How to Select Stocks for Intraday Trading

Mani Karthik

Entrepreneur. Mentor. Blogger

In my pursuit of getting better & smarter in life,
I share everything I learn, on this blog, so you can make use of it.

Many people think that day trading is only for those who are wealthy or have a lot of experience in the stock market. However, anyone can day trade stocks – all you need is a computer, an internet connection, and a brokerage account. While day trading can be a great way to make money, it’s important to know how to select stocks for intraday trading. This will help you minimize your risk and maximize your profits.

The Different Types of Stocks You Can Trade

There are different types of stocks you can trade intraday, and each has its own set of risks and rewards. Here is a brief overview of the most common types of stocks:

1. Blue chip stocks: These are the stocks of large, well-established companies that have a history of strong financial performance. They are typically less volatile than other types of stocks and offer a higher dividend yield.

2. Small cap stocks: These are the stocks of smaller companies that tend to be more volatile than blue chips. They offer the potential for higher capital gains, but also carry a higher risk of loss.

3. Mid cap stocks: These stocks fall somewhere in between blue chips and small caps, in terms of both size and risk. They offer a moderate level of both dividends and capital gains potential.

4. Growth stocks: These are stocks of companies that are expected to experience above-average growth. They typically don’t pay dividends, but offer the potential for high capital gains.

5. Value stocks: These are stocks of companies that are undervalued by the market. They often offer a high dividend yield and the potential for capital appreciation.

6. Cyclical stocks: These are stocks of companies whose performance is tied to the ups and downs of the economy. They can be volatile, but offer the potential for high returns during periods of economic expansion.

7. Defensive stocks: These are stocks of companies that tend to perform well during periods of economic uncertainty. They offer stability and a lower level of risk, but may not provide the same level of return as more volatile stocks.

8. Speculative stocks: These are stocks of companies that are involved in new or unproven businesses. They carry a high level of risk, but also offer the potential for high returns.

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What are intraday shares and what happens if you don’t sell them?

When you buy shares of stock, you usually do so with the intention of holding them for a long period of time, in order to benefit from the company’s growth. However, there are times when you may want to sell your shares before the end of the day. This is known as “intraday trading.”

If you don’t sell your shares by the end of the day, they will be “carried over” to the next day. This means that you will still own the shares, but you will not be able to sell them until the next day. If the price of the stock goes down overnight, you will be stuck with a loss.

There are a few reasons why you might want to engage in intraday trading. Perhaps you think that the price of the stock is going to go up during the day, and you want to cash in on the gains. Or, maybe you think the price is going to go down, and you want to avoid further losses.

Whatever your reasons, it’s important to be aware of the risks involved in intraday trading. If you’re not careful, you could end up losing money.

How to Select the Best Stocks for Intraday Trading

When it comes to intraday trading, there is no one-size-fits-all approach. The best stocks for intraday trading will vary depending on a number of factors, including your risk tolerance, investment goals, and market conditions.

That said, there are a few general guidelines you can use to help you select the best stocks for intraday trading.

1. Look for stocks with high liquidity.

Liquidity refers to how easily a stock can be bought and sold without affecting the price. Stocks with high liquidity are typically less volatile and easier to trade.

2. Avoid stocks with wide bid-ask spreads.

The bid-ask spread is the difference between the highest price a buyer is willing to pay for a stock and the lowest price a seller is willing to accept. A wide bid-ask spread indicates that there is not a lot of agreement between buyers and sellers on the stock’s value, making it more difficult to trade.

3. Consider stocks with positive price momentum.

Price momentum refers to how the price of a stock has been moving over a period of time. Stocks with positive momentum are typically experiencing an uptrend and may continue to do so.

4. Be aware of news and earnings releases.

Both news and earnings releases can have a big impact on a stock’s price. Be sure to stay up-to-date on any major news or announcements that could affect the stocks you’re interested in trading.

5. Use technical analysis.

Technical analysis is the study of past price data to identify trends and patterns. This information can be used to help predict future price movement.

6. Paper trade first.

Before investing any real money, it’s always a good idea to paper trade, or test out, your strategies. This will allow you to see how your strategy would have worked in the past and make any necessary adjustments.

When it comes to intraday trading, there is no one-size-fits-all approach. The best stocks for intraday trading will vary depending on a number of factors, including your risk tolerance, investment goals, and market conditions. That said, there are a few general guidelines you can use to help you select the best stocks for intraday trading.

When to Buy Shares for Intraday Trading

When it comes to intraday trading, timing is everything. You need to know when to buy shares in order to maximize your profits.

The most important factor to consider when deciding when to buy shares for intraday trading is the price action. You want to look for stocks that are showing signs of bullishness or bearishness.

If a stock is trending higher, you want to look for buying opportunities. The best time to buy would be when the stock is pulling back from a recent high. This gives you a chance to buy at a lower price and ride the trend higher.

If a stock is trending lower, you want to look for selling opportunities. The best time to sell would be when the stock is bouncing off a recent low. This gives you a chance to sell at a higher price and take profits.

Another factor to consider when deciding when to buy shares for intraday trading is the level of support and resistance. You want to look for stocks that are trading near key levels of support or resistance.

If a stock is trading near a key level of resistance, you want to look for selling opportunities. The best time to sell would be when the stock is testing the resistance and failing to break through.

If a stock is trading near a key level of support, you want to look for buying opportunities. The best time to buy would be when the stock is testing the support and bouncing higher.

The final factor to consider when deciding when to buy shares for intraday trading is the news. You want to look for stocks that are going to be impacted by major news events.

If there is a major news event that is going to impact a stock, you want to look for buying or selling opportunities. The best time to buy or sell would be just before the news event is released. This gives you a chance to get in or out before the rest of the market reacts.

How to Place an Order to Buy or Sell Shares

In order to buy or sell shares, you must first place an order with a broker. This can be done by phone, online, or in person.

When placing an order, you will need to specify the following:

  • The name of the stock or security you wish to buy or sell
  • The number of shares you wish to buy or sell
  • The price you are willing to pay or sell for the shares
  • The type of order (limit, market, stop, etc.)
  • The duration of the order (good for day, good until canceled, etc.)

Your broker will then execute the order on your behalf. If you are buying shares, the broker will try to find someone who is selling the same shares for the price you are willing to pay. If you are selling shares, the broker will try to find someone who is willing to buy the shares for the price you are willing to sell them for.

Once the trade is executed, the shares will be transferred to the buyer’s broker, and the money will be transferred to the seller’s broker. Your broker will then credit or debit your account for the shares bought or sold, minus any commissions or fees.

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What Are the Risks of Intraday Trading?

Intraday trading is a type of trading where investors buy and sell securities within the same day. This means that they take on the risk of holding a position overnight, which can be a risky proposition.

There are a few different risks associated with intraday trading:

1. Market Risk: The market may move against your position, resulting in a loss.

2. Liquidity Risk: There may not be enough buyers or sellers to fill your order at the price you want.

3. Margin Risk: You may need to put up more money than you originally planned in order to keep your position open.

4. Execution Risk: Your order may not be filled at the price you wanted, or it may not be filled at all.

5. Regulatory Risk: The rules and regulations governing intraday trading can be complex and subject to change.

6. Counterparty Risk: The person or firm you are trading with may not honor their side of the deal.

7. Technology Risk: The systems and software you use to trade may not work correctly.

8. Financial Risk: You may lose more money than you can afford to lose.

9. Emotional Risk: The stress of trading can take an emotional toll.

10. Time Risk: You may not have enough time to monitor your positions or make informed decisions.

Intraday trading can be a risky proposition, but it can also be a lucrative one. It is important to understand the risks involved before you start trading.

What Are the Rewards of Intraday Trading?

Intraday trading is a popular form of day trading in which traders buy and sell securities within the same day.

Many traders believe that intraday trading offers numerous benefits, including the opportunity to make quick profits, the potential to capitalize on short-term market movements, and the ability to control one’s own trading hours.

While there are certainly advantages to intraday trading, it is important to be aware of the risks involved before deciding to participate in this type of trading.

The most obvious benefit of intraday trading is the potential to generate quick profits.

Because traders are only holding securities for a brief period of time, they can take advantage of short-term price movements to book profits. For example, if a trader buys a stock at $10 and the stock price rises to $11 by the end of the day, the trader has made a profit of $1 per share.

Another advantage of intraday trading is the ability to control one’s own trading hours.

Unlike investors who may only trade during regular market hours, day traders can choose when to buy and sell securities. This can be helpful for those who have full-time jobs or other commitments that prevent them from trading during regular market hours.

Finally, intraday trading can provide an opportunity to gain experience and learn about the markets without incurring the large capital requirements associated with longer-term investing.

For new traders, the ability to participate in intraday trading without a large amount of capital can be a valuable learning experience.

Of course, there are also risks associated with intraday trading. Because positions are held for such a short period of time, intraday traders are more exposed to the risk of sudden and sharp market movements.

This can result in losses if a trader is not careful. Additionally, intraday trading requires a great deal of focus and concentration, and even experienced traders can sometimes make mistakes.

Overall, intraday trading offers both potential rewards and risks. Those who are considering participating in this type of trading should carefully weigh the pros and cons before making a decision.

Summary

When selecting stocks for intraday trading, there are a few key things to look for.

First, you want to find a stock that is volatile and moves a lot during the day. This will give you the best chance to make money on your trade.

Second, you want to find a stock that has good liquidity. This means that there are a lot of buyers and sellers in the market and you should be able to get in and out of your trade easily.

Finally, you want to find a stock that has a tight bid-ask spread. This means that the difference between the highest price someone is willing to pay for the stock and the lowest price someone is willing to sell it for is small.

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