For many beginner traders, the world of intraday trading seems exciting and fast-paced. One area that often catches the eye of new traders is cheap stocks—those low-priced shares that look affordable and potentially profitable. But are they truly a golden opportunity, or do they come with hidden risks?
This guide explores everything a rookie trader needs to know about cheap intraday stocks, from the appeal they offer to the dangers they pose, and how to approach them with strategy and caution.
Why Cheap Stocks Are So Tempting for Rookie Intraday Traders
One of the biggest attractions of cheap stocks is their affordability. With limited capital, rookie traders can buy more shares, which creates the illusion of higher profit potential. For example, if you buy 1,000 shares of a ₹20 stock and it moves just ₹2 up, that’s a ₹2,000 gain. Compare that with a ₹2,000 stock where only one share would fit your budget—it seems obvious why new traders gravitate toward the cheaper option.
But in reality, low-priced stocks often come with high risks, including poor liquidity, erratic price behavior, and potential manipulation. While they might offer fast returns, they can also lead to quick losses if not handled wisely.
What Really Makes a Stock “Cheap” – And Why It’s Not Always a Bargain
A “cheap stock” isn’t just defined by its price. Many penny stocks or micro-cap companies trade below ₹100 or even ₹10, but that doesn’t necessarily mean they’re undervalued or a good deal.
In many cases, cheap stocks are from companies with unstable earnings, low trading volume, and limited market trust. These stocks may appear affordable, but they often lack the fundamental strength or consistent news flow that supports price stability. They can also have wide bid-ask spreads, making it hard to buy or sell at a fair price during intraday trading.
Understanding the Intraday Trading Mindset for Beginners
If you’re entering the market as a rookie, it’s important to build the right mindset from the start. Intraday trading is not gambling—it’s a calculated activity that involves planning, discipline, and risk management.
Beginners should always trade with a clear plan. That means defining the entry price, exit point, and stop-loss before placing the order. Risking more than 1–2% of your capital on a single trade is never advisable. Over time, consistently small profits will add up and help build confidence and skill.
Also, emotional discipline is crucial. Most intraday losses occur because traders let emotions like fear, greed, or frustration control their decisions. The best traders follow systems, not instincts.
Are Cheap Stocks Suitable for Intraday Trading?
Cheap stocks can work in intraday trading, but they’re not always the best option for beginners. Let’s weigh the pros and cons.
On the positive side, low-priced stocks can be volatile, meaning they often move in large percentage swings even with small absolute changes. That creates opportunities to earn from short-term price action.
However, the same volatility can turn against you. Because these stocks are often thinly traded, even small news or rumors can lead to sharp price changes. Lack of liquidity can also delay your ability to exit a position, especially during panic selling or sharp market reversals.
Additionally, many cheap stocks are targets of manipulation—price pumping followed by sudden dumping—leaving uninformed traders with heavy losses. So while the low entry cost may be appealing, the risk-to-reward ratio often isn’t favorable without proper research and volume tracking.
How to Choose the Right Stocks for Intraday if You’re a Rookie
When you're starting out, the safest strategy is to avoid the cheapest stocks altogether and instead focus on liquid stocks with stable volumes and moderate volatility. These are typically mid-cap or large-cap stocks that trade actively on NSE or BSE.
A good starting point is to build a small watchlist of 3 to 5 reliable stocks. Pick names that consistently appear in the top volume charts, react to news quickly, and show predictable chart patterns. These kinds of stocks are much easier to trade and provide clearer setups for intraday positions.
Avoid jumping from one hot tip to another. Focus on understanding the behavior of a few stocks deeply rather than chasing trends blindly.
Smart Trading Strategies for Cheap Intraday Stocks
One of the best ways to approach cheap stocks intraday is by using technical analysis tools. Moving averages, RSI, MACD, and Bollinger Bands can help you spot breakout or breakdown setups. Combine these tools with price action and support-resistance levels for stronger confirmation.
Don’t enter trades impulsively. Wait for patterns like volatility contraction, flag breakouts, or volume-supported rallies. Use shorter time frames like 5-minute or 15-minute candles to identify precise entry and exit levels.
It’s also important to exit trades before the market closes. Overnight holding of cheap stocks can be risky due to price gaps the next day. Intraday should remain strictly intraday, especially for stocks that show erratic behavior.
A Real-World Example: How One Trader Used a Breakout Strategy on a Small Cap
In 2023, a popular trader used the Volatility Contraction Pattern (VCP) on a small cap that had just spiked on news. After the initial rise, the stock moved sideways with declining volume—this created a base. Once it broke out again with a rise in volume, the trader entered and booked a quick 4% intraday gain.
This example shows that strategies based on volume and price contraction can work, even on cheaper stocks. But such trades require experience, patience, and strict stop-losses to avoid whipsaws.
Key Insights Every Beginner Should Remember
If you're starting your intraday journey, remember this: trading cheap stocks can work, but it’s rarely the easiest or safest place to begin. The right trade isn’t defined by how cheap a stock is, but by how liquid, technically sound, and manageable it is within your risk limits.
Start small. Learn how to read charts, identify setups, and control your impulses. Most importantly, document your trades and review them regularly. A journal can be your most powerful learning tool.
Cheap stocks are just one part of the intraday landscape. Don’t get caught up in price—focus on behavior, patterns, and discipline.
Final Thoughts: Trade Smart, Not Fast
The promise of fast profits in cheap intraday stocks can be enticing—but it’s important to look beyond the surface. Cheap doesn’t mean valuable, and volatile doesn’t always mean profitable.
As a rookie trader, your priority should be survival and consistency, not overnight success. With the right knowledge, proper stock selection, and strong emotional control, you can build the foundation for a long and successful trading journey.
Remember: trading is a skill developed through time, experience, and discipline. Cheap stocks might offer opportunities, but it’s your approach that defines the outcome.
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