I am new to the trading and stocks. I want to know that If I want to do intraday trading, then how do I choose the stocks which are prone to be going up for the day.
I would suggest you learn TA - as it helps you develop a directional perspective on the stock under consideration. Here is a good place to start - http://zerodha.com/varsity/module/technical-analysis/
2 Likes
Look for the ‘Popular’ Stocks
The candidates for Intraday trading should be stocks which are popular and stable over years. They should be a part of wider index such as Nifty, Sensex, BankNifty etc. Or they should be traded in F&O market. These stocks show nice trending movements in Intraday chart and are not expected to move due to some unexpected volatility. Never go for any Penny stock or newly listed stock for Intraday trading as most of them are influenced by promoters and insiders.
Volume matters the most
Volume matters the most for any Trading decision in Intraday timeframe. Volume shows how many traders are actively Buying or Selling the stock which is again a direct measure of the stock popularity. Any technical analysis concept works the best for the stock with decent volumes. For ex: if you are a trendline breakout trader, you should always check the volume of breakout candle for confirmation. In order to pick Stocks for Intraday Trading you can compare the previous day’s volume of stock with the average volume of last 10 days. If you observe that the volume is rising, then that stock is a perfect Intraday candidate.
What is the Bid-Ask spread?
This is another important factor to pick stocks for Intraday Trading. For newbies, Bid price is where you can Sell the stock and Ask price is the price where you can Buy the stock. The very purpose of Intraday Trading is to capture small price movements and book profit. So, if there is a big gap between Bid and Ask price you can never expect to book profits easily, except in the cases where huge price movements occur. See the examples of below two stocks:
Stock 1
Stock 2
For Stock 1, Bid-Ask spread is 0.25 Paise which makes it a good candidate for Intraday Trading. While for the second stock it is 1.15 Rupees, even when the underlying price is lower as compared to the first one. The Bid-Ask spread depends totally on the volume of Traded quantities.
Social Media matters too
Check out for Trending stocks in Twitter, Facebook or any other forums. These stocks carry lot of conviction from fellow traders across the world, and hence they trade with heavy volumes. There have been recent studies that social media affects the mass psychology of traders which directly affects the price movements of the stock.
Don’t completely ignore the news channels
You might have heard in your Technical Analysis lessons that price discounts everything, hence it is useless to look into News that may affect the stock price movement. This holds true for Swing trading, but cannot be applied for Intraday Trading. Any big earning announcement or major deals may directly reflect into prices and volumes of stock in Intraday market. So you should check for any major news associated with stock before entering a trade into it.
200 Day Moving Average: one of the Holy Grail
In technical analysis terminology, moving averages are important indicators to determine the overall trend of stock. And among all the moving averages, 200 day MA is considered as the most trusted one. For ex: If a Stock price is above 200 Day Moving Average it is up trending, and if it is below 200 Day Moving Average it is down trending. So whenever, you buy/sell stocks in Intraday check out what 200 Day moving average indicate. A stock should not be bought when it is in down trend as indicated by 200 Day moving average, and vice versa.
Check out our Excel based Trading system based on 200 SMA here.
Check out some of our most popular Intraday Trading Methods below:
Intraday Open High Low Strategy -Live Signals
1 Like
Liquidity is the most important intraday trading tip while choosing the right stocks to trade during the day. Liquid stocks have huge trading volumes whereby larger quantities can be purchased and sold without significantly affecting the price. Generally, lesser liquid stocks do not provide traders the opportunity to purchase and sell larger quantities due to lack of too many buyers.Some traders may argue that illiquid stocks offer bigger opportunities with rapid price modifications.Apart from this stay away from volatile stocks ,trade in good correlation stocks and follow the Trend with good ammount of research.
There are many ways to short list stocks for intraday, one such method is called as NR7 method.
Trading using NR7 Method:
Market goes through regular contraction (i.e. daily trading range getting shorter and shorter) and expansion (i.e. daily trading range getting bigger) cycle. Expanding range is followed by Contraction and vice-versa. So if we can indetify the narrow range days, then it give us a step ahead of everybody to benefit from coming expansion.
NR7 is term given to a day that has the daily range smallest of last 7 days including that day.
How to Find NR7 day..
1) Get the High and Low data of last few period
2) Calculate the range of each day i.e. high - low) for each day
3) Compare the range of a today and previous 6 days range (to get NR7. To get NR4 get last 3 days range)
4) If today's range is smallest of all 7 days, then today is NR7 day..else not.
It is that simple.
This is one of my favorite setup. It gives u a chance to be ahead of trade follower / indicator followers who will jump in the trend after you.
One of the easiest way to trade this setup will be to
go long above the Day's high of NR7 day with stop at the Day's Low of NR7 day.
Or
Go short below the Day's Low of NR7 day with stop at the Day's High of NR7 day.
Observing this pattern gives day trader /swing trader a distinct edge to trade next 1 or 2 days. In many cases, NR7 break-out is found near the start of a new wave. For day trader, this setup indicates that they can anticipate wide range days, so they should be prepared to chase the trend and use trailing stops so that they can get maximum from
the coming trend.
Examples:
On 02/09/2014, Auropharma had the lowest range day in last 7 days. i.e NR7 day. on 2nd, the high price was 818.3 and low price was 805.25
On next day, if the stock hits the high of 818.3, we will go long with stop loss of that day's low which is 805.25.
You can see that stock was moved out of contraction phase and started trending from 800 to 900 within few days.
On 24/6/14, Tech Mahindra had the NR7 day with high of 2007 and low of 1987.15, next day if the stock hits 2007 we go long with 1987.5 as stop loss. The stock zoomed in next 3 days to Rs. 2135
This method works well with many stocks.
1 Like
please describe how i know about volume in any breakout candle in pi chart ???