How to pick Stocks for Intraday Trading?

Most of the stock market enthusiasts get attracted towards Intraday Trading in the beginning, but soon give it up after observing some huge losses. Maybe they cannot digest the volatile market moves, or they lack proper trading plan. There can be other reasons too depending on the various factors such as Experience and knowledge. I have heard veterans advising the amateur traders to keep away from Intraday Trading and try their luck in Long-term investment first. However, I do not completely agree to this. Any trading strategy based on technical analysis works similar in Intraday timeframes as it works on higher timeframe. Technical Analysis principles and chart patterns do not change with the timeframe or duration of investment. And with the advent of Margin Trading, you can simply do wonders in Intraday Trading. The only thing you would need is a proper strategy, stock selection and risk management. In this article, we will discuss a 7 pointer strategy on How to pick Stocks for Intraday Trading. You need to follow these steps in order to arrive at the best probability to gain profits intraday.

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

TCS Bid Ask Spread

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

Social media

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

200 Day Moving Average

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.

Open Interest

The concept of Open Interest is applicable only for F&O traded stocks, so ignore this if you trade only in cash market. As per Investopedia, Open interest is the total number of options and/or futures contracts that are not closed or delivered on a particular day. You can find Open Interest parameter in any Futures quote for a particular stock.

The relationship between the prevailing price trend and open interest can be summarized by the following table.

Open Interest
Market is Strong
Market is Weakening
Market is Weak
Market is Strengthening

So always, double check the price and open interest before taking any trading decisions Intraday.

Check out some of our most popular Intraday Trading Methods below:

Intraday Open High Low Strategy -Live Signals

AFL of the week: Intraday Trading Strategy for Nifty

Camarilla Pivot Points Excel Sheet: Live Signals

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  1. Very nice article. But I still refrain myself from intraday trading as past haunts me. But there are few people who claim that they have made handsome profits through intraday trading. One such guy in Chaintanya Jaiswal. He was in news few weeks back. Dont know what strategies he follow.

  2. Can you guys create a guide on how to use trendlines, do’s and don’t’s would help out a lot.

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