Intraday Trading for Beginners: How to Choose the Right Stocks?
Intraday Trading for Beginners: Introduction
The stock market enables you to earn great returns if you are investing in the long term as well as in the short term. Intraday trading refers to trading within the day. The stock market is volatile and the share prices fluctuate throughout the day which helps a trader to draw profit from these price movements by opening and closing their position within the same day. Intraday traders have to closely pay attention to price movements, and timing and have to settle all their positions before the market closes. If you fail to settle the position, your broker will square off your position. Suppose a person wants to buy shares of a company, they are given the option to select delivery trade or intraday in the portal of the platform used. If the person chooses intraday then the user has to buy and sell the same shares of the company on the same day before the market closes. For example, if a trader buys a stock of a company for Rs 100 at 9:35 AM and sells the same stock for Rs 105 at 3:00 PM here, the intraday profit is 5%.
This article covers:
- Terms used in intraday trading
- How to select stocks for intraday?
- Intraday trading suggestions
- How to earn a decent profit in intraday trading?
Terms used in intraday trading
Long position: A long position is buying a stock, currency, or commodity with the belief that the value will increase by the end of the day.
Short position: A short position is buying a stock, currency, or commodity with the belief that the value will decrease by the end of the day.
IOC (immediate or cancel): IOC (immediate or cancel) order is an order that allows an order to buy or sell a security immediately in the market, as any unexecuted order will be removed from the market.
Stop loss: Stop loss order is placed to automatically sell the security once the price reaches the stop loss you have set.
Support: A support level is a price at which the price is less likely to fluctuate and buyers tend to enter into a stock at the support level.
Resistance: Resistance is the opposite of support, resistance is a level at which traders expect maximum selling.
Bullish: When the stock price goes up, it is said that the stock is bullish
Bearish: When the stock price goes down, it is said that the stock is bearish.
How to select stocks for intraday?
Traders need to identify the right stocks to succeed as an intraday traders and once you identify these stocks, you can analyze or research them further to identify trends.
- Do thorough research: Quality research plays an important role in intraday trading. Firstly, identify the index and then choose the sectors that are of your interest. Technical analysis along with fundamentals of security can help you to find the right stocks to profit from intraday.
- Follow the trend: A security can either be in an uptrend or downtrend and it is important to trade considering the trend of the security. When the market is in an uptrend, find securities that can potentially arise. On the other hand, when the market is in a downtrend, find securities that are likely to fall downwards.
- Technical analysis: A trader uses technical analysis to identify buy and sell signals of security. There are various indicators used to find buy or sell signals of security and one should use an indicator that works best for him.
- Time analysis: Choosing the right time frame is important while studying charts although it is associated with few risks. Time analysis gives you insights into the past, present, and future of the market. One or two-hour time frame is considered the best time frame for intraday.
- Look for stocks that have a high volume: Usually, the large-cap stocks have high volume and if you trade in stocks that have high volume, you are less likely to see huge swings throughout the market hour.
- Charting analysis: Charting analysis helps you to calculate the target price and depict the price movement from the start to the end of the day. One can trade using charts for short-term, medium-term, and long-term market analysis. Some of the technical analyses best for intraday trading are moving average, moving average convergence divergence (MACD), relative strength index (RSI), Bollinger bands, etc.
Intraday trading Suggestions
Today, intraday suggestions are available in plenty, and finding the right source of information is the biggest concern. So, to become a successful trader, all you need to find the right source of guidance, and information and have is a trading strategy that works for you, not merely intraday tips.
- Choose the right broker: Intraday trading involves frequent transactions in a day. So, it is important to choose the right broker that charges minimal brokerage, quick decision making, and execution.
Intraday trading includes securities transaction tax (STT), transaction charges, stamp duty, SEBI regulatory fee, and GST on brokerage. And these charges can eat up a major percentage of your intraday profit. So, choose your broker wisely that charges a minimal fee for intraday trading.
- Intraday trading strategies: To become a successful trader, you must be disciplined and have a strong trading strategy that suits you.
- Choose liquid stocks: Liquidity is the most important criterion to look at while trading intraday as it allows you to buy or sell in larger quantities at ease. Avoid trading in small-cap and mid-cap stocks as they do not trade at huge volumes.
- Always set a stop loss: When you buy a share, the share price will either go up or go down. So, it is important to decide how much loss you can take if the trade goes opposite your position.
- Book profit when the target is reached: The secret to becoming a successful trader is discipline, mindset, and controlling your greed. Generally, traders do not book profit when the target is reached and when the stock price takes a reversal trend, it is too late to place the order. So, never wait for the stock price to move further when it has reached the target price.
- Work on your mindset: Traders should always have a calm and clear mind while executing orders. It is said that trading is 10% skill and 90% mindset.
- Track market every day: To find out the best stocks for intraday trading tomorrow, you must track the market every day. If you consistently follow the market and follow trends, you can easily find tomorrow's intraday stocks
How to make a great profit in intraday trading?
If you are one of those traders who trade on the advice of someone else's tips or your trading bets are based on intuition then you are not going to stay in the market in the long run.
Firstly, you must have a strong understanding of how the stock market works, and its fundamentals, and being a trader you must be good at technical analysis. Technical analysis includes several indicators to find buy and sell signals but you don't need to use each indicator. All you need to do is learn to use a particular indicator over a long time as using multiple indicators can be confusing for traders.
Secondly, you must know money management, you cannot use all the funds in intraday trading as trading is associated with high risk. So, one must allocate only a certain amount, one is okay to lose.
Thirdly, work on your mindset. As you know the stock market is driven by behavioral finance and one can lose money if he has no control over his emotions.
And lastly, stick to your strategy. Work on your strategy to advance it and follow your strategy or formula closely instead of chasing profit as the right strategy will do the work in intraday trading.
To sum up, the right stock selection, time frame, technical indicator, and strategy are the important steps in intraday trading. However one cannot learn intraday trading in a day, it requires consistent practice for a long time. Make sure your trading bets are based on data-driven, not emotion-driven decisions.
Important things to remember:
1. Do Not Blindly Follow Hot Tips
No matter how credible the source is, never follow a stock marketing tip blindly without conducting thorough research personally. Always select the stocks after doing proper research and analysis on the performance as well as the companies. While some tips can work out to give you huge benefits, the wrong ones can push you down under the risk pretty quickly.
2. Eliminate Loser Stocks from Portfolio
There is absolutely no guarantee that a stock will rise after a great fall. Know that it is extremely important to be practical about what is possible and what's impossible in the stock market. So, upon realizing that a stock is performing poorly in your portfolio, accept your mistake and sell it immediately to prevent further losses.
3. Don't Exceed Your Investment Budget Abruptly
While it's true that long-term investments are way better than other forms of investment, you shouldn't exceed your investment budget in a haste. Instead, decide on a fixed amount and invest it across various good stocks. Rather than investing in only one stock, divide your budget evenly across multiple good-performing stocks and shares.
What is the most crucial thing in intraday trading?
Timing plays the most crucial role in intraday trading.
What time is the best suitable for intraday trading?
Experts suggest that from 10:15 to 2:30 pm is a suitable time to conduct intraday trading.
Can you keep intraday shares the next day?
Yes, you can keep it the next day or you can keep it for as long as you want.
Which candle is used by intraday traders?
The shooting star candlestick is considered the most reliable candlestick pattern for intraday trading.
How to find intraday stocks for tomorrow?
Find liquid stocks, filter stocks based on percentage, and rupee value movements, and classify stocks as per correlation with the market.
How many shares are included in intraday suggestions for today?
There are 39 intraday stock suggestions for today.
How many stocks are included in the intraday trading suggestions for tomorrow?
44 stocks are included in the intraday trading suggestions for tomorrow.