How to Select Stocks for Intraday Trading

How to Find Stocks for Intraday

Selecting the right stocks for intraday trading is crucial for maximising profits and minimising risks. Here are eight essential rules to guide your intraday stock selection.

1. Choose Liquid Stocks

You need stocks that can be bought and sold easily during the day without hiccups. High trading volume means smoother entries and exits with better price execution.

2. Avoid Volatile Stocks

Wild price swings can look tempting, but they’re risky. Stick to stocks with manageable movement and always use a stop-loss to protect your capital.

3. Invest in Correlated Stocks

Choose stocks that mirror their sector or index performance. If the sector is on a roll, your stock probably is too. It makes riding trends a lot easier.

4. Follow the Market Trend

The market trend often determines the movement of specific stocks. An easy way to maximise profits from intraday trading is to follow the current market trend.

5. Opt for Brokers that Offer Charting Tools

Good intraday trading needs good visuals. Opt for brokers who offer live charts, indicators, and research tools to help you trade smart and fast.

6. Look for Transparent Companies

Choose companies that openly share their performance and operations. Transparency helps you make informed decisions and avoid surprises.

7. Choose Stocks with a Presence in the Derivatives Segment

Stocks in both cash and F&O segments have higher analysis coverage, better liquidity, and more trading opportunities.

8. Trade News-sensitive Stocks

News-sensitive stocks can be gold for intraday traders. Just be sure to understand their patterns and always set a stop-loss.

Factors to Consider While Selecting Stocks for Intraday Trading

Remember these three important aspects when picking stocks for intraday trading.

1. Narrow Tick Spreads

The tick spread, or the difference between the bid and ask prices, is one of the most crucial aspects to be examined in intraday trading. A narrow tick spread leads to lower transaction costs, which is crucial for an intraday trader with many trades on a typical day.

Smaller spreads also cause less slippage, allowing you to enter and exit positions more effectively. The smaller the spread, the smaller the stock price move you need to make a profit. Therefore, liquid stocks have narrower spreads and are suitable for intraday trading. With increased liquidity, the stock is easier to buy and sell. It also ensures that transaction costs decrease and traders can make the most of their profit.

2. Price Sensitivity to News

Back-and-forth price action is great for intraday trading, and news events can cause such price action. Hence, it is important to choose stocks that respond to news and market developments. Stocks of companies that issue earnings reports unveil new products or make important announcements tend to have the biggest price movements during the trading day.

Likewise, stocks in industries such as technology or health care might quickly react to geopolitical developments, government action, or economic data. Intraday traders need to keep close tabs on news feeds and market updates to take advantage of prices that are sensitive to breaking news. Stocks that react aggressively to news allow for more explosive price swings and greater profit potential for short-term traders.

3. Chart Patterns

Intraday traders depend greatly on technical analysis, and chart patterns are the most effective tool for forecasting short-term price movement. Utilising technical analysis means recognising repetitive patterns like flags, pennants, triangles, or head-and-shoulders that can give insight into the direction of the prices.

Apart from them, these patterns generally assist traders in identifying the trend, breakout opportunities, or reversal points, which strongly favours intraday decision-making. Stocks that form predictable patterns can be easier to trade, as these patterns provide good visual cues for entry and exit points. However, chart patterns must be combined with other technical indicators for more accurate predictions.

How to Determine the Liquidity of the Stock?

So, what is liquidity, and why does it matter? Liquidity refers to how easily you can buy or sell a stock without affecting its price too much. In intraday trading, that matters a lot, because you don’t want to get stuck holding a stock you can’t exit quickly. Liquidity gives you the freedom to enter and exit trades without slippage or panic.

Here’s how you figure out a stock’s liquidity:

When you’re wondering how to pick stocks for intraday trading, start with these liquidity checks. A stock might look exciting, but if it’s illiquid, you’re basically stuck in quicksand.

How is the Correlation of the Stock Determined

Understanding correlation helps you diversify your trades or choose stocks that will respond predictably to market swings. For instance, if the Nifty is going down, and your stock is positively correlated, chances are it’s dropping too.

Types of correlation:

• Positive Correlation – Stock and market move in the same direction.

• Negative Correlation – Stocks and markets move in opposite directions.

• No Correlation – Stock does its own thing, regardless of the market.

Tools you can use to check correlation:

Knowing how your stock behaves in relation to broader market trends adds a strategic edge to your stock selection. It helps when you’re planning entries and exits based on expected market moves.

Conclusion

Picking the right stocks for intraday trading isn’t just luck – it requires a bit of smart decision-making. You’ve got to mix in market dynamics, perfect timing, and a solid strategy. Want to boost your chances of winning the intraday trading scenario? Keep an eye on things like how easily the stock can be bought or sold (that’s liquidity), how it reacts to news, and what the charts are telling you. Stick to a few tried-and-tested rules, pay attention to these key factors, and you’ll be in a much better spot to make sharp, profitable decisions without losing your cool over the risks.