Generally, individuals are not able to earn gains because they not selecting the appropriate stocks for their portfolio.
Therefore, as a trader for trading in a day, it becomes more important to know that how to pick the right stocks to succeed.
In other words, Traders base their profits on different kinds of purposes. On one hand, it may be a long-term investment which is a gradual process, that may produce high returns, and on the other hand, it can be a short-term strategy that includes trading with quick gains. And one such method is intraday trading.
Intraday Trading
Intraday trading refers to buying and selling of holdings (stocks) on the same day which is done through the online trading platform. Therefore, as a trader, you need to have an active online trading account for a deal in the stock market.
Intraday trading involves the buy or sells orders which are specified by the person who is involved in trading. The basic purpose of initiating orders is to close them before the closing of the stock market.
In also addition, the main objective of the trader is to make profits by taking the advantage of stock market movements. therefore, the level of profits depends on the extent of fluctuations in the prices of the stocks that are held by traders in their portfolios.
How to choose stocks for Intraday Trading?
In intraday trading one of the major questions that arise for every intraday trader that “how to find the right stock for intraday trading”.
After all, when you are picking stocks for intraday trading, you need to keep some factors in mind such as qualitative as well as quantitative. You may come across hundreds of listed shares in the stock market but it is not sure that every share is suitable for intraday trading. hence, you need to make informed and accurate decisions in this type of trading.
So how do we choose the right stock for intraday trading wisely? Let us take a look.
- Stock Volume: The volume of the equity shares is One of the major criteria when doing intraday trading. Because volume is indicated by the total number of shares that are being traded in a given market at a particular time of the day. By simply looking at the screen you may not be able to find out the right stocks which are high in demand. Share volume helps you to shortlist the stocks which are being purchased in high volumes.
- Research and analysis: Looking, analyzing, and comprehending are some basic steps of trading. It is rightly said by someone that “Nothing goes right without proper calculation unless you have luck on your side while trading”. As luck doesn’t often show its grace, so, it is always necessary to research before trading.
- Stock news: Stock news plays a crucial role in the help of traders in the selection of the right share for intraday trading. In other words, positive news reflects a positive impact on the price of the shares, and negative news impacts a negative effect on the price of the shares. So, with the help of these concepts traders can prepare their portfolios with the help of stock news.
- Stock Trends: Look for the general flow in the market or the stocks that have raised the most interest among traders. When the market rises, traders must look for the stocks that rise, when it falls, looks for the stocks that show a potential decline.
- Correlation with major sectors: It’s better to invest in stocks that correlate with major sectors. If the index for the sector goes up, it might also affect the price of the stock positively. Picking stocks while keeping in mind such a market situation would help you a lot.
Indicators of Intraday Trading
1. Daily Moving Average
Some traders trust the daily moving average (DMA) of the stocks. The moving average is a line on the charts that show the behavior of a stock over some time. These charts show the opening price and closing price of the stock. The minimum average line shows the average closing price of that particular stock in the given interval and helps traders to comprehend the ups and downs in the price and determine the flow of the stock.
2. Bollinger Bands
These are bands that show the standard deviation of the stock. It consists of three lines – the moving average, the upper limit, and the lower limit. If a trader seeks the trading ranger of a particular stock, then this helps a trader to locate the price variation of the stock over some time, hence, the trader can put his/her money around the observations.
3. Momentum Oscillators
The prices of the stocks are highly volatile. These variations depend on market situations. If a trader wants to know whether a stock would rise or fall, then it helps a trader to know the variation of the prices. It shows the right time to trade, not making you lose your chances.
4. RSI (Relative Strength Index)
This is the indexed form of all the trading that happens overstock in a time. It ranges from 1 to 100 and graphically shows when a stock is sold or bought highest. The RSI is considered overbought when over 70 and oversold when below 30. It uses a formula for this calculation, that is,
RSI = 100 – [100 / (1 + (Average of Upward Price Change / Average of Downward Price Change))]
