Its hard to find information on how to choose stocks for intraday trading, so I decided to put together this brief, but to the point structured guide. Intraday trading means to trade within the opening and closing of a single day on the stock market. Their are some things you can look for in a stock to make sure its a good one for intraday trading, and also plenty of things you want to avoid.
Make Sure Your Intraday Stocks Show a Solid Trend
One of the first things you should be looking for when selecting stocks for intraday trading is the trend. Some stocks will follow the general market flow, and can be more predictable then those stocks that do not. You should also look for stocks that show their own trend, which is usually displayed in “waves”. In up-trend is one of the best things to look for. You can spot an uptrend when the peak of the new wave is higher then the last, and the more times the new peak is higher, the stronger the up-trend is. If you spot a stock that is moving in a trend, you can usually make a few trades successfully before the trend changes.
What you want to avoid in intraday trading, is stocks with unpredictable charts, charts that have scattered waves with no defined pattern are the most difficult to predict, and almost impossible to make a successful intraday trade.
Make Intraday Trades With Active Stocks
Its very important to choose stocks that are the most active, for intraday trades. The last thing you want is to but into a stock with low volume, this could potential put you at risk of holding your stock for too long, due to lack of buyers. This is a very important rule to follow, and also very easy to adhere to, their are many stocks on the market with huge volume, and that is what you want to go after. Because you choose to make your intraday trades with high volume stocks, you can make larger returns, because of the possibility of bigger swings in the stock price in a short period of time.
Do Your Homework Before You Intraday Trade
The last thing you want to do is buy into a stock blindly, without knowing anything about the company, and how it reacts to news and earnings releases. Whether your intraday trading, swing trading, value investing or long term investing you must do your research on the company. You may find out things that can help you make tons of money. If your able to predict if a stock will rise or fall due to a certain piece of news, you can buy in with confidence. If you know that a stock increases in value on the day of the earnings release, regardless of the results, then trade it that day but before they release the results. That way you can ride the rise up and sell before the results come out, insuring you gains even if the earnings turn out to be bad.
Choose Stocks That Follow Major Indices
Depending on how long you have been trading for, you have probably noticed that some stocks follow major indices very closely, they will go up and down with these major indices. These types of stocks can be easier to intraday trade, as they are easier to predict. A lot of stocks that follow the major indices will move on world news, depending on the market they are in. If your fast you can follow headlines that affect these stocks and intraday trade accordingly.