How to Choose Stocks for Day Trading?
In a nutshell Day Trading 28 is a trading technique where a speculator buys and sells stock multiple times over the course of a trading day to harness the potential of volatility and trends in the stock's intraday price.Day Traders who employ wide array of intraday trading strategies in attempt to profit from price changes within one trading day may deploy a great deal of Day Trading Techniques aiming to predict coming intraday price actions. In harmonious accords with experts' opinion - who see meager chances that Intraday Trading would be lucrative in the long run - though in theory Day Trading can be very profitable, according to statistics more than 97% of Day Traders lose money over time and less than 1% of them are consistently profitable. The rest actually lose on their Day Trades or in best case scenario they sustain zero balance. Aside from gloomy success rate for Day Traders this trifle percentage still amounts to a huge number of investors that itself proves Day Trading minted crowds of millionaires, albeit they are not acclaimed publicly as giant stock tycoons.
Even though Day Traders can find it dismayingly challenging to scan then analyze tons of stocks simultaneously, and to amass a myriad of fundamental and technical data while looking for trading signals, beside to keeping track of open trades, each and every day more and more prime-time players enter Day Trading worldwide. US Stock Market is undoubtedly the most attractive investment arena for Day Traders where anyone can take the advantage of the high volatility incurs in a universe of US Stocks.
While there are countless Intraday trading strategies, for those Day Traders who devise a trading plan each day other than studying Stock Market News, the most important factor is to elaborate a Stock Picking Technique and compile a list of most promising Intraday Stock Candidates. To choose Stocks for Intraday Trades is deemed by far the most grueling combat on the field of Stock Market and this is where Stock Scanning comes into play.
CHOOSING STOCKS
Once a trading opportunity has been identified in a particular stock, the next step is allocating the most appropriate ways to profit from it, that boils down to determining enter and exit points at which you buy and sell the stock and working out your risk management; what rate of loss you can afford. You may have picked the best-performing stock in the world, profiting from it will depend on at what price you can buy and sell it. Ideally, to max out your profit you have to buy at the bottom and sell at top being mostly unfeasible but by optimizing your entry and exit points you may materialize these intentions. At this stage you can rely upon experimental guidelines established by proficient investors, you can create your own rules, or even alloy them.
Here is a bunch of useful market rules that aim at enhancing your Day Trade Stock Picking Technique.
Liquidity
A stock's liquidity represents how quickly it can be bought or sold in the market. Liquid stocks typically have high trading volume that entails larger quantities of outstanding shares to be bought and sold, without notably affecting the stock price. Liquid stocks are more easily Day-Traded and tend to be cheaper than illiquid securities. Though Day Traders often are focused on smaller companies, stocks offered by companies with medium or large market cap are often more liquid than corporations with lower market caps because it's easier to find buyers and sellers for such stocks that allows for quicker trade execution time.
Because Day Trading strategies largely rely on execution time and accurate trade timing, a larger volume facilitates faster entry and exit for your trades.
|
|
|
Beside to liquidity depth is vital because it guides you about stock's liquidity at different price levels, above or below the actual market bid and offer price.
The volatility of a stock is the amount of movement in the stock's price over a certain timeframe. If the price-swings are more frequent, the stock is considered more volatile. There is a cluster of metrics to be used to calculate stock volatility, as
» Bollinger Bands
» implied volatility
» historical volatility
» beta value
» average true range
As a Day Trader you seek highly volatile stocks with broad-range intraday price movements to profit the most from these price actions. Volatility might become a double-edge sword though. You should be vigilant that when volatility spikes, you might rake in unprecedented endowment, but you also might be exposed to the risk of losing your capital if at the cusp of the trend price starts to fall abruptly.
Group Followers
While the minority of Day Traders specializes in so called contrarian trades, most speculators try to spot stocks that move in tandem with their sector, industry and index group. When certain sector, industry or index gets and upward momentum, the price of the stocks relevant to these groups also increases and vice versa, in case of group declines, stock price begins to fall. This comes into play if the investor's strategy concentrates on the strongest or weakest stocks.
Trend or momentum trading is based upon the idea that it's beneficial to trade strong stocks in an uptrend, and weak stocks in a downtrend. When the indexes, spiders, ETF's (that have a moderate to high correlation with the main stock indexes), and market futures are moving higher, Day Traders should pay close watch to stocks that are rising more aggressively than indexes or futures. Common assumption, when indexes decline, a strong stock won't fall as much, or it may not even decline at all. Historically big investors paid great attention to trends and tried to ride with the wave of a stock that's moving up or down. Traders will buy a rising stock or sell a falling one assuming the trend will keep moving forward.
Stock Market News
Though Stock Market News is widely considered as the most important stock catalyst, and as such it is a determinative factor in stocks' price movements, there are Day Traders who avoid Market News at all costs, under the assumption they can't sort out the "noise" that would baffle their clear vision in Stock Picking. They also do believe if you are wasting time for spotting and reading news instead of studying market data, stock fundamental data and stock charts, planning where and when to profit from Day Trades, their focus would abate and would stay in the dark by the time the market opens.
As opposed to this group of investors others say Stock Market News is a vital component of investing strategy of any sort, especially Day Trading.
From our perspective at BNA, the extract and data you can deduct from market news are important but if you want to trade from a pure mindset and find, read and analyze all Stock Market News trying to find out how certain news may or may not affect stock prices, and trends overall, you won't be able to pay undivided attention to caring of your other strategic tasks that will ultimately result in wrong buy and sell decisions.
Commonly the biggest obstacle to a Day Trader's success is when investor intends to capture a whole bunch of information without having sufficient time to analyze it. Any method to spot the best stocks for your Day Trading portfolio might require modern tools intended to allow you to simplify and accelerate your Daily Stock Picking, and to avoid losing integrity.
Battle Inflation
Monster
Create From-Home
Career
Act for a Luxury Life
» research portals
» charting software
» sentiment analysis
» AI semantic search
are useful for every investor but for a Day Trader by far the most popular online stock trading tools are stock scanners and news scanners. Preferably, you are looking for stocks that are about to make a big move. You want to see stocks in an uptrend within growth sector, with momentum, volatility, and backed by fresh favorable news; a line of stock you can trade profitably on the given day.
As a stunning opportunity to stumble across the best Day Trading Stocks, these tools help you to effortlessly observe the market daily, and trace the most volatile and liquid stocks through stock scanners tailored to your investing character and customized to your own Day Trading strategy. Beyond technical aids, trading psychology does exist. Properly developed psychological approach might help you to become a successful stock picker while ignoring the psychology of trading can destroy your trading success.
Big Wall Street names adopted the idea stock trading is a psychological game. Your trading character and true emotions will only be revealed when risking your own money in real trades. In order to choose the best performing stocks you need to sustain certain human attributes including emotions that majorly affect your success as an Intraday Trader. You need to learn how to,
» restrict unreasonable fears
» keep your greed in bay
» cancel regret off your trading vocabulary
» and hope shouldn't replace the reality.
|
|
|
A not-insignificant number of Day Traders had never allocated their own actual trading strategy. Nor had they determined a specific Stock Picking Technique accurately. An investor, especially a Day Trader can't be consistently profitable if basing these key factors upon sketchy trading plans. Good news, you can choose from a raft of existing trading methods Day Traders use individually or combined. Our list of common trading techniques can guide you through the exhausting process of establishing your own Stock Picking Strategy that can make you apt to benefit from the majority of your Day Trades.
Entry and exit strategies
The ability to identify certain intraday trading signals can drive you to higher success rate. Many Day Traders trade only with the current intraday trend. The market always exhibits cyclical volatility resembling waves. When studying trends, your duty is to ride with the waves of uptrends offering the best opportunity to go long. During a downtrend, open short positions. Keep in mind trends throughout a trading day don't continue indefinitely, and keep a close eye on trend turns manifested in reversal stock chart patterns.
Perceiving and clearly identifying the trend can be arduous even for experienced Day Traders. Trendlines help you to work out efficient risk management that can support an entry and stop-loss strategy. Also keeping track of futures, spiders and ETF's repetitively during the trading day can make you more prosperous Intraday Trader. Aggressive drop or spike of S&P 500 or other futures can signal a significant change in trends.
Take regular profits
Day Traders have limited time to take the advantage of intraday price actions therefore minimize the time in your trades, and don't overplay trends that can move in the wrong direction without you could anticipate their move. Should the wave keep the stock price going upward and you are long with a stock, ride with the wave until you encounter the slightest danger signal, yet before the downtick cannot be arrested.
STOCK SELECTING
Some Day Traders prefer to wait and watch in sideway market. They don't open positions but keep their exiting positions open assuming they can reduce risk. Others continue trading in expectation of an imminent uptrend before market would close, taking the possible burden of high risk. Either way, Day Traders may have anticipations of coming price movements based on their daily market analysis but in fact no one can predict where intraday trends will turn.
Momentum Trading: Day traders identify stocks that are trending up or down and will ride that consistent price-move over the day, hour or even minute. Day traders assume that the momentum will continue, allowing them to take profit.
DAY TRADING TYPES
Although there are four main Day Trading techniques as,
» trend trading
» momentum trading
» breakout trading
» contrarian trading.
There has been a large array of other active Day Trading techniques developed by investors. As opposed to passive investing where the goal is to buy and hold stocks for long period of time, active trading refers to a strategy that involves attempting to profit from short-term (often extremely short) price movements that boils down to Day Trading. While you need to figure out which of the different Trading Strategies or the blend of more will be the most rewarding for you, your Day Trading performance eventually relies on your knowledge, experience and market understanding.
Trend trading also referred to as trend-following trading
This is the simplest Day Trading technique that involves the use of moving averages, momentum indicators, stock chart patterns and trendlines to identify trends. Your buy and sell transactions will align with the trend in the same direction of the trend until trend reversal. Simply stated trend trading is a strategy in which investor tries to capture gains by looking at a stock's momentum in trends.
Momentum trading
Momentum trading involves entering a position when stock's price shows significant increase in price and / or volume 87. You buy stocks that are rising - because they have momentum - and sell them when they look forward to decline. Momentum trading is the trading technique of trying to profit from buying when significant price change occurs and selling stocks along with a trend.
Though trend trading and momentum trading bear resemblance practically they are not the same.
Breakout Trading
This involves spotting stocks that are trading within a range, and entering a trade when it is forecasted that this range is no longer supported and price breaks out of this range. Combining it with momentum trading, Day Trader is looking for strong momentum and enters the position when momentum signals an increase of trading volume.
Range trading
Range traders - be they long-term investors or Day Traders with very short time horizon - identify a price range at which they buy and sell stocks for a short period. They determine a low and a high price, then they buy when it nears the low and sell when it nears the high. For example, a stock is trading at $7.81 and you assume it is going to rise to $8.02, then trade in a range between $7.81 and $8.02.
Contrarian Trading
Contrarian traders take a position that is opposite to the prevailing market sentiment. If the current market sentiment is bullish, the day trader will enter short positions and vice versa in case of bearish sentiment they go long. This requires careful stock market analysis both financial- and economic wise, allocation of what news and events will affect a stock's price and how. Then an investor utilizing Contrarian Trading will trade the underlying stocks before, during, or after the news or event.
Swing trading 35
Swing traders enter, and then exit a position in a stock within a short period - ideally within just one day - when stock price goes into the desired direction. Swing trading is employed by investors, majorly by Day Traders in attempt of capturing short- or rarely medium-term gains. Swing trading may be applied to either long or short trades. Swing traders prefer to use technical stock analysis to look for swing trading opportunities.
Spread trading
This high-speed technique is very popular among Day Traders who try to benefit from temporary changes in sentiment, harnessing the stock spread that is the difference in the bid price and the ask price for a stock. Supply and demand on the market have primary influence on the spread. If in the stock market a buyer's bid price drops suddenly, the Day Trader might decide to buy a stock and then attempts to quickly resell it at the stock's ask price or higher, earning a small spread on the trade. Though spread trading doesn't sound to be a highly lucrative Day Trading strategy, employing this technique, you still may generate considerable profit consistently as a spread trader, by dint of transactions' accelerated execution. Should you be able to capitalize small gains on a multitude of stocks your profit might amount to a nice sum of money.
Fading
Fading is a trading strategy in which a trader assumes that a quick upward movement in stock price is passing, the uptrend tends to fade and she or he enters a short position waiting for reversal. Fading involves short selling for a stock that has rose or even soared too aggressively or rapidly, and then expecting the buying interest to abate. The Day Trader engaged in fading covers his or her short after downtrend is about the cease, when the stock starts to rise again and buying interest picks up.
Pullback trading
Pullback trading allows Day Traders to capitalize short-term market corrections within the framework of a wider trend, when there is a temporary break or modest drop in a stock price from recent peaks that transpires within a continuing uptrend. Simply put pullback trading involves attempting to profit from transitory reversals before the prevailing trend resumes and stock market realigns with the prevalent trend. The pullback technique presumes that markets seldom move in a straight line without alterations in trends, and fluctuations in stock price, that occur even during solid trends.
Though while surfing through the tons of websites committed to offering a theoretical overview about stock markets, you'll learn the vast majority of online resources throw words of caution in reiteration of the same judgment; it's a bad idea to pursue profit in Day Trades, hundreds of thousands of people have made millions just by Day Trading. But the most important fact about Intraday Trading is, that only a very few investors can consistently make real money out of Day Trading and the rest fail to earn even a cent, if they don't lose the entire capital.
LIVE A LUXURY LIFE
Then you've come to the right place. Have a glimpse at how our revolutionary Positive News Evaluation System points you to the best Day Trading Stocks. Don't miss out the opportunity to create massive income. Sign up for BNA's Real-Time Updates about Bullish Stock Ticker News that causes the stock price rise significantly with the highest probability, after market opens.
14-Day FREE
Trial
NO Credit Card Needed |
