7 Ways to Choose Stocks for Intraday Trading

Done right, Intraday is a fantastic trading strategy. It helps leverage what many investors/ traders think is dangerous i.e. market volatility. Befriending it is the idea, using in-depth research.

Picking the right stocks for intraday is crucial, we show you 7 ways of doing it effectively,

1. Look for stocks being traded in large volumes (Liquidity)

Liquidity in general for any stock is essential, more so with day trading. You want to be able to get in and out of trades quickly, liquidity helps with that.

The high liquidity of any stock is directly proportional to its popularity. Traders must choose highly liquid stocks, so if the stock is trading above the average volume, it can be considered as liquid eg. above 1 lakh average of 1 lakh.

Besides this, wide ownership of a stock is preferable. If stocks are not widely owned; few market participants will be able to own it quite easily. The ownership pattern of stocks is shown on exchange websites.

2. Movement of top Gainers and Losers

This helps in understanding the market trend.  Top Gainers / Losers are available throughout the day and updated in real-time. Typically, if there’s a sentiment or ‘news’, then the entire sector is affected.

If you’ve picked a top ‘Gainer’, the next default step is to check liquidity. Top Gainers and Losers change every day, so your choice of stocks will also change.

3. Choose stocks with proper Volatility.

ATR (Average True Range) of the stock must be above average to determine its volatility.

4. Don’t’ go for ‘Penny Stocks’

The first apparent problem with ‘Penny Stocks’ is liquidity. If you want to ‘skim’ profits from a stock’s price movement; liquidity is essential. It’s not that ‘Penny Stocks’ hasn’t made it big but it needs in-depth research and is good for going long.

5. Choose stocks that you understand and make Watchlists

While employing a ‘Top Down’ approach; one starts with the economy, then sectors, and then finally stocks. Know the sectors you are most comfortable with and understand easily.  Connecting the dots is important.

Make ‘Watchlists’ of stocks that you like and look for patterns. Opportunities for Intraday trades will be soon available.

6.Check the Market Trend

Day traders have to abide by the ‘Trend is your friend’ theory. Since your trade will be executed in one market session for it to qualify it as ‘Intraday’, follow the trend.  The market shows where it’s headed, so don’t bet against it.

7.Check Stocks or Sectors in the news

Keeping a close watch on news, announcements, and policy decisions is essential. Changes in government policies also factor into a stock or sector’s movement.

These are the 7 simple ways in which you’ll be able to pick absolute ‘winners’ for intraday trades.