Do you feel overwhelmed while trading because there are so many stocks out there? How do you know which stock to trade? Don’t worry. There are several proven techniques that professional traders use to pick stocks. These techniques can be easily learnt and used by beginners as well.
Let’s dive in.
Different ways to find the best stocks for intraday trading
A little research can help you pick the best stocks for trading. You can rely on one of these methods or combine several methods.
Here are the most commonly used methods to pick stocks.
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Volume analysis
Volume refers to how many times a stock has been traded in a given timeframe.
The trading volume of a stock can give valuable clues which can help you pick the stock. If there is a high trading volume, then this means that there is high interest in the stock.
A high trading volume can help you in two ways.
First, a higher trading volume means that the stock is more liquid. You can more easily enter and exit from the stock and the trading fee is also likely to be lower. This is helpful because trading depends on precisely timing entries and exits.
Second, a higher trading volume means that the stock will have more momentum. The volume is used to gauge whether a trend is strong or weak. If there is a higher volume, then the trend is considered to be stronger. A stronger trend means that your trade will have a higher likelihood of success.
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Break-out analysis
Break-out means that a stock has broken a resistance or support level.
A resistance level is a price beyond which the price of a stock is less likely to rise. A support level is a price below which the price is less likely to fall.
Every stock has both resistance and support levels. These levels can be calculated using technical analysis. Once a stock breaks out, it is likely that the price continues according to the same trend.
For example, if a stock breaks a resistance level, it is likely that the price of the stock continues to rise. Similarly, if a stock breaks a support level, it is likely that the price of the stock continues to fall.
Traders can watch out for stocks breaking out and quickly enter into a trade to capitalise on the momentum.
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Current intraday trends analysis
A strong existing trend is a good indicator of future price movement.
Traders can check the latest trend of a stock. In case a stock has been consistently moving higher (or moving lower) for a few days, then it is likely that the trend continues the next day. You can take advantage of such a trend by making a trade based on the direction of the movement.
How do you find the trend of a stock? Every trading platform provides price charts. These price charts can be used to look at the historical price of a stock. Hence, these charts can be used to find out the latest trend of any stock. You can pick the timeframe for which you want the information (one day, three days, five days, etc.). The longer a trend has continued, the stronger it may be.
For example, suppose the closing price of a stock was Rs. 100 three days ago, Rs. 105 two days ago, and Rs. 107 yesterday. This can indicate that the stock price may rise further today and it may be a good idea to buy the stock.
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Track gainers and losers
Gainers and losers refer to the stocks that are performing the best on a given day and the stocks that are performing the worst on a given day, respectively.
Almost every stock broker provides a list of gainers and losers to their traders, or you can use a third-party tool. This list can be used to identify which stocks are experiencing the strongest movement. This information can be used to inform your trades.
If a stock is on the “gainers” list then it may be likely that the stock price rises further and vice versa.
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Monitor your watchlist
Your watchlist is the list of stocks that you have an interest in.
Almost every trader has a watchlist. These stocks are the ones that, for one reason or the other, the trader considers to be important to follow. Which stocks show up on a trader’s watchlist depends on the trading strategy followed by the trader.
For example, a trader that only trades in high-volume stocks may have a watchlist which consists of stocks that usually experience high trading volumes.
A watchlist is developed over time and with experience depending on the needs and goals of a trader.
Once you have a watchlist, you can closely monitor the performance of these stocks and evaluate whether an opportunity to trade any of them arises or not.
Since you can’t keep track of all stocks in the market, watchlists are considered to be essential. That’s why TradingLeauges also offers watchlists to traders.
Stock watchlist on Tradingleagues
TradingLeagues understands the need for traders to keep track of important stocks. That’s why it has curated watchlists of all the stocks that are part of its fantasy stock universe, filtered according to their respective markets.
We provide watchlists such as USTECH10, IND20, CRYPTO20, and so on.
These watchlists can help you keep track of stocks relevant to your trading strategy and make better trading decisions.
Wrapping up
A good way to pick stocks to trade is to use multiple methods and find out which stocks have the highest likelihood of forming or continuing a trend. Or, you can make faster trading decisions by relying on a single stock-picking method. What’s essential is that you rely on a proven strategy to increase your chances of success.
If you’re interested in learning how to trade while playing fun games and competing with others, check out TradingLeagues here.
