HOW TO CHOOSE STOCKS FOR DAY TRADING

3 Simple Steps


  • Rule 1:  Liquidity, Liquidity, Liquidity


Liquid stocks tend to have high volume, which allows larger quantities to be purchased and sold without significantly affecting the price. Since intraday trading strategies depend on speed and precise timing, a lot of volume makes getting into and out of trades easier. Depth is also critical, which shows you how much liquidity a stock has at various price levels above or below the current market bid and offer.

  • Rule 2:  Medium to High Volatility

Day traders require price movement in order to make money. Day traders can choose stocks that tend to move a lot in dollar terms or percentage terms, as these two filters will often produce different results. Stocks that tend to move 3% or more per day have consistent large intraday moves to trade. We recommend always trading stocks with volume at or greater than 1 million in intraday volume.

  • Rule 2:  Market Sentiment

Market sentiment refers to the overall attitude of investors toward a particular security or financial market. It is the feeling or tone of a market, or its crowd psychology, as revealed through the activity and price movement of the securities traded in that market. In broad terms, rising prices indicate bullish market sentiment, while falling prices indicate bearish market sentiment.