Stock trading has always been a very popular method to earn a lot of money and given the huge improvement in technology, it is now possible to execute trades online without having to leave the house. Thus, millions of people have embarked on this opportunity and we are seeing astonishing numbers in terms of the daily trading volume in this market. There are various types of trading depending on whether you wish to trade short-term or long-term.
Intraday trading means opening and closing the trading position within a single day. It is also known as day trading and it is convenient for people who prefer to operate with short-term trades. The majority of novice traders who wish to try out intraday trading wonder how to select stocks for this process in order to get the maximum profit in the end.
However, keep in mind that this task is completely different compared to long-term trading and you are going to need different tools in order to achieve successful results without waiting for a long time. We would not recommend this technique if you are in the starting stage of your trading career since it requires extensive market knowledge. What's more, you have to accurately select stocks in order to rule out possible margin errors.
Rules Of Picking The Right Stocks
The first and foremost task is to seek those stocks that have high liquidity since they have to be purchased and sold on the same day. When stocks include adequate liquidity, it is a good indication that you can buy or sell them whenever you wish. So, you have to wait for the potential gains that appear after huge price alterations during a day and search for stocks that have high volumes in order to make transactions in large quantities.
If you utilize a pips+ account type, you have a chance to experience intraday trading and see how you can perform this task!
What’s more, you need to avoid highly volatile stocks when trading within a single day. The reason is obvious, since highly volatile stocks might change their value drastically even in a short period of time. It might be enticing to think that the opposite will happen as well and the price will be increased significantly, but generally, it is recommended to avoid choosing highly volatile stocks for intraday trading. Also, remember to use stop-loss in order to cut the active position in case it reaches your stop-loss price.
One of the best suggestions you will get is to follow the market trend since it often shows you the movement of certain stocks. In case the market experiences a downfall, you have to look for stocks that have a high potential to rise in value in order to buy them cheaper and sell them at an increased rate when the market will get back its position.
Also, you have to take into mind the correlation of stocks to a sector or an index. In order to accurately follow the market trend, you have to observe the broad sector or the index; as a result, you will be able to get back decent amounts after investing in stocks. There are few possibilities to check the performance of certain sectors and trade within the current market trend.
Advantages Of Intraday Trading
Now that you know how to pick out the most convenient stocks for intraday trading, it is time to talk about the beneficial sides of this process. One of the most obvious advantages is that you don’t have to wait for a long time to see whether your trades were successful or not. Also, when you leave the position open at midnight, there is a tangible risk that drastic alterations will take place and you might lose a huge portion of your holdings. So, day traders try to avoid this risk by closing the position when the trading day ends.
Also, you have the possibility to limit how much you will lose during intraday trading since you use stop-losses and profit targets in this case. They can automatically reduce the risk of losing below a certain amount, so you should not be worried about losing a lot of money.
Lastly, we want to point out that, unlike positional trading where first you buy stocks and then you sell, intraday trading allows you to do vice versa in order to efficiently trade and get a profit in the bear market. As you can tell, intraday trading offers tremendous benefits when it comes to stocks, but there are some recommendations to take into mind when choosing them during this day trader process. Generally, this task is not recommended to novice traders, but if you still decide to try your luck in day trading, then you have to carefully apply all the rules mentioned above!
