The most important intraday trading tip while choosing the right stocks to trade during the day is Liquidity. Liquid stocks have huge trading volumes whereby larger quantities can be purchased and sold without significantly affecting the price. Thus, most of the possible gains dissipate while the downside risk still looms. However, the liquidity of the stocks depends on the quality of the trades placed by the traders.
It is generally noticed that a low daily volume of traded stocks is expected move in an doubtful way. Sometimes, the stock may show volatility even after the report of the big news. Traders are recommended to avoid intraday trading in such stocks.
An intraday tip for choosing the right stock is to opt for those that have a high 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 about according to the opinion of the group are reliable and often follow the expected movement of the sector.
One of the most important intraday trading tips is 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.
Another most essential intraday commands that traders must always memorize is quality research. 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 incorporate sector leaders, but fairly 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 natural risks; but speed plays a very important role in making all the difference. Earning profits through small price fluctuations during the few trading hours is not an simple task.
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