Knowing how to pick stocks for day trading is a good thing to know to be profitable. Day traders buy and sell stocks multiple times a day to take advantage of the price action. Finding the short term, medium term, and long term trends of these stocks and trading the momentum. Search for stocks with a lot of volume, breaking news, liquidity, and are having major chart breakouts.
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How to Pick Stocks for Day Trading
Day trading tends to be fast paced, think quick way to make money in the market. There are so many different stocks that you can chose from to day trade. In this post we will be discussing the different indicators you can use to help pick stocks for day trading.
Finding the right stock picks for day trading will have some different criteria that a trader needs to follow to ensure you’re going to be successful.
- Liquidity in the stocks you day trade is probably the most important aspect of day trading. Stocks that are liquid have huge volume on the day. Look for stocks with at least 2x the daily relative volume. I also prefer 50k shares per 1 minute candlestick or I tend to not want to trade the stock.
- Prints in the stock market lets you know there’s shares trading hands, every time shares are bought/sold counts as a print. If there a lot of prints, you can get in on some of that action. Day trading is fast and precise; do not want to be stuck unable to close your position from lack of volume or shares trading hands. Look for stocks with prints over 1000 a day, more shares trading hands on average is always better in my book.
- Volatility is something else you need in the stock you’re day trading. High volatility can be dangerous because of the extreme price movement, so you need to make sure you’re getting a good entry at the 9EMA 5 minute before entering the trade, or you could be chasing and get a terrible entry. Are you trading a stock that’s trading sideways for weeks in a tight range? That is low volatility and might not be best for your strategy.
- News Is there a catalyst causing the stock to run? There should be a reason WHY people are buying the stock. FDA approval? Earnings? Did Elon Musk tweet something? If you find the why behind the move, and its positive or negative, you’ll have a better shot at knowing if you are on the right side of the trade when you buy and sell. Day trading stock picks with news is a big help.
Having a scanner like Trade Ideas will alert you to the best stocks with volatility and volume. Another resource to take advantage of are trade rooms.
Entry and Exits
Learning how to pick stocks for day trading is only the first step. Learning how to get a good entry and exit is crucial to profiting on the trade. You may have the perfect stock but if you mistime your entry or exit it can be costly. No one likes to lose, at anything. Trading is no different, and picking winning stocks to trade is only half the battle. Knowing when to pull the trigger is key.
The market moves up and down. Finding the trend of the stock will tell you which way to go. When the trend is bullish you can ride it up and buy the dips. When the trend is bearish you can short the stock and cover at support.. Having a broker that allows you to short is good.
Check out the short setup here! Very nice action in $GDX due to meeting all the criteria above for day trading.
Using moving averages and VWAP to alert you to the best entries and exits is an excellent tool. Those indicators can be used as support and resistance. Unless shorting, writing an option, or entering a put a stock you never want to enter at resistance. Make sure it is the correct entry when placing your order. Unsure on the right entry…we will teach you right here on this site how to do it.
Wait for the Pullback
When learning how to pick stocks often see them moving fast, but do not want to miss the action. When price is flying the candlesticks get overextended away from the moving averages and cause fomo or “fear of missing out. This is where most people are impatient and chase the trade. This often can result in getting a bad entry, buying on emotion just to get stopped out on a pullback. Instead, wait for the pull back.
Price will always want to come back to equilibrium. Wait for the pull back so you can buy the dip and sell the rip. Buying the rip is often used by more experienced and aggressive traders, do not try and catch a falling knife either. Always wait for a set up and stick to your game plan.
Shorting is a different story. If the trend is reversing and want to ride the move down, and cover when price starts to move back up.
Following the Trend
When knowing how to pick stocks for day trading, understand how to follow the trend. “The trend is your friend.” Stocks move and fluctuate through out the day; up and down.
Following the trend allows traders to take advantage of the price action. Find the sectors that are hot that day, week, month or year. Trade stocks within those sectors with good chart setups.
When a sector is hot, stocks that relate to it are going to move, regardless of whether or not they are good companies sometimes.
Find the Patterns
Knowing how to pick stocks for day trading helps when you can find patterns. Patterns tell you which direction the stock is headed. You can use the daily chart to find the patterns and the minute charts to get in and out. Trendspider is good for looking at short term time frame patterns and moving averages and comparing those short term candlesticks to daily indicators.
Patterns can tell you if a stock is a pump and dump, especially when trading penny stocks. Being able to spot these patterns allows you to know when a pullback is coming. You can wait on an entry instead of taking a loss.
Marijuana stocks and bitcoin sector stocks are notorious for pumping and dumping. Take our stock market courses to learn more about technical analysis basics, how to read stock charts, find patterns and pump and dumps.
Knowing how to pick stocks for day trading make a stock watch list. Putting them in a watch list keeps them organized for you to look at the next day.
Only trade the stocks that have good setups. Do not force trades have to make a trade because the stock on your watch list. Sometimes no trade can be the best play of the day.
If you need more help, take our day trading course.
Frequently Asked Questions
- Choose a scanner like Trade Ideas, Finviz, Black Box Stocks, StockstoTrade
- Set up your scanner criteria based on your trading style
- Columns such as symbol, name, volume, float, short float, relative volume
- Customize columns such as momentum plays, parabolic movers, surging volume
How many stocks can you trade in a day? If you have at least $25,000 in an account then you can trade as many stocks as you want. If you have less than $25k then you will get hit with the PDT rule, which means that you can only do 3 day trades within a 5 day calendar period.