How to Pick Stocks for Intraday Trading: A Complete Guide

Intraday trading can feel like a high-stakes game, where quick profits are tempting but the risk of loss is just as real. The single most important skill separating successful day traders from the rest is their ability to pick the right stocks.

Choosing the right stock is more than half the battle won. A stock that is illiquid or barely moves all day is a recipe for frustration and tied-up capital. Conversely, a well-chosen stock provides the momentum and opportunities needed to achieve your trading goals. This guide provides a systematic approach to identifying the best stocks for your intraday trading journey in the Indian market.

Key Takeaways:

• Prioritise Liquidity & Volatility: Always select stocks with high trading volumes (liquidity) and sufficient daily price movement (volatility).
• Trade with a Strategy: Don’t rely on tips or whims. Use proven strategies like Breakout, Momentum, or Gap and Go trading.
• Master Your Risk: Never trade without a stop-loss. A disciplined risk management plan is your best defence against significant losses.

What is Intraday Trading?

First, let’s clarify the basics. Intraday trading, or day trading, is the practice of buying and selling stocks within the same trading day. All positions are closed before the market shuts. The goal isn’t to invest in a company’s long-term growth but to profit from short-term fluctuations in its stock price.

This requires a mindset completely different from long-term investing. Here, technical analysis, market sentiment, and swift decision-making are your primary tools.

Core Criteria for Selecting Intraday Stocks

Not every stock listed on the exchange is suitable for day trading. The ideal candidate has a specific set of characteristics.

1. High Liquidity: This is non-negotiable. Liquidity refers to how easily a stock can be bought or sold without significantly impacting its price. In practical terms, this means choosing stocks with high trading volumes. High volume ensures you can enter and exit trades smoothly at your desired price points. Large-cap stocks, especially those in the Nifty 50 index, are generally very liquid.

2. Medium to High Volatility: Volatility measures the degree of a stock’s price variation. For a day trader, a stock that doesn’t move is useless; you need price fluctuations to make a profit. However, be wary of extremely volatile stocks, as they can amplify risk. The sweet spot is a stock with a healthy and somewhat predictable daily trading range.

3. Correlation with the Broader Market: It’s often easier to trade stocks that move in sync with major indices (like Nifty 50 or Sensex) or their respective sectors. For instance, if the entire banking sector is bullish, a liquid banking stock is more likely to show an upward move. This adds a layer of confirmation to your trade.

4. Stocks in the News: Companies that have recently announced earnings, mergers, new orders, or other significant corporate news often experience increased volume and volatility. These “newsy” stocks can be excellent intraday candidates as they tend to have strong momentum.

How to Screen for Intraday Stocks

Manually tracking thousands of stocks is impossible. This is where technology becomes your best ally.

• Using Stock Screeners: These are powerful tools that filter the entire market based on your defined criteria. You can set up a screen to find stocks with:
  • High trading volume (e.g., over 1 million shares traded).
  • A specific price range that suits your capital.
  • Technical indicator signals (e.g., RSI crossing above 60, or a moving average crossover).
• Key Technical Indicators: Indicators help you analyse price action and identify potential opportunities. Popular choices for intraday trading include:
  • Moving Averages (MA): To identify the prevailing trend.
  • Relative Strength Index (RSI): To gauge momentum and spot overbought or oversold conditions.
  • Moving Average Convergence Divergence (MACD): To identify changes in momentum and potential buy/sell signals.

Proven Intraday Trading Strategies

Once you have a watchlist, you need a strategy. Here are a few popular approaches:

1. Momentum Trading: This strategy involves finding stocks moving strongly in one direction on high volume and riding that momentum, assuming the trend will continue for a short period.
2. Breakout Strategy: Traders look for stocks trading within a defined support and resistance range. They enter a trade when the price “breaks out” above resistance or below support, anticipating a strong move in that direction.
3. Gap and Go Strategy: This involves finding stocks that open with a significant price gap up or down from the previous day’s close, often due to overnight news. Traders then bet on the trend continuing in the direction of the gap.
4. Scalping: A very short-term strategy where traders aim to make small, frequent profits on numerous trades throughout the day. It demands immense focus and discipline.

Risk Control: Your Most Important Job

This is the most crucial aspect of intraday trading. Without proper risk management, a few bad trades can wipe out your capital.

• The Stop-Loss Order: A stop-loss is an order you place to automatically sell a stock if it falls to a certain price, thereby limiting your potential loss. Never enter an intraday trade without a pre-defined stop-loss.
• The 1-2% Rule: A widely followed principle is to never risk more than 1-2% of your total trading capital on a single trade. For example, with ₹1,00,000 in your trading account, your maximum risk per trade should be between ₹1,000 and ₹2,000.
• Take-Profit Orders: Just as you plan your exit for a loss, you must also plan your exit for a profit. A take-profit order automatically sells your stock when it hits your target price, ensuring you lock in gains.

Pre-Market Preparation: Your Daily Routine

The best traders are prepared before the market opens. The Indian stock market’s pre-market session runs from 9:00 AM to 9:15 AM, with order entries happening between 9:00 AM and 9:08 AM.

Here’s a simple routine for success:

1. The Evening Before: Review the day’s market action. Identify stocks that had strong closing trends, high volume, or are trading near a key breakout point.
2. The Morning Of (Before 9:15 AM): During the pre-market session, watch for stocks with significant price gaps or unusually high volume. These are often the stocks that will be “in play” for the day.
3. Final Watchlist: Based on this analysis, create a final, manageable watchlist of 3-5 stocks to monitor closely as the market opens.

Conclusion: Building Your Intraday Game Plan

Success in intraday trading isn’t about luck; it’s about discipline, strategy, and rigorous preparation. Build your trading plan on these solid pillars:

• A Strict Selection Process: Only trade liquid, volatile stocks that fit your chosen strategy.
• A Clear Trading Plan: Know your entry price, target price, and stop-loss before you place the trade.
• Unyielding Risk Management: Protect your capital above all else.
• Continuous Learning: The market is constantly evolving. Keep studying and refining your approach.

By following these principles, you can shift from being a reactive gambler to a proactive, strategic trader, significantly improving your odds of success in the dynamic world of intraday trading.

---

This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before investing.