How to select
stocks for day trading
Tips for day trading strategies
Selection of stocks for day trading is critical part of developing one or several day trading strategies. It is important to make this selection based on type of day trading strategy that you want to use for day trade stock.
What are best day trading stocks ?
There are several common criterions that any of best day trading stocks should have. Only stocks with these parameters could be considered if you want to develop profitable day trading strategies.
Best day trading stocks
have good average trading volume
First critical parameter for best stock to day trade is liquidity. Any stock you want to day trade should offer enough liquidity i.e. intraday trading volume. This condition is critical as it has direct impact to
risk and money management
process for every day trader.It is good to have high average daily volume for best stocks for day trading. But not all high volume stock are good for day traders. There are also high volume stocks that do not move enough during
intraday trading hours.
Such stocks should be avoided. You can see that GE stock is high volume stock but its daily trading range is not good for day trading strategies.
You can compare it with KLAC stock. This stock has also high volume but trading range during regular stock exchange trading hours is much higher.
I recommend to select stocks with 1 million average daily trading volume.
Best stocks for day trading
have good trading range
And so I described second important condition for best day trading stocks. As I wrote above these stocks should be able to do good intraday moves. This parameter is often called
volatility.
But these days (10/2011) the volatility of stock market is quite high for majority of stocks. So it is good to check volatility of any such stock in longer period of time. It is known that stocks that are traded on Nasdaq stock market are more volatile then NYSE listed stocks. So it is possible to start with Nasdaq listed stocks when searching for good stocks for day trading.
Best day trading stocks price
The price of stocks for day trading is another parameter that should be considered in selection process. A lot of day traders that starts with smaller accounts think that it is better to trade low priced stocks. They tend to select stock with price in range from (under) 1 USD to 5 USD. It is not good way. These stocks are known as penny stocks and I must warn everybody who wants to trade them. Trading these stocks is extremely risky. It is not possible to manage risk with trading these stocks. A lot of traders cleared their accounts by trading these penny stocks. I would recommend to think about price of stock above 20USD. 20USD is minimum, better will be to find above 30USD. These stocks could offer quite good intraday trading range and it means also good and profitable opportunities for stock day trading strategies The final question I would like to discuss here are stocks with high price. If you apply parameters described above you will find also several stocks with price of shares north above 100USD. Typical daytrader could consider that day trade stock with price above 100 or 150USD could be very risky. Especially if his/her trading account is not big enough. I would like to tell you that it is not so risky to day trade stock with such share price. It is possible to buy small amount of shares for each day trade . Best stock trading brokers offer possibility to buy one or few shares (5 or 10pcs). So the risk can be managed well also with these highly priced stocks. Good examples of best day trading stocks with price above 100 USD are stocks like AAPL, AMZN, GOOG. Here are their charts.
I think that it is really possible to make profitable day trades also with these stocks priced above 100 USD.
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