Trading in stocks requires patience and understanding as it is a volatile market with prices changing frequently. The market conditions depend on various fundamental and technical factors that impact the trade and accordingly move the price of the instruments.
In stock trading, investors buy and sell the shares of a company to make money. The shares are units of the stocks that are made available in the market by companies. The companies, in order to expand their business or make money, issue stocks that are further traded by market investors.
Trading in stocks can be done with various market strategies; however, the article focuses on intraday trading strategy and how investors select stocks for trading. Let’s explore the topic in detail and understand intraday trading with stocks.
What are Stocks?
Stocks are trading instruments of the financial market that are issued by companies in order to raise money. The money could be raised for various purposes such as expansion, introducing new products, making money, etc. The company issues stocks in the primary market as an initial public offering (IPO), and then these are further traded in the secondary market.
Investors buy and sell the shares of the company in order to earn a profit. The holder of a company share is called a shareholder and has the right to vote, dividend, paid first during liquidation, etc., facilities depending on the company and their share type. A traditional market with many companies offering their stocks.
Shares of the companies are traded through stock exchanges like The London Stock Exchange or via brokers such as Investby. They can select the method which best suits their trading goal and invest in the market.
What is Intraday?
Intraday is the method of trading in the financial markets; investors buy and sell using this to have high returns on their investments and be successful stock traders in the financial market. Also termed day trading, the strategy of the market is for short-term trading.
Traders can invest in the market and then use the intraday trading strategy to invest. The buying and selling of the stocks take place within a day, and investors are expected to be quick with their trade. In financial terms, the traders take market positions, and these are squared off before the stock market closes.
The intraday trade could last for a few seconds, minutes, an hour, some hours, or a whole day. This is totally the choice of the trader and the market conditions prevailing at the time of the trade. A short-term trading strategy that helps investors earn from the market quickly. However, traders need to be experts and make fast decisions to benefit.
How to Select Stocks for Intraday?
When an investor selects the right stock to invest in, they have achieved the core of financial trading. Equity trading is a volatile market with risks of loss at every point of investing. To become successful stock traders, investors have to continuously research, constantly monitor their investments and have the required technical skills to select the right stock.
Intraday is a trading strategy that has high risks if it goes wrong; therefore, traders have to select their stocks accordingly. Stock selection is necessary for intraday trading as it is a one-day investment or could be for some time period less than a day. If this goes wrong, then the trader will end up losing money invested.
Factors that investors can consider to selecting the stocks for intraday trading are:
Trading in the stock market requires liquidity in the stocks for a favorable trade. When the stocks are liquid, traders can easily buy and sell the stocks at the market prices and trade. Mostly, shares of companies with high market capitalization are considered to be liquid. These are traded continuously in the market with different price levels.
Volatility is the fluctuation of the stock’s value in the market. For trading stocks intraday in a volatile market, investors have to consider the three types; low, medium, and highly volatile stocks. When a trader goes for low volatile stock, the losses are limited as the fluctuations are confined. However, this reduces the chances of earning high profits.
The medium volatility stocks are between the low and high with balanced trading. Investors can buy and sell stocks that have medium volatility and could be traded easily. In addition, they can earn profits that are not low or high but moderate. The stocks fluctuate within a range and offer some profit for the traders.
The high volatility stocks are for investors who are experts and willing to take high risks. The stock’s price fluctuates frequently but has high market profits. Traders can invest in such conditions when they are sure of the returns and make good profits.
Technical analysis is another factor that investors use to select the stocks for intraday. Online brokers offer many tools to study the market price change and invest in the market. Traders, with the help of these advanced tools, analyze the price shift of the company shares in the future and invest.
This will help the trader know which will be profitable stock investing and how much the trader will be able to earn from the investment of a day.
Fundamental analysis is for the study of the market factors other than the price of the share that impacts the movement of the stock’s price. The news, market happenings, economic, political, social, etc., factors should be analyzed for fundamental analysis and select the stocks for intraday.
Intraday trading is a frequently used trading strategy of market professionals. They want to make daily profits in large numbers. So, they use intraday trading for betting or trading in the stock market. They study the trends, range, and other factors of the market for trading and making profits.
With the volatility, technical analysis, fundamental analysis, and liquidity, traders can select the intraday stock in which they can invest and earn good returns.