How to Pick Intraday Stocks

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The Intraday Trading Mistake that an investor usually do is pick a random stock without research and analysis and trade in it. That is why it is necessary to know How to pick intraday stocks?

How to make sure I get the best of the returns from my trades?

Shall I hold or exit or buy more?

Do these and a lot more related questions bang up your head when you sit in front of the trading terminal or open up your mobile trading app?

Don’t worry! This is normal and almost every trader goes through this phase in his/her initial trading period. All you have to make sure it doesn’t let all these questions rule your head and distract you from the actual job i.e. trading.

In this detailed review, we will break down all these confusions and get the answer to the topmost doubt – How to Pick Intraday stocks?

But first, let’s brush up on a few basics.

Intraday trading is a unique domain, that includes buying and selling of securities within the trading day. It capitalises on the volatility of the prices of the securities to earn profits.

The specific domain that intraday trading is, it needs specific intraday trading strategies, trading tools, procedures and techniques for an intraday trader to make suitable decisions.

Pick Intraday Stocks Rules

The traders need to research a lot, devise strategies, practice them and then come up with changes and alterations depending upon the market scenario, the outcomes of their trades and their own specific risk appetite and circumstances.

The most important aspect of intraday trading is to be able to pick intraday stocks that will be able to give returns and profits as expected by the intraday trader.

It is the most difficult part of the job as if the trader is not able to pick intraday stocks that fit his requirement, market sentiments and other criteria, the whole process just comes to a halt!

The situation is quite similar to try to cook a perfect meal, with all the ingredients available in high quality except for the central core ingredient being rotten or of bad quality. The dish will end up being a disaster however hard the cook tries.

Similarly, even if a trader learns the best of strategies, and uses the best intraday trading indicators, but if the stocks chosen by him are not correct, the end result will undoubtedly be a failure!

The choice to pick intraday stocks depends on a number of factors, including the level of experience of the intraday trader, the style of trading, the amount of capital available, the risk appetite of the trader, market situation and so on.

It is a part of the traders’ trading plan, however, the process is dynamic and keeps evolving from time to time as the traders keep learning from their experiences and understand their own strengths and weaknesses.

The bottom line of any strategy that is used to pick intraday stocks is to make it one that preserves the capital and controls the risk.

Thousands of stocks are available in the market to be traded, and to an untrained eye all of this may be too overwhelming, however, an experienced trader must know how to do the proper research and pick intraday stocks that fit his trading plans and strategies perfectly.

You can read this review in Hindi as well.

There is a variety of stocks depending upon the volatility, prices, and volume and with associated risk elements; to begin with, risk must be kept minimum, which can be increased as the skills and experience increase with time.

There are many trading softwares and tools available to help the traders pick the intraday stocks and many ways too but a trader must pick the way that fits his own individual style using his own discretion.

5 Ways to Pick Intraday Stocks

Following are the Five Commonly Used Ways to Pick Intraday Stocks for your trading:

#1 Liquidity is the most important Criterion:

The holy grail of intraday trading is Liquidity.

It is the most important way to pick intraday stocks. It is the most important characteristic to be looked into when choosing stocks for intraday trading.

Liquid stocks trade in high volumes and large quantities can be bought and sold without affecting the price a lot, and as intraday trading depends a lot on speed, liquid stocks give ample chance for high-speed trading.

Even statistically, liquid stocks show more movement in price in a short period of time, giving the trader ample opportunities to trade.

Also, liquid stocks are less unpredictable and chaotic, giving the trader a good chance of accurate prediction of price movements. So, a very precise and effective way to pick intraday stocks is to pick stocks with high liquidity; it works.

#2 Stocks must be picked after Extensive Research:

A very crucial element to pick intraday stocks is to do a lot of research. Successful intraday traders are those who keep themselves abreast with all the latest happenings through current news and do a lot of good quality back-end research before choosing the stock to trade in.

The research must include the historical study of the stock, both technically and fundamentally and studying the sectors and indices to understand his own interest and to know what is happening.

After the identification of sectors and indices after research, few stocks are put on the wish list and then studied.

Proper research will help to shortlist the sectors like banking or retail or pharmaceuticals, and the shortlist the stocks with high popularity or high liquidity and volumes in that particular sector.

The research also includes analysing the selected stocks on a daily basis to understand whether they are expected to move up or go down and their expected level of resistance and support.

A seasoned intraday trader will devote a lot of time to research before he decides to pick intraday stocks suitable for him and his trading plan.

#3 Choose stocks with Moderate Volatility and Strong Correlation:

Another very important way to pick intraday stocks is to choose the stocks that have a strong correlation with the major sectors and the indices. Such stocks are more predictable and reliable.

Any good or bad news will affect these stocks in the same way as it affects the entire sector.

These stocks follow the current trend; strong stocks remain strong in the bullish markets and weak stocks remain weak in the bearish markets.

Also, in order to pick intraday stocks, the intraday trader must choose stocks that have moderate volatility.

The stocks with very high volatility are quite unpredictable and unreliable and involve huge risks, while those with moderate volatility can be relied upon and can be helpful in making small but sure profits.

The stock picking softwares provide a list of such stocks which are the positive hot shares or negative hot shares and so on.

#4 Trade Volume and Trade Volume Index:

This is an effective way to pick intraday stocks.

Stocks with high volume indicate high liquidity which is a boon in intraday trading. The volume of a stock is the number of times a stock is bought or sold in a time period.

More volume means that there is more interest in the stock, either in buying it or selling it.

This proves to be helpful to intraday traders as all the technical trading indicators also work the best with high volumes.

Intraday traders mostly use the trade volume index, which indicates the money going in and out of an asset, to decide whether to pick a particular stock or not.

High volumes give the traders easy opportunities to enter or exit a stock. There must be minimum volume requirements before picking intraday stocks, mostly an average daily volume of 1 million-plus.

The traders must also keep an eye on the stocks that show a sudden increase or decrease in volume, such stocks have a great potential in intraday trading. Many softwares provide a list of such stocks as Unusual Volume by Yahoo Finance.

#5 Stocks with low Bid-Ask Spread:

This is an important technical way to pick intraday stocks. The bid price is the price where the trader can sell the stock and the ask price is the price at which he can buy the stock.

The difference between the bid and ask price, called the bid-ask spread, becomes an important parameter as when the spread is low there is more opportunity to capture the price movements and book profits.

So, for one stock with a bid price of ₹2530.35 and ask price as ₹2530.6, the spread is Rs 0.25 and for the second stock with bid price as ₹47.20 and ask price as ₹48.35, the spread is ₹1.15, the first stock is more suitable for intraday trading due to low bid-ask spread.

As a bottom line, any or all of the above-mentioned ways can be chosen by the intraday traders to pick intraday stocks and the decision is made considering a mix of all the requirements like liquidity, volatility, volume, the risk involved and other factors.

The way that is chosen also varies from trader to trader based on his personal experiences and requirements; the way that works for one trader at one point in time may not work for him at other times or for another trader.

Although choosing the appropriate and most suitable stocks is the most important decision that is to be made by an intraday trader as it is the basic focus around which the entire intraday trading revolves and operates.

In case you now understand how to pick intraday stocks and want to start trading in the share market, then fill these basic details.

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