The most important question is how to choose equities for intraday trading. Not all equities are suitable for intraday trading since they must be predictable but being responsive to news flows. There are numerous approaches, however there are some general guidelines and parameters to follow. You can, for example, combine stability, responsiveness, and trends to determine how to choose stocks for intraday trading.
The first major problem is to create a universe of equities for intraday trading. You can't have more than 50-60 highly liquid stocks in your universe. Even with this many stocks to follow and trade, you should focus on the 10-12 top stocks for intraday trading. When we say top stocks for intraday trading, we don't mean the gains they can provide, but how easy it is to trade them profitably on a consistent basis.
There are various aspects to consider while choosing stocks for intraday trading. Here are some important recommendations to help you make sound decisions:
Emphasise on stocks that are highly liquid and actively being traded in the market for many days.
These companies have lower bid-ask spreads, making it easier to enter and exit positions without experiencing severe price slippage.
Look for equities with a high level of volatility. Intraday traders thrive on price changes, thus it's critical to select equities with the potential for large intraday price swings.
Higher volatility raises both profit potential and risk, thus risk management is critical.
Consider stocks that have a high trading volume. Adequate volume guarantees that market participants are interested and participating, allowing for smoother price changes and improved trade execution.
Price trends and technical indicators should be examined to identify probable entry and exit positions. Breakouts, pullbacks, and trend reversals on the chart can provide useful information for intraday trading methods.
Keep up with market news, corporate announcements, earnings reports, and other significant catalysts that may have an impact on stock prices.
News-driven events can generate short-term opportunities for intraday traders, so staying up to date on the newest developments is critical.
Evaluate the general health and performance of the industry or sector that the stock belongs to.
As this might raise the likelihood of profitable transactions, intraday traders frequently concentrate on particular industries that are displaying favourable trends.
Utilise efficient risk management strategies, such as determining a trade's risk-reward ratio and stop-loss orders.
Rapid decision-making and brief holding times are inherent in intraday trading, therefore a disciplined approach to risk management is essential for long-term success.
You might grow weary of hearing this over and over again, but opening your trading account and Demat account is the first step in any trade, whether it be intraday or delivery. Remember that intraday trading does not result in delivery, therefore if you simply want to trade intraday, a Demat account is not necessary. The short answer is yes, as per SEBI regulations, no equity trading of any kind is allowed without a Demat account connected to a trading account.
It is best to keep your intraday trading separate from your regular day trading if you are a frequent and consistent intraday trader. Maintaining a separate account makes it simpler to track results and earnings for tax purposes. In this situation, you can also enrol in the appropriate tools that will support your intraday trading.
The following are some starting points for intraday trading. Spend some time studying daily charts before you start intraday trading so that you become familiar with price patterns, trends, breakouts, etc. You must be a trader and analyst. Many tools provide technical assistance, but they most critically stay current with news flows.