The stock market is full of Surprises, and Intraday Trading is one of them because one can buy or sell any of the Securities listed on the Stock Market within one day, and a day Trader can choose any of them (mainly Stocks) they want to Trade. But the catch is they have to Buy and Sell (Square off their Positions) the Stock within the market hours on the same day of Trade.

It’s all about making profits from the short-term price movement of a Stock listed on the Exchange. Not only this, one needs to be accurate about the Stock in which he/she is going to execute the trade because a wrong action can lead to drastic losses. So the very first thing to do as a day trader is to find the right Equity to Trade.

But first let’s learn, What is intraday Trading?

Now let’s Find the Right Stock for our Intraday Trading.

How to Select the Best Stocks for Intraday Trading

First of all, there is no straightforward rule for selecting the Best stocks for Intraday Trading. Wait, you can find the top-performing Intraday Stocks inside your Broker’s App, but still, you have to measure some aspects of the Stocks, like Their Volatility, Liquidity, Depth, Sector (described below), and so on to find the right one to Trade.

Let’s Describe that one by one.

Liquidity

Liquidity usually refers to Volume, the higher the volume is the better for a Day Trader to trade in that particular Stock, which means you can easily Sell or Buy the stock at any time. The best part of a liquid stock is you can trade in higher volumes without affecting the Price of the Stock, as I said earlier Intrady is all about capturing short-term price fluctuations, and higher volumes make getting into and Exit from from a Trade easier.

But note, don’t be fooled by high volumes only, you also need to see the depth of the Stock, which means how many buyers and sellers are interested in buying and selling the Stocks at various price points (The deeper it goes the better it is).

For Eg. A Stock has volumes in Crores but is concentrated at only one or two price levels, then stay away from that, and on the other side A Stock with a decent volume (for example 50 or 60 lakhs) but is distributed among different price levels, is good for your Intraday Strategy.

Here is an Example of Market Depth of a Stock,

Volatility

Volatility refers to the Movement in the Price of a particular Stock, the more the price goes Up and Down the more volatile a stock is, but don’t go for a Stock with too much price fluctuation especially when the drop or rise in the price is too steep.

Volatility matters a lot in Intraday Trading as it gives traders a chance to make money by entering and exiting at the right price point.

And for your Instance,

There is no such rule for price movement, but most traders prefer to trade in stocks that tend to move between 3-5% on either side on a particular day.

Respective Sectors

Let’s take an example, After properly analyzing the Stock, You pick a Stock from the IT sector, and then you need to follow the whole IT Sector to see that when the Nifty IT Index moves upwards or downwards your selected Stock also follows the pattern, so you can trade the strongest or the weakest stock of the day (I will discuss it later, how to identify the Strongest and the Weakest stock of the day)

But there is a case, If you want to Trade the same Stock every day, then following the respective sector is not necessary (I assume that you have the proper understanding of Price Action, Scalping, Pullback Trading, or something else which you follow to trade). It’s better to focus on that one Stock, its Price Movement, and Its Behaviour in different market conditions.

Now let’s move to the various Strategies of Intraday Trading.

Read: Best Books on the Indian Stock Market

Strategies Day Trader Uses for Intraday Trading

Everything evolves, hence trading in the stock market also evolves a lot. In earlier days people used to trade based on tips or insider information which was meant to help only the big players but nowadays it is not accessible at all (exceptions exist) and with the evolution of technology people can trade in real time. One can see real-time charts, and create diagrams to find patterns, and indicators also play a major role which if used correctly can provide almost accurate predictions of price movement.

Therefore there are various techniques an Intraday Trader can use to make profits from their trade. Some of the popular ones include Scalping, Momentum Trading, Breakout Trading, Pullback Trading, and so on.

Let’s Discuss some of the popular Intraday Strategies one by one.

# Scalping

Scalping (small quick profits) is a technique of trading that involves quick buying and selling of shares and taking quick and small profits from little price movement in a very short period. This approach of trading is kind of risky, as a small price movement in the wrong direction can result in major losses as you are playing with a large quantity.

The goal of this Strategy is to take benefit of small price movement and accumulate small profits over time resulting in a decent amount of money.

# Momentum Trading

As the name suggests Momentum Trading is a way of trading an equity as it gains momentum on either side. First, you need to identify a Stock that may move a lot either Up or Down, then wait for the volume, and when the price hikes you need to enter and ride the wave and exit when it stops and start consolidating in a range.

There can be other ways of momentum trading, for example, if a Stock is already in its Uptrend and news comes out that one of the Mutual Funds houses buys some stake in the company then there is a high possibility that the price might go up and then you need to enter assuming that the price will go up for hours, or even for whole day, resulting in a decent profit.

# Breakout Trading

Breakout trading is the most prominent way of trading with high possibilities of profit as it involves finding a stock that is trading within a range and eager to break that range and move further either up or down.

You just need to find the stock that is in the range and wait for it to break the range and move further but remember you have to enter when the price of the stocks moves aggressively after the breakout, if not then its a high possibility that it is a trap.

# Pullback Trading

This approach of Trading requires a high conviction that the price continues to move in the same direction as in the past (a few hours, or days) so you can enter it and take benefit from that.

First, you need to identify a stock that is in a Trend no matter its uptrend or downtrend, and then wait for a reversal of the price (but a little bit not completely) and from where the price again starts moving in the current Trend Direction you need to enter and ride the trend to make Profits.

# Range Trading

This is the easiest form of Trading as you only need to identify stocks that are trading in a range like the price of that particular stock stuck between a range and as it touches its top it starts going downward, and as it touches its bottom it starts going upward.

After identifying the Stock wait for the price to touch either the top or the bottom and reverse and then you can enter it and book some decent profits.

Entry and Exit Strategies

Now you know how to find Stocks for Intraday Trading and different Intraday Trading Strategies.

So, let’s learn when to Enter the Trade and When to Exit the Trade.

Nothing matters if you aren’t able to Enter and Exit the trade at the right price point, So what matters is that you need to find the right Strategy to identify the perfect entry point and then wait patiently for book profits and exit the Trade at the best price.

Here are some reputed rules which if you follow you can make the most profits from your personal Strategy.

Wait for a Pullback

As I mentioned earlier the best possible way to ride a trend is from the Pullback, and yeah it works perfectly no matter which instrument you are trading, and your best friend is “Trendline”.

Trendline is just an assumption that if the price reacts from a certain point it can further do the same, and for that, you just need to join a minimum of two points with a straight line and wait patiently for the price to touch that line and react the same as earlier, and that’s the perfect point for you to enter in the trade.

No matter whether that stock is in an Uptrend or Downtrend you can apply the same rule for creating Long or Short positions. If the stock is in an Uptrend then it forms Higher Highs and Higher Lows, and you need to connect two or more Higher Lows to find the pattern. If the Stock is in a Downtrend then it forms Lower Highs and Lower Lows, and you need to connect two or more Lower Highs to find the pattern to enter the Trade.

Just remember that you need to be patient for the pullback, to enter the trade with the minimum risk because you are entering the trade at your Stop Loss level.

Trade Strong Stocks in Uptrend

What I mean is, If you are doing Intraday you need to choose the correct stocks to make the most profit, but how do you find these stocks? And here comes the Strategy, First, find Stocks that are leading its Sector and look for their co-relation with the Index, then isolate stocks that are relatively Strong or weak compared to the Index.

And, here is the opportunity for you as an Intraday Trader,

Then look for the stock that moves Up more aggressively compared to the Index (for eg. If the Index goes up by 0.5% then these stocks go up by almost 1%), and when the index falls or consolidates these stocks don’t fall that much or even may not fall at all.

Because these stocks are in their uptrend, and also leading the sector, providing more profitable trading opportunities.

Trade Weak Stocks in Downtrend

This is just the opposite of the Above paragraph, First, you need to look at the Weak Stocks and isolate those Stocks that are relatively weak compared to the Index. After that look at the Index and find their co-relation with the Index. When the Index falls, these stocks fall the most (for eg. If the Index falls by 0.5% then these stocks might fall by 1%), and when the Index goes Up then these stocks might not go up or Consolidate, waiting for the next fall.

Because these Stocks are in their downtrend these stocks lead the market when the Index is falling it is the best opportunity for you to Short these Stocks to book more Profit.

Intraday Trading Tips – Things to Remember When Doing Intraday Trading.

Now we come to the End of this article, and here are a couple of things you need to note when doing Intraday Trading because many traders lose because of these common mistakes. They take markets Granted and act emotionally and as you know, the Stock Market Never Favours You, instead You have to Favour the Market to Stay for Long. If not then NSE says that 90% of Retail Traders book losses.

Follow the Trend

Remember “Trend is your Best Friend” in the Stock Market, if you trade against the Trend, nothing stops you from losing your money.

Stock Market moves in a trend, and it’s your job to find and ride those trends. If the current market trend is Bullish, then go for the Long Positions, and if the current Market Trend is Bearish go for the Short Positions. And the best way to determine a trend is by Drawing Trendlines as in the image below.

Remember there may be some corrections in the short term or a pullback then you can go for a short trade, but look at the overall market mood and then make your Decisions.

When the Market consolidates “Don’t Trade”

One day of market Consolidation can blow your Account if you aren’t able to determine it and take it for Granted. so, look for the current trend and if the Stock or any other instrument is bound in a range, then make sure you must change your Trading Style, and go for the range bound trading.

How to determine the Consolidation is by looking at the chart, if there are no Higher Highs and Higher Lows, or Lower Highs and Lower Lows, then it means a stock is consolidating.

In this, we will Draw two horizontal lines as in the image below, to find out the range, and now you will find the support and resistance. You have to Buy when the price is at its support level and sell when the price is at the Resistance level, but always wait for the confirmation because there may be a breakout and you will be trapped.

Believe in your Strategies, Not your Emotions

Emotion kills especially in the Stock market, as no one is here to see your Emotions. So, you have to trade based on the current Data, and patterns. If you find any pattern that suits your Strategies only then Execute any Trade, not based on what you think, what you have watched on TV, or what you are thinking.

Sometimes your thinking/imagination may be correct but for overall trade, your future of trading is in Danger if you are not able to control your Emotions.

The Bottom Line

Finding the Right Stocks for Intraday Trading is difficult as you have to choose from a list of Stocks and then you need to isolate the most prominent one that best suits the Criteria mentioned above. Once you find the Stock wait for the perfect Entry point to take the most benefit, and Exiting from a trade at the right price is also crucial for your overall profit.

But don’t worry, there are various tools available to help you find the current trend of the market, Perfect Entry, and exit, placing the right Stop-Loss, and yeah Trendline also helps a lot in Intraday trading.

Now, it’s all upon you, and how you control your Emotions.

FAQ’s