Knowing how to pick stocks for day trading is good for being profitable. Day traders buy and sell stocks multiple times daily to take advantage of the price action. They are finding these stocks’ short-term, medium-term, and long-term trends and trading the momentum. Search for stocks with a lot of volume, breaking news, liquidity, and that are having major chart breakouts.
Introduction on How to Pick Stocks for Day Trading
Do you know how to pick stocks for day trading? Day trading tends to be fast-paced and a quick way to make money in the market. There are so many different stocks that you can choose from to day trade. This post will discuss the 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 they’re successful.
Criteria on How to Pick Stocks for Day Trading
- Liquidity in the stocks you day trade is probably the most important aspect. Liquid stocks have huge volume during the day. Look for stocks with at least 2x the daily relative volume. I also prefer 50k shares per 1-minute candlestick, or I don’t want to trade the stock.
- Prints in the stock market let you know there are shares trading hands; every time shares are bought/sold, it counts as a print. If there are a lot of prints, you can get in on some of that action. Day trading is fast and precise; you don’t want to be stuck and unable to close your position due to a 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 must ensure you’re getting a good entry at the 9EMA 5 minute before entering the trade, or you could be chasing and getting 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 the 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, whether positive or negative, you’ll have a better shot at knowing if you’re on the right side of the trade when you buy and sell. Day trading stock picks with news is a big help.
Keep these in mind when learning how to pick stocks for day trading.
Entry and Exits
A scanner like Trade Ideas will alert you to the best stocks with volatility and volume. Trade rooms are another resource to take advantage of.
Learning how to pick stocks for day trading is only the first step. Knowing how to get a good entry and exit is crucial to profiting from 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; 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 stock’s trend will tell you which way to go. When the trend is bullish, you can ride the trend up and buy the dips. You can short the stock and cover at support when the trend is bearish. Having a broker that allows you to short is good.
Example on How to Pick Stocks for Day Trading
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 you are shorting, writing an option, or entering a put, you never want to enter at resistance. Make sure it is the correct entry when placing your order. If you are unsure of the right entry, we will teach you right here on this site how to pick stocks for day trading.
Wait for the Pullback
When learning to pick stocks, I often see them moving fast. But I don’t want to miss the action. When the 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. Often, it results in getting a bad entry, buying on emotion just to get stopped out on a pullback. Instead, wait for the pullback.
Price will always want to come back to equilibrium. Wait for the pullback so you can buy the dip and sell the rip. More experienced and aggressive traders often buy the rip, so do not try to catch a falling knife. Always wait for a setup and stick to your game plan.
Shorting is a different story if the trend is reversing. If you want to ride the move down and cover when the price starts to move back up,
Following the Trend
When picking stocks for day trading, understand how to follow the trend. The trend is your friend.” Stocks move and fluctuate throughout the day, up and down.
This allows traders to take advantage of the price action. Find the hot sectors that day, week, month, or year, and trade stocks within those sectors with good chart setups.
When a sector is hot, related stocks will move, regardless of whether or not they are good companies.
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, moving averages, and comparing those short-term candlesticks to daily indicators.
Patterns tell you if a stock is a pump and dump, especially when trading penny stocks. Spotting 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 about technical analysis basics, how to read stock charts, find patterns, and pump and dumps.
Final Thoughts: How to Pick Stocks for Day Trading
Knowing how to pick stocks for day trading and make a stock watch list. Putting them on a watch list keeps them organized for you to look at the next day.
Only trade the stocks that have good setups. Please don’t force trades to make a trade because of the stock on your watch list. Sometimes, no trade can be the best play of the day.
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, and 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.
Look for a stock with volume, volatility, news, and liquidity. It would help if you had those to trade stocks.
This is where scanners come in handy. They can help you find stocks with good pre-market volume, float size, and market cap.
