Intraday Trading Guide: Tips to Understand Stock Fluctuations & Select Best Stocks

Last Updated : May 22, 2023, 3:14 p.m.

To dive into the rules for intraday trading, we need to understand the term intraday trading itself better. It refers to buying and selling stocks and dealing with them on the same trading day. It is important to understand the fluctuations of the shares and buy or sell them at a time that will generate the best profits. You have to be very attentive and cautious right from when the market opens until it closes. There are a few intraday trading tips and tricks to be followed while doing it to make a profit. If you fail to do so due to any circumstance, your position will convert into a delivery trade. Intraday trading is often called day trading, and the traders participating in intraday trading are called day traders.

This article introduces the rules for selecting the best stocks for intraday trading.

Rules for Selecting Stocks for Intraday Trading

A few intraday trading tips might make your experience more profitable. One of those essential tips is selecting the correct stocks to make the most out of your trading. Below are a few rules for selecting stocks for intraday trading –

Group Followers

Traders sometimes tend to decide to go with the equities that move with the index group and their sector. It implies that when the sector ticks upward, the stock price increases. However, if you opt to focus on the same stock every day, this might vary. You don’t have to worry about its correlation with the index, sector, or anything else.

Liquidity

A stock has high liquidity if it can be bought and sold without impacting the stock price to an extent. If you are a day trader, stocks with high liquidity are best for intraday trading. A high trading volume of stocks benefits traders since this type of trading is all about timing and precision.

Medium to High Volatility in Price

If you are following the intraday trading tips, you have to be attentive while following this one. It might give you an immediate price surge or loss. Volatility refers to the ability of the stocks to move in percentage terms. This price movement is essential in making money for day traders.

Types of Strategies Used

To make quick profits, day traders use a few techniques. These intraday trading tips or techniques can help you. Five of those tips are shared below.

• Breakout Trading – This process involves examining stocks that are fluctuating within a range and taking a position when it is believed the range that the stock is fluctuating in is no longer maintained.
• Scalping – It is a strategy used to make a small profit over time. It is based on the concept ‘little drops of water make the mighty ocean.’ Scalping is taking advantage of little price variations and having several positions during intraday trading.
• News Trading – This strategy involves staying current with all the global and current events and guessing how they will affect the stock price. Stay updated with all the recent financial and economic events and invest accordingly.
• Momentum Trading – Traders get an idea of how the price will move for a stock on a particular day, and they trade accordingly. For intraday trading, this is a very effective strategy to make money. You have to monitor the prices closely to get an idea.
• Trend Trading – As the name suggests, traders check the trends and patterns of stock to get an idea of its future. It involves closely examining the chart patterns, momentum indicators, and trendlines. A trader might follow the same strategy until the trend reverses itself.

Entry and Exit Strategies

Even if you pick the right stock that will give you profit, it is necessary to follow specific intraday trading tips for success. Here are a few established, tried, and tested guidelines to increase your profit through intraday trading.

Follow the Current Intraday Trend

As the market faces its ups and downs, it is the trader’s job to keep up with this trend. This type of trading requires you to focus on uptrends and downtrends and take positions accordingly. The trends often vary slightly, but that does not require changing your strategy. However, if you see the dominant trend changing, it is time to change your strategy and flow with the new trend.

Handle Things with Patience and Wait for the Pullback

Short selling and trendlines are low-risk but slow ways of entering into intraday trading. The traders derive trendlines by drawing charts and knowing the data’s best fit. Short selling in a downtrend means waiting for the price to rise and entering as it starts to go down. This step might give you overall profits if you are a little patient.

Take Profits

Since the trading is in a single day, do not give your time to trades moving negatively. In an uptrend, take profits that are on or slightly above the former price, while during a downtrend, take them at a slightly lower level than the previous price. Stay updated with the exits and entries.

Conclusion

Since intraday trading is to be done within a short time, it usually gives you quicker profits. But, to gain these profits, you need to follow some intraday trading tips mentioned above and understand the trends and flow of the stock. These can sometimes be risky. So, think and study before investing your money. Ensure you are ready to trade, and do not invest big amounts right at the beginning. You will learn gradually.

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