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19 Aug 2019

SHARE MARKET--How do I find shares for intraday?

One of the most important steps in intraday trading is the selection of stocks. Out of the 5000+ listed companies, it becomes difficult to choose the few right stocks and invest in it. To make the complex selection process easy, following are the few techniques that can be helpful as well as profitable.

a. Choose stocks with high liquidity: The principal basic parameter for a good stock to intraday trading is liquidity. A stock ought to sufficiently offer liquidity, i.e. intraday volume. There are two ways to look at liquidity of stocks in a measurable way. Firstly, you can look at liquidity as the proportion of daily volumes to market capitalization. The common benchmark considered is 15-20%. The second aspect is a slightly more instinctive. A good intraday stock is one that trades with small ticks. This means that trades can be executed with a minimal impact cost.
b. Focus on stocks that move with the market: A number of stocks in the market have a positive correlation to the movement of the major indices. For example, if the Sensex is up, these stocks will also tend to rise and vice versa. This makes it easier to predict the movement of the stock and thus increase your chances of making a profit.
c. Gap up/down strategy: Gaps are areas on a share price chart where the price of a stock moves sharply up or down, with little or no trading in between. A Gap up is when a stock opens at a higher level than the previous day's high. For example, if the previous day's high was 400, and the stock opened at 405, there would have been a 5-point gap up. This is considered a bullish signal. The reverse is true for a Gap down.
d. Stocks with clear technical signs should be favored: As an intraday trader, you will need to extensively use technical charts and charting patterns to make profits in intraday trading. Check the historical patterns of the stock and read the charts. Then, try putting in small trades to test it out. Avoid stocks that give excessive false breakouts on either side of the trend-line.
e. Pick stocks with smaller bid-ask spreads: Bid price is the maximum price which buyers are willing to pay for a particular stock while Ask price is the minimum price sellers of a stock are willing to sell it for. If there is a huge gap between Bid and Ask price, you can never expect to book profits easily.

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