Factors to consider before selecting stocks for intraday trading

Maria J. Danford
Top 5 Factors To Consider When You Pick stocks for intraday trading.

Intraday trading is the most common format of market speculation where a trader opens and closes all the trades within a day to book profits. To succeed as an intraday trader, it becomes very important to get stocks to buy today right

What is intraday trading?

Suppose if you want to buy and sell vegetables for a profit. A single trade won’t turn your fortunes upside down. You will only succeed when there is constant buying and selling throughout the day, with prices fluctuating based on the vegetables’ demand and supply.

Applying the same concept to the stock market, intraday trading is a kind of market order where you do not plan to deliver shares. You don’t wish to buy shares. You are only expecting the prices to rise or fall in order to square off your position before the market closes. 

How to pick stocks for day trading?

While trading on an intraday basis, it becomes crucial to understand how to choose stocks for intraday as you have a limited time to square off your position. Here are the things that you should consider when selecting stocks for intraday trading:

  1. Liquidity – At any point in time, liquidity of the said stock should be high to ensure buying and selling in large volumes. As a trader, you should analyse the liquidity of stocks at different price levels so that you can trade them at the right time.
  2. Volatility – For volatile stocks, more intraday orders can be placed so that traders can benefit from favourable price movements as per their expectations. However, it is important to note that highly volatile stocks could also be counterproductive if the drop/rise is too steep.
  3. Market trends – Based on the economic, political, social, and other factors, the market tends to move upward or downward, and stocks are directly correlated to such movements in the market. Hence, you as an investor need to keep yourself abreast with all the latest updates.
  4. Sector trends – The market can be divided into various sectors and as an intraday trader, it is important to keep track of the performance of different sectors in the economy.
  5. Momentum of stocks – Momentum is the speed of change in the stock price that helps you determine the strength of an upward or downward trend. 
  6. Technical analysis – Various strategies under technical analysis of stocks help traders identify buy or sell signals by understanding the gaps in stock prices. These gaps can be great opportunities for intraday traders.

Being smart about selecting stocks is crucial to maximise profits as an intraday trader. If you are someone who is not confident enough to make such huge decisions, it is always advisable to reach out to a financial expert.

If your objective is to earn attractive returns over long-term, explore your options across investment avenues like mutual funds and stocks with the help of a financial expert who can curate plans that are unique to your short-term and long-term goals and appetite for risk.

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