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Home Finance How To Choose Stocks For Day Trading - A 2022 Review

How To Choose Stocks For Day Trading – A 2022 Review

The sale and purchase of stocks during the course of a single trading day are known as intraday trading. Day trading strategies require you to keep a close eye on the price of securities. In order to make profits, you have to sell the stocks when the cost increases. Prior to the share market’s closing time. Visit

Intraday trading has its own perils. Since as an investor you will not hold on to your stocks for more than a day. It is important to select the right stocks to avoid losses. 

Once you’ve made the decision to engage in intraday trading, ensure that the commodities you trade have the following aspects: 

High Liquidity and Demand

Usually, liquid stocks are also the ones that can be traded in big numbers. This means you can buy and sell a large number of stocks at once without worrying. About the impact on their price. 

Speed and timing are key when devising intraday trading strategies, therefore, trading. Greater volumes eases the process of entering and exiting the trade with profit.

Depth reflects a stock’s liquidity during different price stages. When the price is less or more than the present market offerings. 

Price fluctuation (volatility)

Is day trading profitable? The answer to this lies in your trading strategies. Intraday traders generally opt for stocks that have a lot of movement. Since it is the key factor that decides whether there will be profit or loss in trade. 

Traders in the securities market, even the most experienced ones, can only predict price movements. Strategies are built on calculated and well-researched guesswork and like all guesses. These too run into the risk of being incorrect. When volatile stocks underperform, traders can incur losses. Even though there isn’t a rule of thumb that can prevent this from happening. A large number of traders would advise investing in stocks that go up or down by only three to five percent. 

Group Followers

A popular day trading strategy is to invest in equities whose movements are aligned with those in their market sector and index group. It implies that the price of individual stocks move in direct proportion to the sector and index’s movement. When the latter rises, the former rises too but when the latter slumps, so do the stock price. It becomes necessary to keep track of these movements if you want to trade in the most stable or the weakest stocks but if you’re trading in only a particular stock every day, the sector/index link is irrelevant. 

Advanced players also engage in contrarian trade where they go against market trends when buying and selling stocks. 

Sector Trends

Intraday traders should be well-versed with the different sectors in the market. Automobiles, pharmaceuticals, banking, technology, and crude oil are some key sectors that influence market prices. Make it a practice to track the growth of these sectors and identify the ones that are performing well. If you spot growth in say stocks of a pharma company and you notice that you did not make an investment. Then, it may be a good idea to invest in the stocks of its competition which could also rise in a similar way. 

Entry and Exit Strategies

In any trade, defining entry and exit strategies are the most important factors. You can lose out on the best ever stock if you do not know when to buy or sell it. To minimize risks and increase the probability of profit, stick to guidelines and specific trading signals. Remember this as the key formula while you create your own trading style. 

Momentum of Stocks

If you want to speculate whether a particular stock will pick an upward or a downward trend and at what strength it could possibly do so, understand the momentum of the stock. Momentum is simply the speed at which the stock prices change. If the stock price moves with the strength of the momentum, that stock is referred to as momentum stock. Intraday traders make use of these stocks which go long (up) or short (down) to make profits. 

Technical Analysis

Like momentum, there are many concepts and formulas that can be a part of your trade strategy to help you decode trade signals. Stocks that highlight gaps in prices can offer good opportunities. You may also study the ones that are breaking their support and resistance levels to identify the stocks you can leverage. 

Be Patient and Wait for the Pullback

Rather than taking market trendlines at face value, treat them as visual representations of the highs and lows of the market.  These can be particularly useful in determining the entry points and picking stocks for day trading. Upward trendlines start at a low price point and are charted towards the right, sliming at a higher price point. When the trendline chart seems to move in the opposite direction, it’s a signal to sell short. When the price moves up in a downward trendline, you sell and when it moves down you enter the market again, i.e you buy more. 

Take Regular Profits

It is not advised to risk investing in trades that are not profitable or when their prices are likely to take a hit simply because intraday trading has time constraints. How do you ensure that your trading strategy is one that will increase the probability of earning more profits?

When you are trading with trends, be mindful of the following: 

  • The best position to earn profit in an upward trend is when the current trend is equal to or above the previous price high. 
  • The best position to earn profit in a downtrend or short position is when the present trend is at par or slightly below the last low price point.

Intraday trading is a matter of picking the right set of stocks. While the above guidelines will help you get started, eventually you will be able to understand what works best for you. Remember to be very cautious since it is a volatile market. Refrain from making uninformed and hasty decisions to avoid losses.


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