How to Select Intraday Trading Stocks in India?
Intraday trading refers to the buying and selling of stocks on the same day. It is done using online trading platforms.
Intraday trading is considered riskier than investing in the regular stock market. It is important, especially for beginners, to understand the basics of such trading to avoid losses.
Let’s understand it with an example:
If you buy a stock at Rs. 500 and sell it at Rs. 550, you make an intraday profit of Rs. 50 per share (if all the shares were bought and sold).
So, Intraday Trading has its advantages and disadvantages. Intraday traders can make money when the market is volatile, but they can also lose a lot if they are not careful.
Hence, it is essential to know the factors that determine profits in intraday trading.
Trade with the Trend
The concept behind Trade with the Trend is that most traders don't have time in their schedule to watch for news events, but they can watch for technical signals that can predict trends.
Traders can also watch for support and resistance levels that may be reached as a result of market movement.
Resistance and support are arguably some of the most widely discussed concepts in technical analysis.
In its most basic sense, resistance indicates a price level that is likely to act as a barrier to the price of an asset, preventing it from getting pushed in that direction.
The principle behind "Trade with the Trend" is that many traders lack the time to monitor news events but can focus on technical signals that predict market trends. Traders should also observe support and resistance levels, which are critical concepts in technical analysis.
Support and resistance levels are pivotal in determining price movements. Support refers to a price level where an asset is likely to experience buying interest, preventing its price from falling further. Conversely, resistance is a price level where selling pressure may arise, hindering the asset's price from rising beyond that point.
If buying pressure is strong at a support level, the price is likely to bounce back and move upwards. Conversely, if selling pressure is significant at a resistance level, the price may reverse and direction will change after hitting resistance.
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Liquid Stocks
When you plan to trade intraday, you need to be sure that you can buy and sell large volumes of stock without affecting the price.
These are essential for two reasons:
- You don't want to pay more than the current price by buying a large amount of stock in one transaction.
- You don't want to wait around while your order is being executed if there is any chance of the price moving against you.
The only way to be sure that a sudden move in the price does not impact you is to buy or sell very small amounts of stock at a time.
Tick-size trading depends on having liquid stocks to allow even tiny transactions to be executed swiftly.
Know About the Charts
Once you have been trading for a while, you will get to know the characteristics of various stocks.
Many stock trading investors know about charts, it is important to identify stocks that are likely to be the right stock to trade.
The most vital tool in your utility belt is a strong chart pattern recognition ability.
Once you gain proficiency at reading charts, you can spot the formation of stock patterns and trade accordingly.
It is essential as an intraday trader that you are familiar with chart patterns.
By default, every stock will move in an overall trend direction.
There is a bull trend, and there is a bear trend. In other words, the market will move in one direction or another for a long time at a stretch.
As an intraday trader, you need to know these trends so that you can make good decisions regarding the buying and selling of stocks.
The best way to spot market trends is by looking at charts of stocks for which there are historical records available for a long period.
This will give you an idea about how the stock has behaved over time and how it behaves during different phases of its life cycle.
Medium to High Volatility
There are two kinds of intraday breakouts.
The first one is when you see a stock breaking out in the early morning hours around 9:45 am and 10 am, and then it starts moving up or down in the regular trading hours and forms a top or bottom.
The second type is when a stock closes above or below its opening price in the first few minutes of opening the market.
The first type presents good entry points for long positions, while the second gives you good entry points.
The best way to identify breakout stocks is to keep an eye on your trading platform's Top Gainers and Losers list.
Once you have shortlisted stocks, keep an eye on their daily prices, especially in the first 10 minutes after the market opens.
If you find a stock that has broken out, then place an order to buy or sell as soon as possible so that you don't miss out on the opportunity to make some money from it.
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Stocks that are Price Sensitive to News Flows
If you are a day trader, you need to have a stock list that is extremely sensitive to news.
These stocks are best for trading because they fluctuate rapidly with new information and thus offer traders numerous trading opportunities. They also allow a trader to capture profits quickly.
There are essentially two types of Intraday traders in India.
The first one is the one who trades on fundamentals and technicals.
The second type of trader watches the news for trading opportunities.
Conclusion
Selecting the right stocks for intraday trading is a crucial aspect of achieving consistent success in the stock market. By focusing on factors such as liquidity, volatility, market trends, and the alignment of technical indicators, traders can improve their chances of making profitable trades. It is also important to stay updated on news, set stop-loss orders, and have a disciplined trading strategy in place. Intraday trading requires patience, risk management, and continuous learning. By applying these best practices, traders can navigate the dynamic nature of intraday trading more effectively and optimize their returns.
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