To become a successful trader, you need to understand the market to trade stocks. This means learning to find your stock ideas in everyday trading. You will need to wake up before the market opens and start doing your analysis.
To find the best day trading stocks, you need to know more than their tickers. You need to know their trading volume about their breakout potential. And you need to understand their volatility… and the risk of trading stocks with high upside potential.
This article is a tutorial on these concepts. We hope this opens the door for further exploration. Heck, we hope you teach me something too someday! Join Exness, where you can test my strength!
To learn how to day trade, you must understand what makes a stock move. It’s not as easy as picking the right stock. But it all starts with this.
How to Find Stocks to Day Trade: What is Day Trading?
Day trading is like that old Othello board game. It takes a minute to learn, but it takes a lifetime to master yourself. Or at least a few years of study and screen time! This is just trading in shares during one trading session. If you buy stocks and sell them on the same day, you are only day trading.
But if you want to be successful at this, you need to develop a strategy and stick to it. This is the hardest part. Relying on emotions like fear and greed instead of preparation is the main reason most day traders fail.
How to Find Stocks for Intraday Trading: 8 Critical Criteria
Well, you know you can join us in the premarket and find out everything that’s going on in the market. If you are still here, we think you want to learn how to find these opportunities yourself. This is amazing.
Screening is the best way to eliminate trades with 16,000 actively traded stocks. But first, you must understand why these criteria are essential.
High trading volume is the first sign of a good potential trade. Volume is the number of buyers of stock. After all, trading is a supply and demand type of situation. If everyone wants a stock, the price will go up.
Volatility is another vital component of good day trading. we would go even further and say that volatility is the secret to intraday play.
Talking heads on television hate fickleness. This is one of the reasons they advise anyone who listens to them to stay away from the penny stock sector. Many of these promotions are failures. Like everything in trading, never risk what you cannot afford to lose. But if you’re looking to build up a small account quickly, volatile stocks can be a good option — as long as you understand the rules, risks, and strategies.
To prevent the dark side of volatility, your stock needs good liquidity. You can exit the trade and take profits according to your trading plan.
You want to look for stocks predicted to move at least a million daily shares. It sounds like a huge number, but it’s the minimum you need to ensure you don’t get stuck in a trade. You can set up a screener to collect stocks trading at least 50,000 shares in the premarket. If they continue gaining momentum, they could make a solid deal.
It won’t bring or break the deal. But for you, the trader, this is significant. How big is your account? What trades are you looking for? What is your risk tolerance? These are all critical questions to ask when reviewing stocks. Many people don’t want to take a risk when it comes to penny stocks. Perhaps they will check stocks worth between $5 and $10. They miss the opportunity to make huge profits for greater certainty.
Another thing I’m looking for is low float stocks. A float refers to the number of publicly available and actively traded shares. This is the supply side. We usually refer to stocks with less than 40 million shares outstanding as low float stocks. When a stock gets high volume, this limited supply will cause the price to rise. And that’s what you want as a day trader. Higher float stocks can also move but need a lot more volume. Stocks like Apple (NASDAQ: APPL) will probably never see the same huge percentage gains as low-floating stocks.
All of these ingredients should add up to a high percentage of returns for the stock you are about to trade. Stocks that have risen in the premarket have the potential to give you a boost. But the wave can come on…and then crash like you’re dreaming about your new Lamborghini. You cannot fall in love with numbers. But they are a good sign of a future move you could trade if the setup is correct and in line with your strategy.
Often you are looking for the reason why the price target is moving. Otherwise, your transactions will be rather useless.
You can trade stocks like EVK, but it’s best not to hold them overnight. In less than 24 hours, this stock is up almost 300%… and is now almost down to its pre-spike lows.
There was no real reason for this. And when the surge ended, traders who did not take profits were left with nothing.
On the other hand, thanks to quality news catalysts, stocks can run for several days. These could be earnings announcements, press releases, or sector-wide news. The catalyst can lead to several green days in a row.
Of course, you want to get the news early. If you wait too long, the critical news will already be factored into the stock price. If this happens, you may be wrong about this classic market advice – buy the rumor, sell the news. No one can guarantee that even the best news will lead to a stick shift. That kind of thinking is for amateurs. But quality news is one big check mark on the list of what makes a good trade.
The news can also cause an entire sector to move. Or sometimes, the hot sector is just what people pay attention to.
A hot 2020 for Tesla (NASDAQ: TSLA) has drawn sympathy across the EV sector. Marijuana legalization referendums saw stocks in the sector rally for a week. The pandemic has been a TON of heat, from pharmaceuticals to the entire home sector. When will there be news about the vaccine? The entire stock market went into a sprint.
How do you know which stocks to trade?
So we just tossed you a bunch of stuff. But we know what you are asking. Misha, how do we find the right stocks to day trade out of 100 stocks that look good?
Here’s how it works. Here is an example of the criteria you can set:
⦁ Price from 1 to 10 dollars. This is land for pennies. It’s also the best place to focus if you have a small account.
⦁ Percentage change of at least 10%. If you follow the rules of the pattern day trader (PDT), your trades are limited. Therefore, we want you to focus only on the best trades. Maybe even bring it up to 20%.
⦁ The volume is at least one million per day or close to this mark. You need liquid shares. This means that demand will continue to drive up the price. This also means that you are more likely to be able to exit whenever you want.