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How to Select Stocks for Intraday Trading In India

select stocks in intraday trading

There are thousands of listed stocks on the stock markets in India. There is a list of stocks on the BSE and there is another list of stocks on the NSE. These many choices can become confusing for anyone, especially when the trading system in India allows you to choose any stock or script to trade in.

What you need to identify is the stock which gives you a ‘trading opportunity’. Intraday traders are always on the lookout for these best intraday trading stocks. Basically what they are looking at stocks with is liquidity which means it can be easily bought and sold, volume which means there is plentiful quantity of stock available and volatility means that the prices do move up or down for these stocks at a regular basis instead of staying constant.

So let’s have a look at the top factors you should keep in mind before choosing a stock for intraday trading.

Guide to Select Stocks When Intraday Trading

• High Liquidity

• Medium Level Volatility

• Move Along with the Index

• Clear and Decipherable Chart Patterns

• Having Futures and Options

• High Liquidity

When it comes to trading in the intraday markets, liquidity is the king. It is the one factor which trumps all other factors when it comes to intraday trading. Liquidity a stock means that at any given point during the trading day, there should be buyers in the market if you wish to sell and sellers in the market if you wish to buy. If you invest in a stock which does not have buyers when you want to sell it, then you will be stuck with the shares and might have to sell them at a unfeasible price. Shortlisting stocks, on the basis of, liquidity eliminate a lot of names from the list which would otherwise have been a part of your tentative trading list.

• Medium Level Volatility

Imagine investing in a stock which simply does not react to any news and has its own pace of buying and selling.  Such stocks cannot be good when the markets start moving in a fast paced trend. To invest in a stock for day trading, the stock should have a medium level of volatility. Too high volatility is also not good when the prices start fluctuating on extremes. This can trigger your stop loss very easily. Hence, the stocks in which the change in prices is too fast and too extreme should be avoided for intraday trading. On the other hand, stocks which have a normal pace of price change are a good option.

• Move Along with the Index

A stock which moves in the direction of the index and follows it is always a good and a safer bet for investments. Stock which defy the index might be risky as there cannot be any prediction for the future price movements of such stocks. As you might know, the index of any exchange is the cumulative of all the major stocks listed on it. Also, the index of the country’s major stock exchange is an indicator of the country’s economic health. Thus, a stock which follows the indicator essentially follows the path of the economy which can be predicted.

The index here not necessarily means the entire stock exchange’s index, it might also mean the sectoral index of the sector to which the stock belongs.

• Clear and Decipherable Chart Patterns

If you cannot study and analyze the chart patterns of a stock, you will not be able to decide when to enter and exit the stock, when to expect an upswing or a downtrend and when to stay away from the stock completely. Technical analysis which is the most useful tool for intraday trading depends on understanding and analyzing chart patterns. And if a stock’s price chart pattern is not clear, then you should probably stay away from such stocks.

The stock’s price chart should also preferably have moving averages and other indicators which help the traders in understanding how the stock has performed previously.

• Having Futures and Options

A stock which also has its derivative instruments will have a better liquidity and volume for intraday trades, because the traders can easily trade in its intraday cash instruments and derivative instruments. It is a matter of great pride for any company to have its derivatives along with its shares in the stock markets. Such stocks are also quiet trustworthy and transparent and it is easier to predict their trading ranges on the basis of the put and call option data of the same.

CONCLUSION

If the stock you are picking has all the above mentioned qualities then definitely it can be a very good stock for intraday trading. But simply following these eligibility criteria does not mean that you will earn profit by trading in this stock. To earn profit, you need to have a very well framed plan or a strategy to invest and also, a clear idea about your entry and exit in the market.

If you feel that you do not have time to do so, you can always take help of a certified and a registered stock market advisor who will not only help you in picking the right stock and the right trade, but will also explain to you the rationale behind picking up that particular stock or trade.

You as well as the investment advisor you are choosing to help you in intraday trading should have a scientific and research based approach towards investments in the stock markets.

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As On 30th April, 2020
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