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Best Small Cap Stocks For Intraday Trading – Learn to appreciate the power of price action trading in large-cap stocks that are liquid and volatile through three detailed stock trading examples.
Can you apply price action for trading stocks? How about futures? Find Forex? Cryptocurrency? These are common questions I get in my email. The short answer is yes.
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You can use price action trading in most liquid markets. Some price patterns may work better in specific markets. But these are observations you can only pick up when you trade.
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This article is the first in a series that shows how price action analysis works in different markets.
Here you will find detailed trading examples that show you how to apply price action in the stock market.
For price action trading, liquidity and volatility are essential. Therefore, I have chosen large cap technology stocks for the trading examples below.
To keep things simple, I’ll stick to fundamental price action trading tools: trend lines and channels. (Note that they are not drawn randomly. They are drawn according to the rules taught in my trading course.)
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We will also focus on a single price pattern: trend bar failure. It is a versatile and straightforward price pattern. Click here to learn more.
In some aspects, they are because I have left the discussion of many nuances. I did this to ensure ease of understanding in this short article. (These subtleties include congestion, pressure zones, price momentum, and climatic patterns, etc.)
In this final example, we will advance a bit and add more price action concepts. Work through it slowly and see how these ideas contribute to your stock market analyses.
This article seeks to show the relevance of price action techniques in stock markets. Do not treat it as a comprehensive course on price action trading.
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Price action trading works in most markets. This is the beauty of a simple approach. But a working trading method is not the same as a profitable one. For this, you need to be patient, stick to a consistent plan and record your observations. Intraday trading refers to buying and selling stocks on the same day for financial gains. In other words, people exit their positions before the market closes to earn a profit. That said, compared to regulator equity investments, it is risky due to higher volatility. Hence, you must implement a prudent intraday trading strategy to fulfill your financial goals.
As the name suggests, the basis of this strategy for intraday trading is to make the most of the momentum in the market. This involves tracking the right stocks before a significant change in the market trend materializes. Based on this change, traders buy or sell securities. The choice of stock depends on the latest news, the announcement of takeovers, quarterly earnings and more.
Thus, it is vital for intraday traders to learn such news about stocks that are on their watchlist and place buying or selling orders accordingly. Since share prices fluctuate due to various external factors, intraday traders must make quick decisions to earn returns. The duration for which people hold the shares depends on the momentum of the market.
When it comes to buying and selling securities on the same day, timing is undoubtedly one of the most critical factors. This intraday trading strategy involves finding the stocks that have broken out of the territory in which they usually trade.
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Alternatively, a trader can identify stocks that are about to trade in a new price range. In other words, traders have to find threshold points at which share prices increase or decrease. If the stock prices rise above the threshold point, intraday traders consider entering long positions and buying shares. That said, stock prices plunge below the threshold point, it’s an indication for people to consider short positions or sell shares.
The fundamental idea behind this strategy is that when share prices cross the threshold point, the trend will continue, and volatility would increase simultaneously.
This trading strategy is associated with high risk. It involves making investment decisions against the market trend, based on analysis and calculations. Compared to other methods, this intraday trading strategy is more difficult. This is because intraday traders need to have extensive knowledge about the market. Furthermore, pinpointing the pullbacks and strengths accurately can also be quite challenging.
The scalping trading strategy involves making financial gains from small price changes. This method is commonly used by intraday traders when buying and selling goods. In addition, usually people who engage in high-frequency trading use this technique.
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People must keep in mind that the fundamental or technical setup in its entirety does not have much relevance in this case. That is, price action has greater significance in the case of a scalping strategy. When choosing stocks, people who opt for this intraday trading strategy must ensure that they choose shares that are liquid and volatile. Additionally, they must make sure to set a stop loss for all orders.
Another successful intraday trading strategy in India is the moving average crossover strategy. When the price of stocks or any other financial instrument moves above/below the moving average, it serves as an indication that there is a change in momentum.
When share prices rise above the moving average, it is called an uptrend. Whereas when stock prices are lower than the moving average, it is referred to as a downtrend. In the case of an uptrend, experts recommend entering long positions or buying stocks. When there is a downturn, traders enter short positions or sell their shares.
The gap and go strategy involves finding stocks that have no pre-market volume. The opening price of the stocks represents a gap with regard to yesterday’s closing price. When the price of a stock opens higher compared to the closing price of the previous day, it is known as gap up. However, if the opposite happens, it is known as gap down. Intraday traders opt for this strategy to identify such stocks and buy them believing that the gap will close before the closing bell.
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When it comes to intraday trading, there are various methods that you can opt for to earn returns. That said, it is essential to understand an intraday trading strategy fully before implementing it to make financial gains.
Moreover, people must make sure to stay updated with the latest stock market news and follow the market trend to make the right decisions at the right time.
The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the risk disclosure documents carefully before investing in equity shares, derivatives, mutual fund and/or other instruments traded on the stock exchange. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives will be achieved. NBT does not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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At times like these I always go back to the view that small and mid caps outperform their larger peers long term.
Small-caps in particular stand out on this metric; They really are the gift that keeps on giving, especially in the UK. Liquidity is a big fear for small caps, and the UK has had to battle both Brexit and the pandemic over the past five years, but the FTSE UK Small Cap Index has comfortably outperformed the FTSE 100 over that time (40.3 per cent versus 26 per cent).
In my eyes, UK small caps have passed the acid test and there’s no reason why they can’t continue to promote long-term from here. But you also need the right management team in what is a pure stock-picker market – and it is
