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How to pick stocks for Intraday Trading?
This is one of the most popular questions asked by traders in the Indian Stock Market. In this post, you will found out the best methods that you can use right now to pick the best stocks for intraday trading.
Intraday trading does not mean that you start preparation after the market opens the next day.
If you take intraday trading seriously which you must, you should start preparing a day earlier. You must know that each day is dependent on the previous days and it’s not an independent activity. You must have realised this when you are looking at the short term chart of a stock and you are unable to realise when the day ended. The price movement of today has a major impact on the price action of the next day unless there is a major news overnight.
Important Factors to consider before taking an intraday trade
Intraday Trading is tough
Intraday trading requires fast mental skills, trained reflexes, and subconscious level decision making. All these things make intraday trading a very tough activity. But there is a reason which overpowers all other reasons. And that is, that as we reduce the timeframe of analysis, the level of randomness increases.
It is relatively easier to anticipate a price move that may happen over a week or a fortnight or a month but it is far more difficult to anticipate a price move that may happen in next 10 minutes or 5 minutes or 1 minute.
Intraday Trading is not beginners
You need to spend time doing trading and gain experience before you proceed to intraday trading.
Intraday trading is like playing Chess while solving Sudoku and doing both while sprinting. Such stunts are performed by professionals only. Do not try this at home!
It might not seem like it initially but its true.
Only Trade in Liquid Stocks
Liquid Stocks are the stocks which are actively traded throughout the day so that they can be easily bought & sold quickly without a substantial change in price.
Illiquid stocks are difficult to trade because there are not many buyers & sellers and also the spread (the difference between the bid and the ask) is high, so to make sure that your trade is executed you need to make adjustments to your price.
Also, you must note that illiquid stocks are easy to manipulate and hence you might be trapped frequently.
As an intraday trader, you would be using technical analysis to take positions in the stocks so you must choose the stocks that liquid because they are chart-friendly meaning that the candles are continuous and smooth.
Simply choose stocks only from NIFTY100 and your work is done.
Here is an example of the difference between the chart of liquid stock and an illiquid stock.
Any kind of news is helpful
The news may be positive or negative for the company but as a trader, any kind of news is helpful for you because you can take the trade as per your perception of the news. Buying on positive news and shorting on negative news. If you are going long, enter on every pullback and if you are going short, sell on every bounce.
Keep Note of Corporate Announcements
Bonus, Splits, dividends etc cause false moves in the stock price to factor in the changes. This makes technical analysis tough to apply and often gives the wrong outlook.
Look at the Higher Time-Frame Charts
You might be thinking that why do you need to look at higher time-frame charts like daily / weekly when you are trading intraday?
But this is important because if the price is near daily / weekly support or resistance, there will be unexpected moves that can shock you while trading intraday.
Ok, so now that you know the factors you must consider before taking your intraday trades, lets get to the methods you can use to successfully pick stocks for intraday trading.
Methods to pick stocks for Intraday Trading
#1 – Choose from top ten gainers and losers
The data of the top 10 gainers and losers is available on the NSE website.
Here is a link to that page – Click here
You can click on tabs named Gainers & Losers to check them respectively.
The table also makes sure that you don’t miss any corporate action or announcement, when you hover over the icon in the CA column it will show you the corporate announcement of the company (check it in the screenshot below). You can check out the latest ex-date of the CA as well in the table.
You don’t need to blindly buy the top gainers and sell the top losers, this is just a step to shortlist the stocks for your watchlist after then you can do your analysis and take the trades.
If the stock is already moving since the last few sessions then there is not much benefit in trading that stock but if it the first up-move since the past few days then it could be a great opportunity to buy.
On the day when the market is falling, you can check out the top gainers and note them because they are rising in spite of the bearish sentiment of the market. Similarly, if the market is strongly bullish, then look at the top losers, these are the stocks are good shorting candidates.
#2 – Stocks Under Pressure
Find the stocks having bad news associated with them and short them as soon as you see the index Nifty facing resistance during the day. When the Nifty is making small candles near the pivot resistance or any trend line that you have drawn, it is the right time to short the weak stocks. The downward moves in these weak stocks will be magnified and you will be able to make good profits out of it.
High Beta stocks are ideal for this kind of situation. You can check out the list of high beta stocks from here.
#3 – Based on Daily Volatility
To capture big moves in intraday trading stock you need to ensure that the stock you choose is highly volatile. You won’t be able to make handsome profits if you trade in less volatile stocks even if your trading direction is correct, this is because the moves would be too small.
The data of the daily volatility is available on the NSE website. You can access it from here. Once you have downloaded the excel sheet having this data, simply delete the other columns leaving just the stock name and daily volatility.
Sort the data from high to low based on daily volatility and choose the stocks having daily volatility greater than 0.02 ( which is 2%)
Those are the best stocks to take intraday trades for the next day. You can follow this method daily and narrow down to the best stock picks for intraday trading.
Also make sure that the stocks you choose are in the Nifty 100 because the number one rule is to always trade in liquid stocks.
#4 – Based on Open Price
After 15-20 min after the market opening simply use a screener to find the stocks having open = low and the stocks having open = high. The stocks in which open is equal to the low have a bullish sentiment and the stocks in which open is equal to the high have a bearish sentiment.
Once you have the stocks you can check out their charts and trade as per your analysis.
Conclusion – How to pick stocks for Intraday Trading?
These were the simple methods you can use to pick the best stocks for intraday trading. Stock selection is very important for intraday trading, however, it should not be made a complex process as you need to be fast to act in intraday trading.
Comment below if you would like to know about any other aspects of intraday trading, also if you would like to share your method on How to pick stocks for Intraday Trading? Feel free to comment.
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Also, read about the Best Books on Stock Market
Bookmark SGX Nifty Live Chart to identify the market trend daily before opening.
sir..u are providing amazing information free of cost. thank u very much.
Nicely explained with great observation for the market. Keep ti up.
Amazing post. Nice explanation. Keep it up.