How to Choose Stocks for Intraday Trading

How to Choose Stocks for Intraday Trading?

Intraday trading is one of the best trading options for short-term investors that open and close the trading position within the same day. In other words, those who get in and out of the stock market in 24 hours are called intraday traders.

While this can be a lucrative opportunity for those who are getting started with stock investments, intraday trading works for only those who manage to select the right type of stocks. In this post, we will discuss a few tips for choosing the best stocks for intraday trading. Let’s take a look:

  • Choose Only Liquid Stocks

Liquid stocks refer to stocks that have a significant volume of trading. You can buy and sell these stocks in large quantities. For intraday traders, stocks with high liquidity make the best choice. You need to consider the liquidity of the stocks at different price levels before making an investment.

There are stocks that offer a very high level of liquidity at a low price, but the volume of these stocks falls once they get to a specific price level. The general rule is that you should buy stocks with high liquidity for a successful investment.

  • Avoid Stocks with High Volatility Levels

Many factors affect the price movement of stocks. The trading volume, political factors, and current news around the company are a few crucial factors that might have a significant role in influencing the prices of the stocks. For example, the latest announcement can result in unpredictable movements in the stock prices.

It is better for investors to avoid such stocks, as their volatile nature can affect the prices and your investment significantly. Besides that, these stocks have a low trading volume that makes them illiquid. With that being said, a little volatility is also important for stock trading, as it indicates the active stocks and liquidity.

  • Follow the Current Stock Market Trend

The reason why research is important for intraday trading is that it has a big impact on your returns. You must research the current trends and follow them when making investment decisions. If the market is bullish, opt for stocks that are likely to rise in value. In the bearish market, find the stocks whose value might decline. Following the trend in the stock market is all about identifying the stock market condition and price movements. The main goal is to avoid challenging the stock market and rather go with the flow.

  • Identify Strong and Weak Stocks

Once you have selected the liquid stocks, the next step is to narrow down your options to the strong stocks. Strong stocks are likely to move in the direction of the stock market, which means the rise in the stock market will result in an increase in the value of the stock. For instance, if the market grows by 10%, the stocks will increase by 20-30 percent. Weak stocks do not move in the direction of the stock market.

  • Do Your Homework

You can’t be a successful investor if you are desperate about trading. It’s important to do your homework and research the market conditions well before making any decision. Create a list of stocks, the current position of the company, the goals of the organization, and liquidity.

Making profits from the investment within a few hours from small fluctuations in the rates is not a cakewalk. You need to do your research, understand the market, and learn more about intraday trading before getting started with stock investment. There are hundreds of stocks available in the market, but there is no way you can conduct research on each stock or keep tabs on them all, which is why you should shortlist the stocks of a few companies and research them thoroughly.

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It is, therefore, important to learn both the pros and cons of intraday trading to get a better idea of how this market works and how exactly you can grow your money. In this post, we will walk you through a few advantages and disadvantages of intraday trading. So, keep reading to learn more.

• Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.
• Ensure that pay-out of funds/securities is received in your account within 1 working day from the date of pay-out.
• Be careful while executing the PoA (Power of Attorney) – specify all the rights that the stock broker can exercise and timeframe for which PoA is valid. It may be noted that PoA is not a mandatory requirement as per SEBI / Exchanges.
• Register for online applications viz Speed-e and Easiest provided by Depositories for online delivery of securities as an alternative to PoA.

• Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

• Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: NSE, MCX

• Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

• Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

• Don’t ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

• Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

• Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

• Do not deal with unregistered intermediaries (who are not registered with SEBI/Exchanges).

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