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Intraday Stock – How to Select Stocks for Intraday Trading?

Selecting the right stock is central to achieving success in equity trading. It requires continuous research, constant market monitoring and technical skill sets to select a stock to bank on. And when it’s for the purpose of intraday trading, selecting the right intraday stock is crucial too.

Importance of Stock Selection

The concept of stock selection is paramount in day trading because the trades are concluded within the same day. If you make a wrong choice regarding intraday trading stocks, your day will most definitely end in losses.

Factors To Consider:

When selecting an intraday stock, there are a couple of dominant factors that you must remember. Basis these factors, you will be able to narrow the best intraday stocks to buy:

Liquidity:

It is important to transact in stocks which are highly liquid in nature. Liquidity of stocks imply the ease with which you can buy or sell that particular stock at the prevailing market rates. It is typically seen that large-cap stocks, belonging to companies with high capitalisation, are quite liquid and have enough takers for them in the market at different price levels. Imagine that you buy a stock in the morning at price X, a few hours later the stock price rises to Price X+1 and you put in a sale trade to square off your position and earn profits. If multiple buyers appear instantaneously to buy your stock lot at price X+1, you can conclude your held stock to be highly liquid.

Volatility:

The term volatility refers to the fluctuation or varying movements in a stock’s value. Basis the quantum of price fluctuations, intraday stocks can be classified as low, medium and high volatility stocks. If you were to bank on a low-volatility stock, your losses would be limited considering there’s only so much that a stock’s price would fluctuate. But the drawback remains that your profits would not be amplified either, and would hover to be only minimal. Risk averse investors usually lean toward low-volatility intraday trading stocks. On the other hand, if you choose a highly volatile stock, you could amplify your profits if the price moves basis your speculation. However, if the market breaches your expectation and moves in the opposite direction, the losses could be significant as well. Risk-lovers inch toward high volatility stocks, and live by the “high risk, high reward” mantra. A possible solution to the volatility factor is to maintain a standard margin range between which you can bear losses and want to earn profits, and then select your intraday stock whose price is expected to fluctuate within this specific range only.

Technical Analysis:

Your ability to read market trends, basis stock price charts, is a coveted skills that you should strive to learn. Through effective technical analysis, you will be able to do educated guesswork to a stock’s price movement. Technical analysis involves strategies which could help you time the market, and place intraday trades efficiently. The key levels in technical analysis remain support and resistance levels, and if your intraday stock is breaching these levels, or even fast approaching them, you can take appropriate trading positions accordingly.

News Trends:

If you are engaged in intraday trading, you need to keep up with the news updates. The selection of your intraday trading stocks would require immense research work, and through the news, you can keep yourself apprised of updates of companies, market trends, economic developments which could have a direct impact on a stock’s value.

Conclusion:

In intraday trading, you cannot keep betting on the same stock every day. Hence, rather than relying on a bunch of stocks, it is best to keep yourself apprised of the trends in the market and select your intraday stock basis in depth research. 

Disclaimer

ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.

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