Most aspiring traders want to make huge profits from intraday trading. However, it is important that you come up with a best stocks for intraday & applying your trading strategy and then make your dreams come true. Some traders are making huge profits by working within just one or two hours. It is done with a strategy called momentum trading. In today’s post, we will discuss how to choose a stock for intraday trading with the most sought-after momentum strategy.
What is momentum intraday trading?
In this strategy, all you need to do is find out stock with plenty of upsides.
Every day, there are some stocks that have considerable momentum. So a trader must be able to find these stocks and make huge returns.
Now the big question is how to find that stock and how do you know when will the momentum end. The goal is to understand for how long to hold the stock and sell the stock prior to its running out of momentum.
How do you select stocks for intraday?
When you search for stocks for the momentum strategy, you are basically searching for an always moving one. There are three different aspects that you need to consider when choosing the stocks:
- Time
- Volatility
- Market sector
For the same day trading, you need to search for momentum. So keep in mind, the momentum will only be found for a few hours and you need to keep that time frame in mind before investing.
Trading risk is directly linked to volatility of the stocks. When a stock gains momentum, it can be a trendline with no drops. You need to understand there can be deviations before and after momentum. So begin investing by keeping the volatility risk in mind.
Consider choosing a market sector to make an informed decision about momentum stocks. It is easier to find a market that is experiencing plenty of deviations. Based on the market sector, you can easily find 5-10 stocks with individual momentum.
How to select stock for intraday one day before?
Apart from the above mentioned factors, there are certain tips that will help you determine a trading strategy. One must begin with liquid stocks. These have plenty of momentum and you can avoid delay by trading for large volumes.
Moreover, it is important to understand the daily price movements to find a stock day before for momentum trading. The best way to do this is to put filters on stocks based on Rupee value. You might need some technical analysis here because experts suggest daily movement should be at least 3% or 150 Rs to find indications for momentum trading. Here is how you can do that:
- Indicators: The idea to predict price movement is to follow indicators. Stocks that closely follow group trends are your best bet.
- Trends: To put simply, momentum trading is all about finding the wave in the stock market and trading on it. You must not challenge the market if you lack experience. Following the stock market trend is a safe and risk free way to find momentum trading stocks.
- Strong stocks: The pace of momentum determines if a stock is strong or weak. If the movement is higher than the market rate, it is a stronger stock, and a slower pace determines weaker stocks. Be patient and resist the urge to invest in a weaker stock.
- Volume: If a stock depicts high volume trading, it is indeed the right choice, you can go with it.
- Analysis: It might not be suitable for beginners but a week long analysis of the momentum of a stock helps you make an informed decision.
- Breakout levels: Breakout levels are when the stock price goes beyond the expected resistance levels. Observe the stock carefully and pick it to book huge profits.
- Broker highlights: Technology has made it possible to find daily losers and gainers in the stock market. Intraday position can easily be decided based on the momentum of these top gainers or losers.
- Shortlist: You cannot trade or monitor every stock in intraday trading. Therefore, it is best to shortlist some of the most crucial stocks and book profits.
For real life momentum day trading strategy, you must be able to learn about the profit loss ratio. Be wise and choose stocks for intraday trading and set a tight stop order to minimize the risk.
Final words
Finding the real-time pattern is the key to making huge profits from momentum trading. In order to easily find the highest relative volume of a stock, you can either make good use of technology or seek help from an expert. Stock screeners are useful to find patterns. If you lack the skill to analyze the patterns it is best to leave it to the experts.
FAQs
What are the benefits of the momentum strategy for day trading?
When a trader is able to quickly and accurately identify the momentum of stocks, then intraday trading can be a great way to make money. Studies show that the momentum strategy is considered the most profitable method for intraday trading. The trend trading strategy is even beneficial for beginners. A little analysis and market study can help them to gain huge returns on investments.
How do you select momentum stocks for intraday trading?
In order to understand the daily price movements, traders make use of indicators, trends, breakout levels, and volume of trading. A thorough assessment of daily losers and gainers can also be used as a strategy to find momentum stocks for intraday trading. When in doubt, it is best to consult an expert to make an informed decision.
Which stocks are best for momentum intraday trading?
Compare stocks that are making new highs. Moreover, experts suggest that stocks near 52 weeks highs can also be considered a good source for higher returns in intraday momentum trading.
Which are the best indicators for intraday momentum?
The Moving Average Convergence Divergence (MACD) is considered a useful tool for finding momentum. Although traders might think that MACD is not useful for intraday trading, it can be used smartly to understand the price charts and their momentum on a daily, weekly or monthly basis. A lot of technical aspects go into the calculation, therefore it is best to consult an expert before investing.
Which is the best timeframe for momentum day trading?
Seasoned traders might begin trading within the first fifteen minutes of the stock market being opened. However, if you are a beginner and want to work on the momentum strategy for day trading then it is advised to wait for one to two hours after the stock market is opened.
