Day trading, or intraday trading, is buying and selling stocks within a single trading session. This type of trading demands razor-sharp focus, discipline and the capacity to make snap decisions. Choosing the right stocks is one of the most essential things when it comes to successful intraday trading. While investing in stocks might come with losses when picking the wrong ones, the right ones will also provide an opportunity for profit. Learn how to choose stocks for intraday trading with tips on liquidity, volatility, market trends, and strategies. Maximize profits with expert insights!
1. Learn About the Essentials of Intraday Trading
Stock selection is following, but before going deep into stock selection, it is essential to understand the basics of Intraday Trading. You use short-term price movements instead of carrying positions overnight. Traders must close their positions ahead of the market close, making liquidity, volatility, and timing all the more critical.
2. Stock Selection: Things to Consider
So here is all that you need to remember when selecting stocks for intraday trading:
Liquidity
Liquidity describes how easily a stock can be purchased or sold in the marketplace. For example, highly liquid stocks are high trading volume stocks where traders can quickly enter and exit positions with minimal price slippage. Also, stocks of large-cap companies or blue-chip stocks have high liquidity.
Volatility
Volatility measures how much a stock’s price varies. For intraday trades, you require stocks with moderate volatility. Stocks with high volatility may involve higher risks, whereas stocks with low volatility might lack sufficient price action to create profits.
Correlation with Market Trends
Select stocks that correlate with market indices like the Nifty50 or Sensex. These stocks have more predictable price movements because they depend on the broader market. Consider the following: if the market is bullish, find stocks that are expected to go up, and if the market bears, find stocks that are expected to go down.
News and Events
Issues affected by recent news or announcements often have notable price movements, and in turn, this creates excellent opportunities for trading. Intraday trading is attractive due to aggressive stock price movements caused by earnings announcements, rule changes, or other company announcements.
3. Instrument for Finding Stocks for Intraday
Technical Analysis
When it comes to Intraday trading, the backbone is technical analysis. Use tools to help identify entry and exit points, such as moving averages, Relative Strength Index (RSI), and Bollinger Bands. Performance on charts allows recognition of price structures and tendencies.
Stock Screeners
You can use stock screeners to make the vast universe of stocks more manageable. Select stocks based on various criteria, such as liquidity, price range, and daily volume. Most online trading platforms have stock screening tools built in.
Volume Analysis
An unusual increase in volume could signal an uptick in interest in a stock. High volume is often seen before price, an excellent indicator for the intraday trader.
4. Which stocks to buy for the best intraday trading?
Blue-Chip Stocks
These are stocks from established companies with a track record of stability. They have high liquidity and are usually closely aligned with market trends.
Mid-Cap and Small-Cap Stocks
Mid-cap and small-cap stocks tend to be more volatile than large-cap stocks, leading to improved opportunities for intraday profits. But they entail more risk than blue-chip stocks.
Sector-Specific Stocks
Concentrate on sectors where the trend is positive. If the IT sector is doing well, you could also start to trade stocks belonging to the IT sector, like Infosys or TCS.
Stocks with High Beta
Beta measures a stock’s level of volatility in relation to the market. High-beta stocks move more than the market, which makes them best suited for intraday trading. But they carry greater risk.”
5. Intraday Trading Strategies
Momentum Trading
It is a strategy of trading stocks exhibiting significant price movements. Identify stocks breaking through critical resistance levels either on an upward or downward trend at high volume.
Range Trading
Find stocks that trade in a tight price range. Buy on support and sell at the resistance level.
Breakout Trading
This is trading stocks that breach a consolidation phase. Breakouts usually cause a big move in the price and thus profit opportunity.
Scalping
Equity scalping aims to make small profits on many trades during the day. This strategy requires quick decision-making and strict risk management.
6. Risk Management Tips
Intra-day trading has its risks as well. Here are some tips for mitigating your risks:
Set a Stop-Loss: It’s always a good idea to use a stop-loss to minimize your risk. A stop-loss closes your position automatically when the price hits a certain level you previously defined.
Define Profit Targets: Always have a clear profit target for every trade to secure profits.
Overtrade on a Single Day: Limit the number of trades you take to avoid emotional decisions.
Implement Position Sizing: Determine the size of your trades according to your risk appetite and available capital.
7. Common Errors in Intraday Trading to Avoid
- Trade Illiquid Stocks: It is hard to sell or buy illiquid stock due to the investor’s solvency, thereby leading to potential risks.
- Not following the market trends: Most stock market winners follow the market; going against the trend, they usually lose.
- Holding Positions Overnight: With intraday trades, positions need to be closed by the end of the day. If you are holding positions overnight, it adds to the risk.
- Emotional Trading: Trade dependent on emotion instead of being strategic can create destructive features.
8. Best Intraday Trading Platforms
A reliable trading platform that offers advanced trading tools, live data, and low brokerage fees. Some of India’s most popular trading platforms are Zerodha, Upstox, and Angel One.
9. Checklist for Choosing Intraday Stocks
Before finalizing a stock for intraday trading, ensure it meets the following criteria:
- High liquidity
- Moderate volatility
- Alignment with market trends
- Influenced by news/events
FAQs
What is the best time to trade intraday stocks?
The first and last trading hours are ideal due to high volatility.
How many stocks should I trade in a day?
Focus on 2-3 stocks daily to manage risk effectively.
Is intraday trading risky?
Yes, but risks can be minimized with discipline and proper strategy.
What technical indicators are best for intraday trading?
Use moving averages, RSI, Bollinger Bands, and MACD.
Can beginners succeed in intraday trading?
Yes, with proper education, practice, and small initial trades.
Conclusion
Intraday stock selection is an art, and it comes with experience and practice. However, you may improve your chances of success by emphasizing liquidity, volatility, market trends, and analysis. This goes through to remain stable when your strategy is not so perfect. Intraday trading can be rewarding if done with the right mindset and approach.
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