Day trading means purchasing and selling stock within the same day. This is a great market for investors. In order to make money, investors can make use of prices fluctuations. If played well, this game can be extremely profitable for investors. However, to succeed, traders must follow a well-developed strategy.
What Stock is the Best for Day Trade?
It is difficult to say which stock is the best for day trading because all traders use a different trading style and strategy. However, most traders search for the following points in stocks for day trading:
- Heavy price movement.
- Tight spreads.
- Large volume.
Heavy price movement is the key point, because the easiest way to earn quick profit is to trade the stock that has a lot of movement. At the same time, it is important to remember that all stocks fluctuate and the market is constantly changing. The stock for the next 10 days is selected taking into account the above characteristics and is a good choice for most day traders.
General Principles of Day Stock Trading
Evaluate your risk and make a decision how much you can risk!
The majority of traders are ready to risk 1-2% of the amount on their account in every trade. If your trading account is $50,000, and you are ready to risk 0,05% in every trade, the maximum you will lose is $250. Ensure that you have additional resources for risking and losing, but always remember that you may lose, and you may not.
Spend your time!
Day trading requires time. IN order to succeed, you have to follow the market all day long and move quickly to catch up with the emerging opportunities. It means that you must be ready to spend most of the day by monitoring the market.
Don’t forget to do your homework!
It is important to know about the basic trading procedures for day trading. However, traders also have to do their homework and be aware about all latest events and news that can affect the stock prices. Enlist all stocks you would like to trade and follow all events related to these companies, as well as everything that takes place on the market.
Make use of limit orders!
A limit order is a kind of order for purchasing a share at the defined price or even better. Limit orders help traders to trade with a greater degree of accuracy because you define the price for selling and purchasing.
Value the time!
Experienced traders have a small secret. Following the market, they often define the regularities and can successfully trade as soon as the market opens. Since many investors trade at the beginning of the trading day, the prices can be unstable during the first 15-20 minutes. If you only start day trading, be careful about trading during this time. Actually, beginners would better wait till the middle hours when the market is not so much volatile.
Follow your strategy!
Successful traders involved in day trading always have a well-developed strategy they follow day by day. This guarantees that they are always calm and never follow their emotions. The strategy helps them to become winners over the long term.
Start small!
If you only start day trading, focus on one or two stocks. This will simplify thorough monitoring the market and detecting opportunities if any.
Today it is getting more and more wide-spread to trade fractional shares. What does it mean? Traders can choose certain amounts in US dollars they want to invest even if it means buying partial shares. It means that you can spend only $50 and buy a share sold at $250.
Stay a realist!
When day trading, always stay a realist and remember that it is impossible to win every trade. In fact, many day traders win only half of all cases. However, the key is that they win more when winning than lose when making the wrong choice. When they limit the risk of each trade, they protect themselves from high losses.
Best Stocks for Day Trading
Advanced Micro Devices Inc. (AMD)
Advanced Micro Devices had a wonderful year: its stock surpassed 100% as compared to the previous year. Such growth is not characterized for such company as Advanced Micro Devices. Many day traders focused on this stock during the year in spite of its considerable gain.
Stocks of Advanced Micro are extremely liquid and their everyday volume exceeds 85.4 mln shares. Its monthly volatility is about 4.6%, which means that it has many movements for the promising day trading. Many investors monitor Advanced Micro because of its recent contract with Google on developing the equipment for Google Stadia, the future gaming platform. The stock of Advanced Micro will definitely move as soon as a new platform is launched. That is why day traders must attentively monitor the headlines.
Basic Energy Services Inc. (BAS)
Basic Energy Services is another company having the best stock for trading. Its average indicators decrease a bit under 3 mln shares per day with the average indicator of 7.28% for 30 days. Its days with low volatility decrease approximately by 4%. However, most often the fluctuations of stock prices make up 5% and more.
Bill Barrett Corp. (BBG)
Bill Barrett Corp. is also a good stock for day trading. Its volatility and volume have been stable since 2014. The average day volume of stock is 2.5 mln shares both for the short-term and long-term analysis. Its volatility fluctuates from 4% as minimum to 10% as maximum. In average, this is 7.29% for 100 days.
Etsy Inc. (ETSY)
Etsy is well-known e-commerce retailer that offers suppliers its platform for selling non-standard products. Consumers can buy unique products that are not sold by large retailers like Wal-Mart.
Etsy complies with all the criteria to be one of the best stocks for day trading. It trades about 3 million shares per session, and its monthly volatility is about 4.6%. As for the price movement, Etsy is a leader: every month the prices for shares increase and make up 14%, while in terms of a year this figure is 42%.
Facebook (FB)
Facebook is a reliable stock for beginners, especially those who prefer following the trend line. When trading, a trader studies the stock graph and defines the minimum points. Low points make up a line which makes it possible to draw a rough line across them, and thus create the lower trend line. Every time the stock decreases to this line, the trader is aware that it will increase again.
Facebook is a wonderful starting stock because the lower trend line is meant for you. However, make sure that the stock graph displays 50 days moving average for you to see the current trend line.
Traders also like creating trend lines over the stock maximum. It helps them to see when the Facebook stock reaches this upper trend line which indicates to the fall probability. Facebook has about 13 million shares. It says that it is quite liquid and new traders are likely to easily leave the position.
The trend line can be useful for beginning traders, but it is important to study the market and learn when the stock price is about to change. To rely on the trend line is not enough.
Roku Inc. (ROKU)
Roku specializes in creating flow technologies for smart TV producers and ordinary consumers. Their stock also increased last year with the upward tendencies by more than 100%. Roku’s volume exceeds 14 mln, which explains why traders like it. Short placement of Roku stock is more than 15%, which is often considered as bad. However, if traders have a position on the stock market, a higher short-term placement can let traders earn good money.
Synergy Pharmaceuticals Inc. (SGYP)
Synergy Pharmaceuticals Inc. is one more company occupying the leading positions in day trading. Nevertheless, this indicates the problem traders face when relying on the average statistics. During several days in June there was a large volume and rapid movement of the stocks, which made them more volatile and liquid than they were in fact.
If to look at the average volume for 30 days, it is possible to see that the average volume of stock is 9.2 million shares. However, the average indicator for 100 days is only 4.3 million shares. Ordinary trading session for Synergy is the exchange of about 2-3 million shares with the average interest change from 3%on days with the low volatility.
Twilio Inc.
Twilio Inc. is a technological company specializing in providing large companies with clouding services. It complies with all requirements set to day trading.
Its stocks are traded at the volume of 4 mln and provide a good liquid market. Besides, the monthly volatility rating of Twillio stock is above 4%. This means that they are characterize by considerable price fluctuations. Nowadays prices for its stock tend to increase. Since January 2019 it has been growing by more than 47%.
Tesla Inc.
Many investors know about Tesla know about Tesla because of its popularity last time. This is a fashionable company that offers a good range of stock both for day traders and retail investors. As a rule, in average Tesla stock is traded in the volume of 8.5 million shares per session. However, its stock is not so volatile as others, its ATR (average true range) is above 10. The ATR is based on the recent 13 sessions and means that the Tesla volatility was exceptional last time.
Now the Tesla stock is an object of great interest of day traders. More than 20% of the stock is shorted. High short ratio usually indicates the bearish market, and it can also mean the coming market rebound that causes a short squeeze. Day traders positioning themselves in the stock before the squeeze can find such short squeezes rather profitable.
ZIOPHARM Oncology Inc. (ZIOP)
The volume of ZIOPHARM Oncology Inc. is about 3.9 mln shares per day. Its range is 6.9% for 100 days. From May to June the day price movement exceeded 4%. Day traders searching for short positions can buy ZIOPHARM shares but only if they plan the time well.
Invest in Stocks Trading
The above concepts and basic principles to define the best stocks for day trading are not universal. Every trader has his own point of view about investing and investment strategies. Mind that the more you trade, the better trading strategy you can develop and define the principles of the most efficient trading to follow.
