Intraday trading, which involves traders opening and closing trades within one day, is a common type of market speculation. Intraday traders are traders who trade in and out of the market within 24 hours.
It is essential to be able to identify stocks that can be traded intraday in order to succeed as a day trader. People often fail to choose the right stocks to trade during the trading day, which can lead to them not being able to make profits.
It all boils down to choosing highly liquid stocks to determine the best intraday stock.
When choosing which stocks to trade in the day, liquidity is an important intraday tip. Large trading volumes allow liquid stocks to be bought and sold in large quantities without affecting their price. Because there are not enough buyers, less liquid stocks don't allow traders to buy and sell large quantities. Illiquid stocks may offer traders greater opportunities for rapid price changes and better trading. Statistics show that volatile stocks have greater volatility in a short time period. Therefore, while potential gains fade quickly, downside risks still exist. However, the quality of trades made by traders will determine the stock's liquidity. If the trade is for 50 Rs or 100 Rs, then 50,000 to 75,000 shares will suffice. However, if there are hundreds or thousands of trades, the volume requirements can be significantly increased.
When selecting liquid stocks, make sure to verify liquidity at different price levels. There will be stocks that are extremely liquid at lower prices, but drop dramatically once they reach a certain price level. These stocks can be bought by those who are able to understand the volatility of liquidity at different price points.
Commonly, it is noticed that stocks with low daily volumes or stocks where major news is expected to cause volatility are less traded. Sometimes volatility can be seen even after big announcements. These stocks are best avoided by intraday traders. Some volatile stocks can be found in the mid-size category, while many stocks traded in low-cap categories such as S, T and Z are chaotic. These stocks are volatile and illiquid due to their low daily volumes.
Let's not forget the warning. However, intraday traders and active market traders can make a profit from successful bets in these stocks if there is a certain level of volatility. Although there is no standard, intraday traders generally consider shares that move between 3-5 percent and 5-7 percent as the best intraday stocks.
For intraday tips on choosing the right stock, opt for stocks that are more closely linked to major sectors or indices. The stock price will rise if the index or sector experiences an upward movement. Stocks that follow the expected movements of the sector and move in accordance with the sentiment of the group are more reliable. All information technology companies that are dependent on US markets will be affected by a strengthening of the Indian Rupee. Higher export incomes will be achieved by these companies if the rupee is weaker.
Remember that it is always beneficial to follow the trend when you are trading. Stock market bull runs require traders to look for stocks that could be created. On the other side, it is important to identify stocks that could decline during a bear run.
Quality research is a key intraday tip that traders should always remember. Most day traders don't do their research. It is a good idea to identify the index and then find sectors that interest you. Next, create a list with stocks that are in these sectors. The next step is to identify liquid stocks. Traders do not need to include leaders in each sector. The technical analysis, determination of support and resistance levels and study of the fundamentals will allow traders to identify the best stocks to profit intraday/day trade.
Although intraday trading is not without risks, speed is key to making a difference. It is difficult to make small price movements during trading hours and earn profits. Angel One Angel Eye allows stock monitoring in real-time. You can trade online from any location, as browser-based. These platforms allow traders to make quick decisions and book profits.
Intraday trading involves initiating and closing trades within the same day. If you buy 500 shares at Rs.920 in the morning and then sell them by evening at Rs.928, you can make a profit of Rs.4000 per day (500x8). As your net position at end of day zero, this trade doesn't result in any delivery. If you think the stock will fall, you can sell it in the morning and then buy it back in evening. You can only short-sell stocks without delivery if you do not have access to rolling settlements.
An intraday trader's most important task is to choose the stocks they want to trade. Stocks that are predictable and can move are essential. These are six factors to consider when selecting stocks for intraday trades.
When considering intraday trading, market liquidity is the most important factor. You don't want to be in a position that you can't exit. This is a problem that usually exists in smaller stocks. However, F&O stocks tend to be more liquid than mid-cap stocks. How do you measure liquidity? One way to measure liquidity is to look at daily volumes in relation to market capitalisation.
Liquidity = Market capitalisation / Average daily volumes
There are no set rules for intraday trading, but a minimum liquidity ratio should not exceed 10%.
Is it possible to buy or sell stock with low impact costs?
What is low impact cost? This is the effect on the stock price when large buy/sell orders are placed on the stock. High impact cost stocks are not recommended for intraday trading because they pose too much risk. If you place large orders, the impact cost could make it difficult to get the stock at a favorable price. This could affect the economics of your intraday trading. You should prefer stocks with low impact costs, which is usually another proxy for liquidity.
These details can be found on the website of the exchange. The trading pattern of the stock can also be used to help you make decisions. Stocks that aren't widely owned will be more volatile, and they will also have a greater chance of hitting circuit filters. This is because only a few market operators will have the ability to capture these stocks easily if they're not widely owned. Intraday traders should always choose liquid stocks that are widely owned. This will help you reduce your risk.
This argument extends the liquidity and impact cost arguments. The tick is very important because we are dealing with an intraday trader. The tick represents the minimum gap between two orders. To qualify for intraday trading, each tick must have enough volume. It is not a good idea to place an intraday trade and then realize that the order execution occurred several ticks later. Intraday trades are about capitalizing trends. Market orders are usually placed. The tick gap is a crucial consideration when selecting intraday stocks. The smaller the tick gap, you will be able to make better stock selections.
Intraday traders rely heavily upon technical charts. You must be able to read charts. Clear chart patterns are essential. Trades in stocks that do not have enough history or don't show clear patterns are impossible. Only with a long history can you decipher patterns and trade for the same.
Intraday traders typically rely on two factors to trade: Chart patterns and sensitivity of news flows are two factors that intraday traders rely on. A stock that doesn't react to news can be traded intraday. This basically means that you are looking for stocks that are sensitive to news. This is why the strategy of selling on announcements and buying on expectations can work well in practice.
Intraday trading is not just about having a stock list that is correct. It is also about being disciplined. It is important to limit your stock universe so that you can accurately track these stocks in terms fundamentals, technicals, and news flows.
Every intraday trader has a big question: How do I find the right stock to trade intraday? The key to trading success is the selection of the right stocks. Stock selection should consider a variety of factors. Although there are many listed shares, it doesn't mean that all of them can be used for intraday trading. Below are some tips.
Volume of stocks is an important factor in intraday trading. Volume is the total amount of shares traded on a market at any given time. Stocks with high volumes are generally recommended.
A few stocks will perform well depending on positive news. These stocks are expected to move in any direction and with high volumes. These shares are available for intraday trade.
Analyze the stock movements that have been closing in a negative or positive direction for the past week. This analysis will assist you in choosing the stocks to trade intraday.
Stocks that have broken resistance levels, and move in an upward direction, are worth your attention. These stocks are a favorite choice.
Intraday traders may trade in specific shares only. These traders are involved in the detailed analysis of share movements. This is the most important intraday strategy that traders follow.
Some shares are top gainers while others fall under the top loser category. These shares could provide some good movement. These shares may offer good trading opportunities, but you should be careful.
Successful intraday traders are skilled at using their senses and eyes to identify the best shares. It is crucial to choose the right stocks in order to make money with intraday trading. Technical analysis should be your friend. You will learn how to choose the best intraday stocks over time. You must make data-driven decisions, and avoid emotional bias.