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How to Select Stocks for Intraday Trading

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Stock Market

How to Select Stocks for Intraday Trading

Posted by ONLINE NIFM
21-Jan-26 04:19PM

Intraday trading, also called day trading, is one of the most exciting but difficult ways to trade in the stock market. Unlike long-term investing, where you buy stocks and keep them for months or even years, intraday trading involves buying and selling stocks all within one trading day. The main goal is to make money from small changes in stock prices. One of the most important things for intraday traders is picking the right stocks. If you choose the wrong ones, you might lose a lot of money, but if you pick the right stocks, you can make profits quickly.

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Understand What Makes a Stock Suitable for Intraday Trading

Not every stock is good for trading throughout the day. The stocks that work best usually have certain features:

  • High Liquidity: Stocks that are traded a lot are easier to buy and sell without making big moves in their price. Liquidity helps you to start and finish trades quickly.

  • Volatility: Volatility means how much a stock's price goes up and down. Intraday traders look for stocks that change a lot because that creates chances to make money. If a stock's price doesn't change much, there's not much chance to gain profit during the day.

  • Market Interest: Stocks that have news, events, or strong market feelings often move up and down a lot. Company announcements, earnings reports, or changes in a particular industry can cause big price changes within a single trading day.

In short, liquidity + volatility + market interest = ideal intraday trading candidate.

1. Use Technical Indicators for Stock Selection

Technical analysis is important for traders who buy and sell stocks within a single day. Unlike long-term investors who look at a company's basic value, day traders use charts and price patterns to make decisions. Here are some common technical tools that help pick stocks:

  • Moving Averages: Short-term moving averages, such as those on 5-minute, 15-minute, or hourly charts, help spot trends. When a stock's price crosses a moving average, it may signal a possible trend for day trading.

  • Relative Strength Index (RSI): RSI helps determine if a stock is too high or too low. For traders who buy and sell within a day, RSI can show when to enter or leave a trade.

  • Volume Analysis: When trading volume goes up, it can signal that big price changes are coming soon. Stocks that show unexpected volume levels might have chances for profit within a single trading day.

  • Support and Resistance Levels: Knowing the important price points where a stock usually turns around can help traders decide when to buy or sell.

2. Look for Stocks in the News

News-driven stocks are usually good choices for trading during the day. News about company profits, new products, government rules, or big world events can cause quick price changes. Here are some ways to find news-driven stocks:

  • Financial News Platforms: Websites like Bloomberg, CNBC, and Reuters provide real-time updates.

  • Stock Screeners with News Alerts: Tools like TradingView, Moneycontrol, or MarketWatch can filter stocks that are trending due to news.

  • Sector-specific Developments: Sometimes whole industries respond to big economic changes. For example, if the price of crude oil goes up quickly, it can affect the value of energy company stocks.

3. Focus on Highly Liquid Stocks

Liquidity is very important for trading during the day. Stocks that have a lot of buying and selling happen throughout the day let traders buy and sell quickly without much price difference. Here’s how to find such stocks.

  • Average Daily Volume: Look for stocks that have a high amount of shares traded each day. Stocks that move in millions of shares are usually easier to buy and sell.

  • Tight Bid-Ask Spread: A smaller spread shows better liquidity. Big spreads can reduce profits and make trading less effective.

  • Large-cap Stocks: Usually, big companies have more cash on hand and are easier to sell, but they might not change direction as quickly as smaller, more risky stocks.

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4. Select Stocks with Clear Trends

Intraday trading works well when stock prices are moving in a clear direction, either going up or down. When stocks move sideways or stay within a certain range, it's harder to guess where the price will go next. To spot trending stocks:

  • Use Trend Indicators: Moving averages, MACD (Moving Average Convergence Divergence), and Bollinger Bands can help identify trends.

  • Check Recent Price Movement: Stocks that keep moving in the same direction throughout the day usually keep going in that same direction.

  • Avoid Flat Stocks: Stocks that start trading and stay close to the same price without much movement are not good for trading during the day.

5. Monitor Pre-market and Opening Session Activity

The first hour of the trading day, when the market opens, usually shows the direction prices will move during the day. What happens before the market opens can give hints about which stocks are likely to be active. Steps to analyze:

  • Pre-market Volume: Stocks that see more trading before the market starts often keep moving when the market actually opens.

  • Price Gaps: A stock that starts trading much higher or much lower than its last closing price can gain momentum in the short term.

  • Sector Movements: Stocks usually go up or down along with other companies in the same industry. Keeping an eye on industry indexes can help you understand which stocks might move in the same direction as the trend.

6. Use Stock Screeners and Filters

Stock screeners can save time and help focus on the best candidates for intraday trading. Key filters to consider:

  • Volume Filter: Only show stocks with high trading volumes.

  • Price Movement Filter: Look for stocks with significant percentage changes in the last hour or day.

  • Volatility Filter: Identify stocks with higher intraday volatility.

  • News Filter: Focus on stocks mentioned in recent market news.

7. Risk Management Considerations

Even the best way of choosing stocks won't be effective without good risk management. Intraday trading moves quickly, and you can lose money fast. Key practices include:

  • Position Sizing: Never risk more than a small percentage of your trading capital on a single trade.

  • Stop Loss Orders: Always set stop losses to protect against unexpected price reversals.

  • Profit Targets: Define exit points for taking profits to avoid greed-driven mistakes.

  • Avoid Overtrading: Focus on a few high-probability trades rather than chasing every price movement.

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8. Practice and Observe

Selecting stocks for intraday trading is a skill developed over time. Before committing real money:

  • Paper Trading: Use online trading platforms to try out picking stocks and making trades without using real money.

  • Track Performance: Keep a journal of trades, noting what worked and what didn’t.

  • Refine Criteria: Adjust stock selection parameters based on past performance.

Conclusion

Choosing the right stocks to trade during the day. It involves knowing how the market moves, using technical tools to analyze prices, keeping an eye on news that might affect stock prices, and understanding how easily a stock can be bought or sold. Traders should look for stocks that have a lot of trading activity, move a lot in price, and are moving in a clear direction. Using technical tools and managing risks carefully can help increase the chances of making money. Keep in mind that day trading isn't about trying to trade every stock, but instead picking a few that have the best chance of making a profit on a particular day.

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