How To Select Stocks For Intraday Trading: Intraday trading is a popular form of trading that involves buying and selling financial instruments within the same day. This type of trading is popular among short-term traders who seek to take advantage of short-term price movements.

However, the usual question that new traders have is – “which stocks to choose for intraday trading and in what timeframe should they trade?”

In this article, we will understand how to select stocks for intraday trading and the time frames you can use for intraday trades.

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Rules For How To Select Stocks For Intraday Trading

Selecting the best stocks for intraday trading requires you to follow the following rules:

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How To Select Stocks For Intraday Trading #1 – Look for Liquid Stocks

Liquidity is the most crucial factor when selecting stocks for intraday trading. The price moves quickly when you are trading on an intraday basis and a high liquidity in the stock will ensure that you can buy and sell the stocks swiftly at any time.

Another significance of liquidity is its huge volume. It is possible to buy and sell big quantities of stocks with high volume without it having an impact on the stock price, which disrupts the market unnecessarily.

How To Select Stocks For Intraday Trading #2 – Look for Volatile Stocks

As you are aware, intraday trading takes place on the same day, and you can only profit if the stock moves in your direction. Only a volatile stock will experience good movement during the day. Thus, it is suggested to pick stocks with medium to high volatility.

However, it is also important to note that picking volatile stocks can also prove to be counterproductive if they move in the opposite direction of your expectations. Thus it is crucial to place a stop-loss whenever you engage in intraday trading

How To Select Stocks For Intraday Trading #3 – Select Stocks that move with the Market

Markets frequently increase or fall due to a variety of factors, including economic, political, social, and other factors. While engaging in intraday trading, it is recommended for a trader to trade in stocks that move with the general trend of the market. This increases your likelihood of making profits in intraday trading.

How To Select Stocks For Intraday Trading #4 – Trade based on Sectoral trends

The stock market is divided into several sectors. Being knowledgeable about these sectors is essential for intraday traders. If you observe any trending news that influences a certain industry/sector, you can choose stocks from that sector and execute suitable trades based on that information.

How To Select Stocks For Intraday Trading #5 – Monitor select Stocks

The market has thousands of equities that are exchanged, making it impossible for one person to keep track of them all. Thus, it is advised for traders to concentrate on a small number of shortlisted stocks.

Doing so can help the traders become more familiar with the stocks, which will enable them to make better trades. The best and most easy way to achieve this is to already have an intraday watchlist of companies.

Selecting the timeframe for intraday trading

Selecting the timeframe for intraday trading depends upon the type of trader you are in the market. Let us discuss the types of intraday traders and understand the time frame for each of these traders.

Scalpers: Scalpers are the type of traders that aim to capture the short-term volatility of securities and earn profits from it. The main aim of this trading strategy is to earn a lot of small profits from multiple trades undertaken. The duration for which the scalpers hold their position range from a duration of few seconds to a few minutes

As the scalpers execute many trades in a day, they need to find as many opportunities as possible which they will be able to find in the lower timeframes. Thus, the best time frame for intraday trading can be the 1-minute, 3-minute, or 5-minute timeframe.

Day/Momentum traders: Day/Momentum traders are the type of traders that aim to capture larger price movements and execute fewer trades when compared to scalpers. Here, the traders follow the trend of security and hold onto the position for a duration of a few minutes to a few hours.

As Day/Momentum traders try to capture a big movement in security, they will need to look at the larger time frame as the price moves more in the long run. Thus, the best time for intraday trading can be a 15-minute, 30-minute, or 1-hour timeframe.

Intraday Trading Rules while executing trades

Following are the rules to be followed while executing intraday trades:

Have a well-defined trading plan

A well-defined trading plan is one of the things while intraday trading. Before you enter any trade, you should have a clear grasp of your entry and exit points, stop-loss levels, and profit objectives.

This will allow you to make more educated trades, especially in volatile markets. Your trading strategy should be based on your risk tolerance, investment objectives, and market analysis.

Stay disciplined

Intraday trading may be stressful, and it is easy to make wrong decisions that result in substantial losses. As a result, it is important to stick to your trading strategy and avoid making bad judgements based on emotions. Staying disciplined will help you avoid expensive mistakes and boost your chances of success.

Manage risk

Because intraday trading is inherently riskier than longer-term investments, risk management is very important. One can manage risk by using stop-loss orders while trading which can automatically exit a trade when the price hits a specified level. 

Capital preservation is another important part of managing risk. Thus, traders should limit the capital invested in a single trade in order to avoid huge losses.

Keep emotions in check

Trading based on emotions results in more losses than profits, so it is important to keep your emotions in check. When making trading decisions one should be aware of their emotional state and follow the trading plan which will help you avoid making bad trading decisions

Stay informed

Intraday trading requires regular market monitoring and staying informed on the latest news and happenings that may affect your trades. This implies you should stay updated on market news and occurrences, as well as analyze the markets regularly to make informed trading decisions.

Avoid over-trading

Many intraday traders make the mistake of overtrading. This involves entering too many trades in a short duration, which increases the risk of loss.

Overtrading increases the probability of losses, increases transaction costs and can also lead to mental exhaustion making you vulnerable to mistakes. Thus, it is important to stick to your trading plan and only enter trades when conditions are favourable.

In Closing

As we conclude our article on ‘How To Select Stocks For Intraday Trading”, one should note that irrespective of the type of strategy or methodology one uses to execute intraday trades, it is not possible to earn profits every single time.

Rather, than getting disappointed with the losses, one should examine where you went wrong and learn from your mistakes so that you may avoid them in the future. This can make you successful in the long run.

Written By Aaron Vas

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions.


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