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Things You Don't Know About Identifying Intraday Trading

Investment

Megha Parmar

6 Dec, 2022
8 mins read

Intraday trading is all about buying and selling shares and stocks in the stipulated time before the market closes. Such a trading tactic leaves the investor with the ability to extract the most out of the minor fluctuations happening in a single day. However, given the technicalities involved, intraday trading can be a bit tricky for a novice trader.

But with multiple trials and persistent efforts, one can dampen their feet in the world of intraday trading. So, how should one go about intraday trading? And how to obtain optimal results out of it? This blog traces down the answers to all these questions. Read till the end.

Fundamentals of Successful Intraday Trading

Every trading tactic or technique is governed by a set of fundamentals or principles so that they can be applied in a manner that can lead to the optimum result. The same goes for intraday trading. Intraday trading comes into the picture clearly when seen from the lens of the below-mentioned principles:

  • Pick Your Stocks Correctly.

Opting for stocks that are both volatile and liquid is the norm. This is because a volatile stock can undergo tremendous price movements yielding profits. On the other hand, liquid stocks have a great volume. So, the first principle tells the trader to opt for stocks that are more volatile and liquid in nature.

  • Find The Trend.

Once you have picked the stocks correctly, it’s time to identify their trend. Usually, it is recommended that strong stocks are traded in an uptrend. When the futures are moving upward, a good trader always looks for stocks that are aggressively moving upwards. When the market futures backfire, a strong stock will not be affected much, thus your profits will be maintained. On the other side, weak stocks are often traded in a downtrend. Here, when the futures go downtrend, a weak stock will not move up. They can yield enormous profits when the market is moving downwards i.e., is falling. If you go with the trend, then you will be able to identify more opportunities where the stock fluctuates favourably.

  • Take A Call At The Ideal Price.

Traders operating in the stock market use support and resistance to monitor stock prices and eventually, they evaluate the entry and exit points at the right price. The technique is to buy a stock when it rises above the support price. In addition to that, it is advised to sell the stock when the levels of resistance are met.

  • Stop Loss

Indian traders have the habit of not giving up. They tend to stick to their beloved stocks even when they go down as compared to the support prices. This ultimately triggers even greater losses. So, it is recommended that a trader should settle for a small loss rather than consecutively incurred losses every second day. As soon as you witness a triggered loss, immediately exit it.

So, these fundamentals can help you in exercising intraday trading in an efficacious manner. Let’s understand how to select stocks for intraday trading.

How to Select Stocks for Intraday Trading?

All the fundamentals or principles of intraday trading have a common source – picking the right stock. But what is a right stock and how to identify it? In this very section, your significant concern has been discussed in detail.

  • Vouch For Liquid Stocks.

It is recommended to always opt for stocks that are liquid in nature so that large number of stocks can be purchased or sold without indelibly impacting the price of the stock. On top of that, liquid stocks give you an edge in entering or exiting the trade market.

  • Don’t Lay Stress On Correlation Much.

Traders often opt for stocks that are correlated with indexes and sector. This implies that when that sector or the index ticks upward, the price of the stock also rises. However, if you are trading with the same stock every day, then it is wise to focus on that stock rather than its correlation with indexes or the sector.

  • Look For The Intraday Trend.

The market always moves as per the trends. And a good trader needs to identify these trends. Lay emphasis on long positions while the market trend is going upwards. For a downtrend, always opt for a short position. It is noteworthy that these trends rise and cease within a day. This means that they don’t last long. So, keep a vigilant watch and don’t go with the flow.

  • Patiently Wait For A Grand Pullback.

Trend lines tell us all we need to know about the beginning as well as the end of the price waves. However, these cannot tell you when and where to pullback. Hence, it is said that one should wait until the price moves up in a downtrend because that’s where you will be witnessing a grand pullback.

  • Count On Regular Profits.

When it comes to intraday trading, one has constricted time to capture profits. So, one should count on regular profits. During an uptrend, profits should be slightly higher than the current trend’s price and slightly lower during a downtrend.

  • Don’t Emphasize On Trend.

Many a time, markets don’t follow any trend. Yes, you read that right. In such an unforeseeable scenario, the market stalls. And then, it becomes difficult to trade. So, it is recommended that one shouldn’t emphasize on trends throughout the day but should look for movements that are insurmountable for the risk to be exceeded by rewards.

But given the changing dynamics of the Indian stock market, this isn’t enough. What one needs is a handful of tips that can make intraday trading efficacious than ever.

A Handful of Tips

As per financial experts, investing in the usual Indian stock market is much easier as compared to intraday trading. This is because it makes traders, both the novices and the proficient ones, lose money. To keep the high volatility in check, here are some tips that can help you in making the right decision during those 24 hours of intraday trading:

  • Pick Two Or More Liquid Shares.

By doing this, you can easily square your open positions by the end of the day. It is advised to invest only in large caps and not in mid-size or small caps because then, your share volume will get reduced, and you will be held up.

  • Keep Realigning Your Trade Strategy.

Traders often have the habit of toggling between long-term and intraday trading. This can be catastrophic for your trade account since you might end up investing long-term for a stock that only required a 24-hour investment. So, keep realigning for intraday trading.

  • Moving Against the Market? Don’t Even Think Of It.

Nobody can predict the movement of the market cent percent accurately. As a result, traders often start moving against the market. This can culminate into huge losses. So, whenever you encounter such a situation, simply exit your position. Don’t go against the whims and fancies of the market.

  • Keep Timing The Market.

Moreover, the most important of all, keep timing the market. Don’t start trading after immediately entering the market. Just wait and observe.

 

Final Words:

So, the bottom line is that identifying stocks for intraday trading is all about identifying the right stock and taking right entry and exit. Keep these pointers in mind and gear up for your first bout of intraday trading.

Happy trading!

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