The word intraday essentially means ‘within the day’. Intraday trading is the process of buying and selling stocks on the same day. Traders usually prefer to do intraday trading because it earns them quick money via the profit that comes in after selling the stocks. And also because the brokerage charges are very less in comparison with the other services. To be able to succeed as a day trader, it is very important to know which stock to pick for intraday trading and how to do it. There are thousands of equities to choose from and the traders can pick whichever stock they want. They are often unable to make profits because they do not choose the right stocks to trade. So one of the first and the most important intraday trading strategies is, selecting the appropriate stocks to trade. Here is a list of a few factors that you should consider while choosing intraday trading stocks.
- Is the stock liquid enough?
- From an intraday trading point of view, showcase liquidity is for sure on one of the most significant things to mull over. We are certain, you wouldn’t have any desire to go into the trade in a position, and afterward need to stress over how to leave the same. However, what amount of liquidity is sufficient liquidity? How would you realize that the stocks are sufficiently liquid to put resources into them? While there is no rigid guideline, a liquidity proportion of 10% can be viewed as a benchmark to think about putting resources into the stock.
- Is it possible to buy or sell the stock with a low impact cost?
What does low impact cost mean? It is the impact on the stock price when you place a large buy or sell order on the stock. When the impact cost is high, the risk is high too, since it means that the price at which you will get the stock could be unfavorable to you in case of large orders. This will change your numbers and economics in the intraday trade. Hence it is always advised to buy stocks with low impact cost.
- Is the stock widely owned?
These subtleties are accessible to be looked at in the ownership pattern of the stock and are accessible on the sites of the trade. The trading pattern of the stock can likewise give you a few pointers with respect to the same. Stocks that are not generally owned are known to be more volatile and different administrators will have the option to corner these stocks without any problem. As an intraday dealer, consistently incline toward stocks that are liquid and widely owned. That will lessen your hazard impressively.
- Does the stock sustain narrow tick spread?
This is fundamentally the same as, and is an expansion of liquidity and impact costs. The tick is a base gap between two orders. There must be sufficient volumes on each tick to fit the bill for an intraday trade. You would prefer not to submit a request and understand that your request execution has really happened a few ticks away. In intraday trades, you attempt to capitalize trends thus you ordinarily put in orders. Along these lines, tick spread is a significant part of intraday trade. The tinier the tick gap, the better it is for you.
- Does it show decipherable chart patterns?
An intraday trader usually needs to depend on technical charts. Apart from the fact that as a trader you must teach yourself the ability to read the charts on your own, the stock needs to depict clear chart patterns as well.
- Is the stock price-sensitive to the news flow?
As an intraday trader, you need to rely on two factors more than most, i.e chart patterns and sensitivity to news flows. Never buy a stock for intraday trading that does not react to the news. A stock’s sensitivity to news is what makes your strategy of buying on expectations and selling on announcement work.
We hope these tips and intraday trading strategieswill help you once you start trading. Ask an expert for more advice if you need any.