The best day trading stocks provide you with valuable profit opportunities. They have ample liquidity, which allows you to get in and out of trades fairly quickly at a reasonable price. Through this day trading tutorial we’re going to breakdown the general principles and the best way to pick stocks for day trading.
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The best stocks for day trading 2018 are the one that moves a lot from an intraday perspective. This is a key standard principle if you want to make money day trading stocks and find the best day trading stocks for today.
Even if you’re the best day trader in the world, if the market doesn’t have enough volatility to provide you with good profit margins, you’ll never make any profit day trading. Typically using straddle option strategy you can even trade purely on volatility and beat whether the volatility will go up or down. It will be useful for you to learn new trading tricks to take advantage of volatile markets.
In the long term, particularly for day traders, volatility is what allows us to speculate in the market and make a decent profit. Day traders have the advantage over the buy and hold investors of being in and out of the market very quick.
Moving forward, we will go over what you have to do every single day to catch potentially winning stocks and what is the best way to pick stocks for day trading.
How to select the best day trading stocks?
Selecting the right stock for day trading is important and it can make a huge difference to your profitability. Picking the wrong stock can lead to a lot of frustration and it may be the reason why some trades won’t work out.
Often times the same day trading pattern can have entirely different outcome when trading it on the right stock.
Each stock that you choose to day trade needs to go through a filtering process. We have used this process for many years. You can use this step-by-step guide on what is the best way to pick stocks for day trading and adjust it to your own needs.
Once you begin filtering the stocks for day trading it will become second nature and you will find that whenever you trade stocks you’ll instinctively begin analyzing if the stocks fit all the check box.
See below our stock selection process:
Best Day Trading Stocks for Today: High-Volume stocks
The number one key factor is the best day trading stocks for today need to have a good trading volume. You want to day trade stocks that have millions of shares traded every single day.
Because the more volume there is in the market the easiest and quickest you can get in and out of your positions. As a result the bid and ask spread is thinner on high-volume stocks.
Last but not least, the best day trading stocks for today are the one who are less prone to manipulation. When it comes to day traders, we’re competing with the best high frequency trading algorithms, the best traders in the world, the biggest hedge funds and institutional traders.
The benefit of day trading high-volume stocks is that it will make it harder for the smart money to manipulate the stock price.
Best Day Trading Stocks for Today: High Priced Stocks
The second feature of the best day trading stocks 2018 is the price of the stock. Normally you want to avoid penny stocks and stick with stocks that are priced over $25. The triple digit stocks are even more suitable for day trading.
The reason why we want to trade high priced stocks is because often times these stocks have higher intraday volatility then lower priced stocks. We want to day trade stocks with enough volatility so always go for the high priced stocks.
Best Day Trading Stocks for Today: Narrow Spreads Stocks
Novice traders usually don’t pay too much attention to how the difference between the bid and the ask of a stock affects their profitability. Large stock spreads can damage your profit potential that’s why we need to choose stocks that have narrow spreads.
The spread is a byproduct of the daily trading volume. Naturally, stocks with large volume will positively influence the spread.
The third feature the best day trading stocks need to have is an average daily volume over 250,000 shares per day. Preferably, if you want to improve your performance you want to day trade stocks with an average daily volume over 1 million shares per day.
Low volume stocks can exhibit very wide spreads that has the capacity to wipe out the profit potential.
Before going long a stock always make sure the difference between the bid price and the ask price is narrow.
Best Day Trading Stocks for Today: Use the ATR to Gauge Volatility
Another important factor you should analyze before entering the market is the daily trading range. Some stocks exhibit a relatively small trading range which makes them not suitable for day trading. But a stock goes through different cycles and every period of low trading ranges at one point will be followed by an expansion period.
So if today your favorite day trading stock has a low ATR, it’s best to simply wait for another day to enter the market when the trading condition are more favorable.
As a day trader the ideal periods to enter the market is when the ATR shows expansion periods in the daily range. We’re going to show you a smart way to determine if significant range expansion is taking place.
In a nutshell, based on our backtesting result, the ATR reading will signal a significant increase in the daily range once it breaks above the 100-day EMA. Simply attach the 100-day moving average on the ATR indicator. Most stock trading platforms will allow you to add studies over another technical indicator.
Best Day Trading Stocks for Today: Monitor the Stocks from the Same Sector
Another big driving factor for individual stocks is their sector. Approximately 70% of all price stock moves in tandem with the sector they are part of. Gauging how other individual stocks in your chosen stock sector are moving can give you more clues in determining if they are suitable for day trading or not.
Take the shares of Facebook and the share of Twitter by example. The majority of the time the stock price moves in tandem. If you look at dozens of other stocks you will see very strong correlation between individual stocks that are part of the same sector.
The best way to pick stocks for day trading is to follow our guidelines and use proper risk management strategies to protect your capital.
In summary, the best way to pick stocks for day trading is to focus on high-volatile stocks, because as long as we have volatility, you may generate consistent profits. Always use an objective method of analyzing your day trading stocks otherwise you’re setting yourself for failure.
If you want to make money day trading the stock market you have to put in the work and only look for those particularly attractive stocks that follow the guidelines outlined in this stock day trading tutorial. With practice you will be able to pick the best day trading stocks by just taking a brief look at the market.
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