Last Updated on August 23, 2020
You don’t have to beat yourself up trying to figure out what stocks to pick for day trading. With the advent of online stock trading schools and financial assets management firms, life is now a bit simple for stock traders. However, if you already have financial investment basics, wouldn’t you like to get a kick out of day trading individually? The more you day trade, the better you get. And the best part: you don’t have to share returns with any third-party.
Aligning your day trading knowledge to a trading approach that suits your investment style and risk levels is the foundation of day trading. But you can’t afford to “ready, fire, aim” with day trading. That’s because day trading heavily relies on volume and volatility. It’s where all day trading returns and stock trading profits, in general, are made.
You want to be able to detect daily price action and movement (the volatility) and sufficient relative volume for successful day trading. That’s where the need to identify stocks that provide daily price movement and high volume opportunities comes in.
Daily stock market reports and trusted business editorials can be a reliable source for making a list of potentially the best day trading stocks. You can also use day trading stock screeners, of which several are free. But don’t rely solely on this information. Instead, access ongoing price action. Stock exchange portals and hundreds of stock price mobile applications are free to access to view real-time price shifts. Here are stocks that can earn you decent daily returns:
High Volume, High Float Stocks
Look out for listed companies that have millions of shares traded daily on the stock exchange. The idea is to have a day trading stock portfolio that allows you to get into a stock position and not have to hold it any longer than necessary. You need that liquidity to stay afloat because tied up capital can halt your day trading.
The more the volume of stock traded in the stock market, the easier it is for you to enter and exit a position. You need to remember that in this day and age, algorithmic trading is a big deal. When the daily volumes of a stock traded are low, automated trading can affect price action in an entirely different direction than you hadn’t projected.
Apart from trading robots, there’re other day trading competitors such as expert day traders, institutional day traders, and fund managers. Collectively, they represent smart money in the day trading of stocks. Luckily, it’s harder for them to manipulate stock prices when the volumes traded are in the millions.
Examples of high volume stocks include Apple, Ford, Tesla, Vodafone, and Google. Depending on your region and stock exchange, the volumes traded can be lower. On an international level, the US stock market has the most substantial traded volumes. You can do a filter query to get a list of virtually all high volume stocks on any exchange in the world.
High Priced and Highly Volatile Stocks
Volatility tells you how much price fluctuation you’re dealing with and the daily returns you can achieve based on those daily pivots. High-priced stocks tend to be more volatile than penny stocks. That’s why penny stocks—usually $5 and below—aren’t an option for any day trader.
Theoretically penny stocks would make for a perfect day trading pick owing to their affordability without the need to leverage. But they’re less volatile and illiquid since most exchange in over-the-counter markets.
Go for the high prices: any stock whose prevailing rate is around $25 and above. It’s even better if you can find a stock with a triple-digit or four-digit market price. Do this quick activity. Open up a NASDAQ or New York Stock Exchange price list from a week ago.
Compare penny stocks, if any, with three and four-figure price stocks. Other factors held constant. What do you see on the intraday price column and the percentage price change column? The triple and four-digit stocks, such as Facebook and Amazon, should have higher and more consistent price changes.
A reliable estimate of volatility is the stock’s beta, which is a measure of the volatility of the stock against a base asset. A beta above 1 or below -1 communicates that the stock is highly volatile. Beta figures between -1 and 1 suggest a less volatile stock.
Stocks With Common Ground and Exchange-Traded Fund (ETFs) Shares
Typically, two listed companies with related business concerns (in manufacturing or service) tend to have a lot in common. As a result, their respective stock volatility happens in a parallel fashion. In other words, there is a high probability that the price fluctuations of a stock A and B from the same sector will happen in tandem.
In that line, you can use a well-established day trading fund to find new stocks to day trade. For instance, the SPDR S&P 500 ETF tracks the S&P 500 stock index. If you came across a company in the same industry as an S&P 500 stock, use daily pivots to determine whether it’s a good fit for day trading.
Examples of day trading stocks under this approach would be Uber and Lyft in the mobility industry, Bank of America and JP Morgan-Chase in the banking sector, etc.
Day stock trading is a great way to earn—whether passive or side income. A host of stock trading techniques underlie day stock trading. One trader could be a scalper while another hangs onto short selling. It’s a short-term strategy meaning day traders are bound to make changes from time to time. The changes can involve rearranging the type and number of stocks they trade, trading hours and leverage margins. Note that as a day stock trader, you’ll have to deal with all these aspects of day stock trading.
Day trading stocks isn’t a walk in the park. You can have strengths in raising adequate investment capital and day stock trading strategies, but be weak in finding the right stocks. And even if you use the methods here to create the ultimate stock portfolio, there’s always room for improvement. Don’t dare sit back because the financial investment industry is ever evolving. You need to keep up with it to continuously be aware of the best day trading stocks.