There isn't a perfect day trading stock, as trading styles vary by trader. That said,most day traders prefer tight spreads and lots of volume. A lot of price movement is also something many day traders seek; it is easier to jump in and out for a profit in a stock that is moving a lot, compared to one that isn't.
Key Takeaways
Ideal stocks for day trading include those with high volume and tight trading spreads.
Lots of price movement and liquidity are trademarks for day trading stocks.
A good day trading stock can typically be traded for several months or more before conditionschange, however.
The following stock combines liquidity with excellent intraday price movement, making them ideal for most day traders. Conditions do change though, so while these stocks currently offer what day traders are looking for, weeks or months from now they may not.
Example of Day Trading Stock
Stocks with high trading volume is the first thing to look for. ZIOPHARM Oncology, Inc. (ZIOP) hasa100-day average volume of2.4 million shares per day. The stock hasa high average day range (from high to low).
Look for stocks that are shortable, but note that a high short interest can make the stock hard to borrow some days. The below ZIOPHARM chart shows the 6-month daily price history, daily volume, and the performance of the stock (percentage) over the 6-month period.
Many ideal day trading stocks are priced below $20. A lower share price allows day traders to trade stocks with volatilityand volume at an affordable price for smaller trading accounts.
For those seeking greater volume, theSPDRS&P 500 (SPY) is popular among traders of all types. For those seeking significant volume and volatility, the iPath S&P 500 VIX ST Futures ETN (VXX) orVelocityShares2x VIX ST ETN (TVIX) are currently offering both in abundance.
As well, other ETFs worth considering include Financial Select Sector SPDR (XLF) and Invesco QQQ (QQQ). Specific industry ETFs that are ideal for day traders include the VanEck Vectors Gold Miners ETF (GDX) and iPath S&P 500 VIX Short-Term Futures ETN (VXX).
In the simplest form, look for high volume stocks with a high beta, such as Advanced Micro Devices (AMD). Other stocks meeting that criteria include Twilio (TWLO) and Tesla (TSLA).
The Bottom Line
These types of stocks are of potential interest to day traders because they provide liquidity and significant daily percentage price movements each day (usually). No specific direction or trade is recommended. Anyone who day trades should have a sound strategy they trade and be prepared for the volatility these stocks offer.
Conditions do change though. A stock with high volume currently could see it reduced (or increased) in the weeks ahead. volatility could also increase or decrease.A good day trading stock can typically be traded for several months or more before conditionschange enough to consider trading something else. Some day traders trade theexact same stock, ETF, or several stocks and ETFs for their entire career.
Although it's possible to make $1,000 (or even more) in a single day when you are day trading, sustaining that level of gain over time is very, very difficult.
Day traders like stocks because they're liquid, meaning they trade often and in high volume. Liquidity allows a trader to buy and sell without affecting the price much. Currency markets are also highly liquid. Some volatility — but not too much.
While these strategies can help make cash within a day, it's important not to expect immediate success and to have a risk tolerance to lose all trades.
Day trading describes buying and selling common stock within the same day to profit from short-term price movements. Since they are prone to rapid price swings and high volatility, penny stocks are particularly attractive to day traders as opportunities for quick profits.
Some professional traders make a living from day trading. If you enjoy this strategy enough and make it work for you, it could become your primary profession.
A common approach for new day traders is to start with a goal of $200 per day and work up to $800-$1000 over time. Small winners are better than home runs because it forces you to stay on your plan and use discipline. Sure, you'll hit a big winner every now and then, but consistency is the real key to day trading.
A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.
It is not a hard and fast rule, but rather a guideline that has been observed by many traders over the years. The logic behind this rule is that if the market has not reversed by 11 am EST, it is less likely to experience a significant trend reversal during the remainder of the trading day.
Day traders are attuned to events that cause short-term market moves. Trading based on the news is one popular technique. Scheduled announcements like releasing economic statistics, corporate earnings, or interest rate changes are subject to market expectations and market psychology.
A typical day trading profit per day is between 0.033 and 0.13 percent. This corresponds to a monthly profit of between 1 and 10 percent for successful day traders. However, only a few traders are successful in the long term - most make losses.
Liquid stocks are more easily day-traded and tend to be more discounted than other stocks, making them cheaper. In addition, equity offered by corporations with higher market capitalizations is often more liquid than corporations with lower market caps.
The best chart patterns for day trading include the triangle, flag, pennant, wedge, and bullish hammer chart patterns. How to find patterns in day trading? To identify chart patterns within the day, it is recommended to use timeframes up to one hour.
Day trading is tough. A University of Berkeley study found that 75% of day traders quit within two years. The same study found that the majority of trades, up to 80%, are unprofitable. While some day traders end up successful and make a lot of money, they are the exception rather than the norm.
The ideal day trading computer setup would include all the critical components such as high-speed internet, multi-screens for charting, plenty of ram, and at least a dual-core CPU, but ideally quad-core.
It's important to note, however, that while investing typically involves less risk than day trading, it does not guarantee profits. Both strategies require thorough research, careful decision-making and an understanding of the markets.
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