatility. The price volatility at a daily level is essential because it is the difference in the stock prices at different times of the day that will help you make money. As a rule of thumb, you should consider those stocks which show a consistent 3% or more price changes frequently. These equities are best suited for intraday trading.
- The third thing is a bit tricky and depends on how you trade. You can either trade some particular stocks and not look at what other equities are doing. If this is the case, then choose equities that have good volume and volatility. On the other hand, if you keep changing stocks to trade periodically, it is wise to select stocks that correlate with their sector or index group. These stocks generally move up when their sector or index group grows in value and vice-versa.
- The selection of stock also depends a lot on your entry and exit strategies. Trading is a long-term exercise that you need to undertake regularly to develop your game plan. These strategies will help you maximize your gains and cut your losses. There can be many trading signals that you could wish to incorporate into your game plan.
- When choosing the equity to trade, you will need to follow a simple rule, trade with the trend. If you look at the stock prices, you will realize that they move up and down in a pattern at a given time. The up-trend continues for a period. Then, some market signals indicate the end of the trend, and a downtrend begins. Upon identifying the current pattern, you can choose the stocks that should do best in the market on that given day. You should buy those equities that are moving up and sell those that are going down. One vital thing to keep in mind is that the market trend may be different based on the time frame you choose. So, for intraday trading, you need to see the intraday trend.
- While choosing the stock, you need to keep one thing in mind, no equity can give you consistent profits. Also, no equity will be able to provide you with quick returns regularly. So, you will need to be patient. The strategy you make for any trade must also have defined stop-loss levels. If the prices go against your expected move, you should cut your losses at these levels. Taking profits every now and then is also vital. One sudden price movement in the opposite direction can not only wipe out your gains but also land you in huge losses.
- The final thing to do is not to trade when the market starts moving sideways. These are the times when you will make much more losses than profits.
When you combine the above tips for choosing your stocks for intraday trading and select the right strategy, you will achieve more and more success with time.