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Day Trading Stocks

As you probably know from articles or courses on day trading for beginners, stocks are equity security that gives its owner (shareholder) the right to receive a portion of the profits of the company that issued these shares. There are two types of stocks: ordinary and preferred. 

  • Ordinary shares allow one to participate in the distribution of company profits (dividends). Funds are paid when the company has funds after payments on preferred shares and subject to good results of the year.
  • Preferred shares are distinguished by a large number of rights regarding participation in the management of the company, and they also provide for a fixed income.

The selection of stocks is not only an important step in profitable long-term investments. It plays may be an even more significant role in intraday trading as it is an important part of developing intraday trading strategies. If you decided on what type of strategy you plan to use, it would also need to be considered when deciding what stocks to pick for trading.

How to Find the Best Day Trading Stocks

Which stocks are best for intraday trading? Stocks should meet some general criteria to be ideally suited for daily trading. If you want to develop a truly profitable day trading strategy, look for these features:

  • An ideal stock should have a good average trading volume

Liquidity is the first important factor to look for when looking for good stocks. The stock should an average to high daily trading volume. This condition is critical because it directly affects risk and capital management. However, not all high trading volume stocks are suitable for day trading. There are stocks with high volumes in which there is not enough movement during the trading session. These tickers should be avoided.

  • An ideal stock should have a good trading range

This is the second important condition for selecting stocks for intraday trading. Stocks should have good movement potential throughout the trade period. This parameter is often called volatility. Currently, there is a large variety of high volatility stocks day traders can choose from. Therefore, volatility over a long period of time should be considered. It is known that stocks listed NASDAQ are more volatile than those traded on the NYSE. Therefore, the selection of good shares can begin with the NASDAQ list.

  • An ideal stock should follow the movement of its sector and index group

Traders find that it is best to pick stocks that follow the movement of its sector and index group and move along with it. This way, when the index or sector starts going up, the price of the stock you also chose increases. This helps to successfully find and trade the strongest or weakest stocks every single day. However, this would not apply to traders who stick to just one stock for a long period of time.

If we talk about specific areas of the market, the financial sector will be the most interesting for day traders. Stocks of large financial institutions are an excellent choice for intraday trading (for example, AIG, American Express, and Bank of America). Trading volumes of financial institutions are traditionally high.

Simple Secrets to Successful Intraday Trading

Day trading is a very risky way to make money, but it is very common and has a great potential profit. Whether you are just learning how to day trade stocks or want to get better in day trading, these tips should be helpful both for beginners and experienced traders. 

  • Assess your psychological capabilities

Although intraday trading is somewhat simpler because a trader does not bear the burden of responsibility for open positions for a long time and avoids the influence of morning gaps, there is also the other side of the coin. The trader regularly experiences mental and emotional strain/tension, since he or she is constantly in front of a monitor and forced to make decisions on which profit or loss depends quickly. Therefore, make sure that you can handle such stress and are prepared for it. 

  • Choose controlled trading

Although it is difficult to make market predictions, and there is always the possibility of errors in forecasts, you can do something to regain at least partial control over the situation. You can set a stop loss and take profit at the opening of each position. This will help you feel more confident. After all, if something goes wrong, the losses will be fixed. If you forget to close the position on time, take profit option will do it for you. The second method is limiting orders. By opening a pending order, you can buy or sell a share at the best possible price and save yourself from the temptation to trade for the sake of trading.

  • Find reliable information resources

Up-to-date information and analytics of the market is important for any trader, but especially for the intraday traders because they need to make decisions very quickly and most likely will not have time to note an error. Therefore, find trusted sources for information and analytics and do not look for data on random resources.

  • Trade with your own money 

The money you use in your trading activities should not be the last you own. Trading involves high risks, so borrowing money for trading is also not recommended. Remember the golden rule of any trading: “Only risk what you are willing to lose.”