How to Find the Best Stocks for Day Trading
It can be challenging to find the best stocks for day trading as there are simply thousands to choose from all around the world. Even if you do find the best stocks to trade there is no guarantee you will find successful trading opportunities as a trader’s skillset, emotional resilience and risk management also makes a difference.
However, day traders can increase their chances of success by identifying stocks that exhibit certain characteristics that will help drive a stock price higher or lower. For example, choosing stocks that have high volume and liquidity over those with low volume and liquidity will make a difference.
In this article, we explore some of the characteristics to keep an eye out for when trying to identify the best stocks for day trading this year.
Table of Contents
How to Pick the Best Stocks for Day Trading
When day trading stocks the first aim is to identify stocks that are likely to move in a specific direction for an extended period of time. No trader can predict the future and know for sure what the best stocks to trade on will be.
However, day traders can increase their chance of success by analysing the following characteristics:
- Volume
- Trend
- Timeframes
Day Stock Characteristic 1: Volume
Identifying stocks with high volume is key for day traders. After all, if there is only a very small amount of daily volume (buy or sell transactions) then it’s likely the difference between the buy price and sell price (the spread) will be higher which can eat into any possible profits, which of course are not guaranteed.
Low-volume stocks can also move in a much more random fashion as a big buy or sell order can cause extreme movements. High-volume stocks mean that there are many traders active in that stock providing higher liquidity and therefore lower spreads.
The MetaTrader 5 trading platform provided by Admiral Markets includes a volume indicator. This can help day traders to identify stocks with high volume as well as when the volatility of a stock is gaining or losing momentum.
For example, the 5-minute chart above shows the stock price of Tesla over several days. The vertical lines, or period separators as it’s called in the platform, shows the end and start of a new day. You may notice that there is a tendency for volume to increase around the opening time and decrease towards the closing time.
However, as Tesla is considered to be a high-volume stock there is still good share price movement throughout the day. The volume indicator can help to identify when the buying/selling pressure is increasing or decreasing.
Day Trading Stock Characteristic 2: Trend
There are many types of traders involved in day trading the stock market. This includes speculators, hedgers, arbitrage traders, mean reversers and many others. To find the best stocks for day trading it’s important to establish what type of trader you are.
Due to the rise of algorithmic trading, most retail traders are only able to try and compete with directional speculators. This means identifying stocks that are exhibiting trend-like characteristics is key.
What are the different ways to find stocks that are trending? This is where technical day trading indicators can become useful. Some of the most common day trading indicators to help identify the trend include:
- Moving averages. These are lines on the chart which show the average price of a stock over a user-defined number of periods or bars. For example, a 20-period moving average will show the average price of the past 20 periods.
- MACD. The moving average convergence divergence indicator can help identify buying and selling momentum as well as price divergences. When the histogram is above the zero line it is considered bullish, when it is below the zero line it is considered bearish.
- Awesome oscillator. The AO is a momentum indicator which helps to determine if a stock price is strong or weak.
The chart 10-minute chart above is of the McDonald’s share price over several days. There are periods of time where the price is above the 100-period exponential moving average (blue line on the chart) and where the MACD and awesome oscillator indicators are above zero.
During these times, the stock price has been bullish, exhibiting strong trend-like features. All of these day trading stock indicators are available from the MetaTrader 5 trading platform provided by Admiral Markets.
Did you know that you can stay up to date with the latest market movements and trends by tuning in to Admiral Markets’ three-times a week, live trading webinars hosted by experienced traders for free? Register for your free spot below.
Day Trading Stock Characteristic 3: Timeframes
While day traders may focus their efforts towards the lower timeframes, there are many other types of traders that will also trade the higher timeframes. Therefore, using multiple timeframe analysis can be very helpful to find the stocks which are moving.
Keeping track of what is happening on multiple timeframes can be challenging. However, the Admiral Markets Symbol Info indicator can help with this. The indicator is available by upgrading your MetaTrader 5 platform to the Admiral Markets MetaTrader Supreme Edition for free.
This edition comes packed with a large range of technical indicators and other features such as a mini-terminal for advanced order trading, a correlation matrix and more.
The 10-minute chart above of First Majestic Silver Corp also shows the symbol info indicator at the top left. This indicator shows what is happening on the 1-minute to weekly chart timeframes in relation to the EMA 14, MACD 12, AO, PSAR and CCI 14 indicators.
As most of the dots are blue, this means that most of these indicators across eight timeframes are showing bullish signs. This is a great way to keep up to date with the indicators on the higher timeframes.
The more timeframes that are exhibiting bullish or bearish conditions then the stronger that trend is likely to be. Download the Admiral Markets MetaTrader Supreme Edition for free below and see for yourself.
Day Trading Stocks List
Below is a list of some stocks that are exhibiting high amounts of volume for day traders. However, a stock’s volume will change over time. Be sure to update your trading list based on the characteristics you look for and whether those characteristics are still relevant.
1. Alphabet (#GOOG.US)
Alphabet shares currently have a beta of 1.05. A stock’s beta measures its volatility compared to the overall market. The overall benchmark for most stocks is the S&P 500 which has a beta of 1.0.
A stock with a beta higher than 1.0 is considered to be more volatile than the benchmark. A stock with a beta lower than 1.0 is considered to be less volatile than the overall market.
2. Occidental Petroleum (#OXY)
Occidental Petroleum currently has a high beta of 1.98 which means it is nearly twice as volatile as the overall market as determined by the benchmark S&P 500 index.
It’s likely that the recent announcement that billionaire investor Warren Buffett has bought significant stakes in the company has attracted the attention of both traders and investors.
3. Amazon (#AMZN)
Amazon currently has a beta of 2.41 meaning its price movements are much more volatile than the benchmark. The stock also has a high two-month average volume of 79.84 million shares.
How to Start Day Trading Stocks with Admiral Markets
One of the best ways to get started day trading stocks is to use a demo trading account. This is an account which allows you to trade in a virtual environment to build your skills and confidence. When you are ready to go live, you can simply switch to a live account.
You can also test the MetaTrader Supreme Edition with a demo account but you will need a live account to access the premium analytical features such as automated technical analysis trading ideas.
FAQs on Finding the Best Stocks for Day Trading
1. What stocks are best for day trading?
Stocks that show high volume and trend-like features across multiple timeframes will provide an ideal starting place for day traders. This includes stocks such as Amazon, Tesla and Occidental Petroleum among many others.
2. What are the best stocks for day trading UK?
Since Brexit, the UK has had one of the lowest levels of stock market activity among the G7 nations. Most day traders focus on US stocks for day trading. UK stocks can exhibit some day trading characteristics but the price movement is much lower than US stocks.
3. What market is easiest to day trade?
Unfortunately, every market is difficult to day trade. While it can be done it takes time to build the right skills and confidence. Most day traders focus on stocks that exhibit high volume and volatility which tend to be in the US stock market.
Other articles you may find interesting:
- How to Start Forex Trading Guide 2023
- How to Pick Stocks to Invest in
- Use MetaTrader Like a Pro With MT4 & MT5 Shortcuts
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