uTrade Algos
Trading in intraday trade without prior knowledge or experience is like jumping into the ocean without knowing how to swim. When trading intraday, it is important to select the right stocks before placing trades for the day. In equity trading, one of the most interesting trades is intraday trading. Intraday trading is a method of trading stocks on a trading day and squaring off positions before the day ends.
Price movements tend to happen quite often in different directions when trading. However, in daily trade, prices may remain static or may change in an unfavourable direction. Therefore, it is essential for any intraday trader to identify the ideal kind of stock and how much to invest in the stock. The risk is high in intraday trading, and the volume of trade makes up for the small returns that traders may get from multiple trades in a day.
This said, selecting the stocks on intraday trade is the first step of intraday trade. This blog addresses this issue and presents some principles for choosing the right kind of stocks when intraday trading.
Principles for Selecting Stocks for Intraday Trading
Traders rely on two factors during intraday trade. These factors include the chart patterns and the sensitivity of stock prices. A trader who wishes to investigate more about a stock can relate to the stock news and understand whether the expectations of the following asset will go in an upward direction or not.
Intraday trading works better when one knows how to select the right kind of stock for intraday trading. An investor needs to have discipline. The key to trade is tracking the fundamentals of stocks. There are a number of stocks that can be considered for trading, and this list of stocks can be changed accordingly. Tracking stock on the basis of fundamentals, technicals, and news flows assists traders in understanding the nature of the stock. So, one of the big tasks is to find the combination of stocks that can be good for trading for the selected time period. To select stock for intraday trading, one can take the following things into consideration. These stock factors can be helpful for various reasons in day trading.
Factors to Consider When Selecting Stocks
- Shares Volume
One of the major criteria while doing intraday trading is the volume of the stocks. The total number of shares traded in the market at a particular time tells about the volume. It is mostly recommended to trade in stock with higher volume.
- Week Analysis
Study the movement of stocks that are constantly closing in negative or positive for the previous week. This analysis of stock movement will help one to understand the performance of a stock over a few days.
- Resistance
Some of the stocks need to be observed, and few of these shares move above the resistance level. The resistance and support levels are used to identify the volatility of a share. Shares with high volatility can be considered risky investments.
Each day, some stocks may perform better than others. Keeping an eye on their movements can help traders add or remove the stocks from their trading list for the next trading sessions.
Choosing stocks is not a one-day skill. One can also stick to stocks that have a presence in the derivative market. This type of stock direction moves moderately and is considered a highly liquid stock. Stocks with derivative segments are easier to rise as they are transparent in nature. After considering different factors, one must also define the entry and exit strategy of trade. Having trade entry and exit strategies is always beneficial for traders. By looking for certain intraday trading indicators, one will most likely get the buy or sell signals.
Intraday traders have limited time to grab opportunities. Therefore, they need to be as fast as possible. Any kind of delay can lead them to lose their invested capital. Highlighting the intraday strategies, one can take an uptrend or long position. In times of downtrends, traders focus on short positions. An intraday trade is not a single trade. It can be done in a series of trades. Unlike other trades, the dominant shift in intraday begins with a new trend.
Different Indicators for Intraday Trading
Technical indicators are a crucial part of day trading. One can use different indicators with several parameters in order to trade. One can customise this parameter as per one’s needs.
Moving Average (MA)
A moving average or simple moving average is an indicator that undertakes the average closing price of a stock over a time period. The period can range from 5, 10, 50, and 200 days etc. The line represents the MA on the stock chart, defining the buying and selling opportunities of stock.
Bollinger Bands
In the Bollinger bands, one has three lines stating the upper band and lower band. Whenever the stock price touches the upper band, it indicates that the share price is high as it has deviated from the MA value. When short selling stocks, it is common to expect them to revert to their MA. In the case when the stock price touches the lower band, it indicates to the trader that the share price is lower and cheaper to buy.
Other than these two indicators, there are other indicators, including the relative strength index (RSI), moving average convergence and divergence (MACD), and many more. These indicators work as pillars for one’s trading strategies. One can get quality insights along with the potential to plan and execute a trade with a better return on investments. Learn about effective intraday trading indicators.
Conclusion
In intraday trading, there are chances for traders to become greedy and invest their money in the wrong type of asset. This asset can drain all their money in vain. So, learning how to select a stock for intraday trading is crucial. While performing intraday trading, one needs to have patience and trust in one’s plan rather than luck. Defining trading goals can assist traders to control their trades according to what works best for them.