TRICKS TO MAKE MONEY IN INTRADAY TRADING
Just
having all the important qualities required to succeed as a day trader won't
help,
proper selection of stocks for day trading is equally important.
Generally day traders fail because they don't select a proper stock for day
trading.
Certain
rules that can help you in selection of stock for day trading are discussed
here. These rules can be digested quickly to help you avoid the biggest
pitfalls in trading.
These
rules include
Trade
liquid stocks
Avoid
unpredictable (chaotic) stocks
Trade
in Good Correlation Stocks
Follow
the Trend
Pick
after Research
Trade
liquid stocks
It
is often said that liquidity is like oxygen to traders; without it, they are
dead. Thus liquidity is the first and most important rule while selecting a
stock for day trading.
A
liquid stock is one, which has a high average trading volumes, so that it can
be bought or sold in sufficient quantities without causing much impact on the
prices.
It
is advisable to day trade strictly in liquid shares less liquid stocks helps a
trader buy or sell large quantities of shares without any problem of there
being no buyers or sellers. While it could be argued that illiquid volatility also
creates opportunity through rapid price change, statistics prove that volatile
shares move the most in the least amount of time. Therefore, most opportunity
dissipates while downside risk looms.
However,
this is not a hard and fast rule, as the amount of liquidity depends on the
quality of your trade.
Suppose
you buy few shares, say 50 to 100 shares, then shares with average trading
volume of 50,000 to 75, 000 will suffice, whereas if you buy few hundred or
thousand shares then you need a stock with average trading volume of few lakh
shares.
Some
of the examples most liquid stocks include Reliance Industries, SBI, Infosys,
ONGC etc.
Avoid
unpredictable (chaotic) stocks
Generally
it is seen that stocks that are trading with low average daily volumes or
stocks where some big news is soon expected, tend to trade in a highly
unpredictable manner. Sometimes even after an important announcement -- which
may be either good or bad (like big order, good results, bad results, plant
shutdown etc) -- the stock may trade in a chaotic manner. So it is advisable to
avoid such chaotic stocks.
Some
of the mid caps, and most of the small caps especially those in S, T and Z
group are chaotic stocks; better not to trade them from intraday point of view.
They also have very low volume thereby increasing their
unpredictability.
Trade
in Good Correlation Stocks
An
intraday tip for choosing the right stock is to opt for those that have a
higher correlation with major sectors and indices. This means when the index or
the sector sees an upward movement, the stock price also increases. Stocks that
move according to the sentiment of the group are reliable and often follow the
expected movement of the sector. For example, strengthening of the Indian Rupee
against the Dollar will generally affect all information technology companies
dependent on the US markets. A stronger rupee implies lower earnings for the IT
companies and weakening rupee will result in higher export incomes for these
companies.
Follow
the Trend
One
of the most important intraday trading trick to remember that moving with the trend is always beneficial.
During a bull run in the stock market, traders must try to identify stocks that
can potentially rise. On the other hand, during the bear run, finding stocks
that are likely to decline is advisable.
Pick
after Research
Undertaking
quality research is one of the most vital intraday tips that traders must
always remember. Unfortunately, most day traders avoid doing their research.
Identifying the index and then finding sectors that are of interest is
recommended. The next step is to create a list of several stocks with these
sectors. Traders need not necessarily include sector leaders, but rather
identify stocks that are liquid. Technical analysis and determining the support
and resistance levels along with studying the fundamentals of these stocks will
help traders find the right stocks to profit through intraday/ day trading.
Intraday
trading has inherent risks; but speed plays a vital role in making all the
difference. Earning profits through small price fluctuations during the few
trading hours is not an easy task. Angel Broking Angel Eye helps to monitors
stocks in real-time. Being browser-based, you can easily do online share
trading from anywhere, without the speed being affected. The platforms helps in
taking Quick decisions, thus enabling traders to book profits.