Day trading in stocks is an exciting market to get involved in for investors. Stocks are essentially capital raised by a company through the issuing and subscription of shares. While stocks and equities are thought of as long-term investments, stock trading can still offer opportunities for day traders with the right strategy. The ability to short prices, or trade on company news and events, mean short-term trades can still be profitable.
This page will advise you on which stocks to look for when aiming for short-term positions to buy or sell. It will also offer you some invaluable rules for day trading stocks to follow. You’ll learn the how to pick stocks and when to trade them, as well as some intelligent trading strategies that could help you turn a profit.
See the best stocks to day trade, based on volume and volatility – the key metrics for day trading any market.
Why Day Trade Stocks?
Day trading stocks today is dynamic and exhilarating. On top of that, they are easy to buy and sell. With the world of technology, the market is readily accessible. The liquidity in markets means speculating on prices going up or down in the short term is absolutely viable.
Also, stocks are relatively straightforward to understand and follow.
Whilst day trading in the complex technical world of cryptocurrencies or forex may leave you scratching your head, you can get to grips with the triumphs and potential pitfalls of Google and Facebook far easier.
This means identifying which stocks suit online trading intraday hopefully won’t be as challenging as it is in other markets.
Day Trading vs Stock Trading
Before you start day trading stocks, you should consider whether it definitely suits your circumstances.
For example, intraday trading usually requires at least a couple of hours each day. One of those hours will often have to be early in the morning when the market opens. Longer term stock investing, however, normally takes up less time. This is because you have more flexibility as to when you do your research and analysis.
In addition, intraday stock trading returns can exceed those of long-term investing. This in part is due to leverage. This allows you to borrow money to capitalise on opportunities (trade on margin). However, with increased profit potential also comes a greater risk of losses. On top of that, you will also invest more time into day trading for those returns.
You could also argue short-term trading is harder unless you focus on day trading one stock only. This is because interpreting the stock ticker and spotting gaps over the long term are far easier. You also don’t have to rush to make decisions. However, this also means intraday trading can provide a more exciting environment to work in.
One major advantage of CFDs and spread betting over traditional equity investment is the ability to “go short“. There is no easy way to make money in a falling market using traditional methods. Day traders, however, can trade regardless of whether they think the value will rise or fall.
Overall, there is no right answer in terms of day trading vs long-term stocks. Spotting trends and growth stocks in some ways may be more straightforward when long-term investing. Having said that, intraday trading may bring you greater returns.
The trading platform you use for your online trading will be a key decision. Do you need advanced charting? Can you automate your trading strategy? Can you trade the right markets, such as ETFs or Forex?
There are some important decisions to make when choosing your trading platform or stock broker, and many will depend on you and you trading style. Read more about choosing a stock broker here.
How To Trade Stocks
The best day trading stocks to buy provide you with opportunities through price movements and an abundance of shares being traded. This will enable you to enter and exit those opportunities swiftly. These factors are known as volatility and volume. You may be thinking ‘I’ve heard of day trading volatile stocks and volume before, but what does that really mean?’
Volume is concerned simply with the total number of shares traded in a security or market during a specific period. Each transaction contributes to the total volume. If just twenty transactions were made that day, the volume for that day would be twenty.
How is that used by a day trader making his stock picks? Volume acts as an indicator giving weight to a market move. If there is a sudden spike, the strength of that movement is dependant on the volume during that time period.
Put simply, the greater the volume, the more significant the move.
If you have a substantial capital behind you, you need stocks with significant volume. Whilst your brokerage account will likely provide you with a list of the top 20-25 stocks, one of the best day trading stocks tips is to broaden your search a little wider.
That way you can find opportunities that aren’t on every other trader’s radar. Look for stocks with a spike in volume. If a stock usually trades 2.5 million shares daily, but you notice it has traded 6 million shares by 10 am, then this could be worth exploring. If your chosen platform fails to offer a rigorous screener for high volume stocks, utilise these alternatives:
- Bar Chart
- Yahoo Finance Unusual Volume
Volatility is concerned with the amount of risk/unpredictability in the size of changes in a security’s value. If it has a high volatility the value could be spread over a large range of values. This would mean the price of the security could change drastically in a short space of time, making it ideal for the fast-moving day trader.
Whereas if it has a low volatility, the security’s value will remain relatively steady, offering less opportunity for a quick profit.
One way to establish the volatility of a particular stock is to use beta. The beta predicts the total volatility of a security’s returns against the returns of an appropriate benchmark (normally the S&P 500).
A stock with a beta value of 1.2 has moved approximately 120% for every 100% in the benchmark, contingent on the price level. On the flip side, a stock with a beta of just .8 has moved 80% for every 100% in the comparative index.
How To Find Stocks To Day Trade
So finding the best stocks to day trade is a matter of searching for assets with large volume, and or a recent spike in volume, and a beta higher than 1.0 (The higher the better). Stocks lacking in these things will prove very difficult to trade successfully.
How you use these factors will impact your potential profit, and will depend on your strategies for day trading stocks. Profiting from a price that does not change is impossible. Buyers and sellers create price movement, a lack of volume shows a lack of buyers and sellers.
Defensive stocks, while normally associated with lower volatility, may suddenly be in demand if a market panic causes a flight to safer investments, so volume and volatility may not always spring up in the obvious places.
Best Day Trading Stocks 2020
Now you have an idea of what to look for in a stock and where to find them. Below is a breakdown of some of the most popular day trading stock picks. The most popular exchange-traded fund (ETF) is the S&P 500 (SPY). Regularly trading in excess of 100 million shares a day, the huge volume allows you to trade both small and large positions, depending on volatility.
With volume being such an important element for finding the top stocks to day trade, it is no surprise that the US market is where the better stock choices are to be found:
|S and P||US 500||Volume+Volatility|
In the UK, the stocks boasting highest volume offer the best day trading opportunities
The UK can often see a high beta (volatility) across a whole sector. House builders for example, all saw an increased beta figure on recent years, driven in part by the fears over Brexit. Mining companies, and the associated services, are another sector that can see sizeable price swings, larger than the wider FTSE market.
However, apart from the popular options above, there are also a number of other popular exchanges worth considering, including the Toronto Stock Exchange, Karachi Stock Exchange, Philippine Stock Exchange, Tokyo Stock Exchange, and the London Stock Exchange.
You could also start day trading Australian stocks, Chinese stocks, Japanese stocks, Canadian stocks, Indian stocks, plus a range of European stocks.
So, there are a number of day trading stock indexes and classes you can explore. Furthermore, you can find everything from cheap foreign stocks to expensive picks. All of the strategies and tips below can be utilised regardless of where you choose to day trade stocks.
“Which penny stocks are best for day trading?” is a popular question we face. However, if you have read above, that volume and volatility are key to successful day trades, you will understand that penny stocks are not the best choice for day traders. They are low volume (very little buying and selling) and this leads to a lack of volatility in the short term.
Volatility in penny stocks is often misleading as a small price change is large in percentage terms, but the fact is that most penny stocks end the day exactly where they started with no movement at all. It is impossible to profit from that.
Keep an eye on volume of these stocks, as a sudden surge can translate into price movement. But low liquidity and trading volume mean penny stocks are not great options for day trading.
Utilising leverage is one way to make trading stocks ‘cheaper’ but ensure you understand the increased risk that leverage brings before using it.
Stocks To Trade Today
Now we know volume and volatility are crucial, how does that help us find the best stocks to day trade today? Well, ‘Risers and Fallers’ tables are a good short cut to find active markets. It means something is happening, and that creates opportunity.
Most brokers will show a table of active shares, whether they call it ‘Risers/Fallers’ or ‘Most Traded Shares’, they should all point you to the most suitable opportunities for stock day trades.
When To Day Trade Stocks
Timing is everything in the day trading game. If you don’t know the best times to trade, you may struggle with day trading stocks for a living. With that in mind:
- Start early – If you want to begin your trading after a generous lie in, don’t be surprised when you struggle to make a profit. The increase in trading volume is seeing the market only get faster. You need to be up at 8 am, prepping for the day ahead. This will allow you time to undertake research and configure your monitors with the stocks you will be actively tracking that day.
- Keep it short – Whilst yes you will make more money if you trade all day, day traders see the best returns when they trade for just 1-3 hours. You might make £750 in 2 hours and £1000 when you trade for 5 hours. So if you’re looking at day trading stocks for a living, you might get the best return per hour if you trade in short bursts.
The pennant is often the first thing you see when you open up a pdf of chart patterns. It’s created simply by significant stock movement and then consolidation. The converging lines bring the pennant shape to life. You should see a breakout movement taking place alongside the large stock shift.
You will then see substantial volume when the stock initially starts to move. Finally, the volume in the pennant section will decrease and then the volume at the breakout will spike.
You will normally find the triangle appears during an upward trend and is regarded as a continuation pattern. Less often it is created in response to a reversal at the end of a downward trend. Whenever they do occur, ascending triangles are bullish patterns (when the small black candlestick is followed by a big white candlestick that totally engulfs the previous candlestick).
Although often a bearish pattern, the descending triangle is a continuation of a downtrend. Less frequently it can be observed as a reversal during an upward trend.
Cup & Handle
Just a quick glance at the chart and you can gauge how this pattern got its name. The cup is a nice curved ‘U’ shape and the handle angles slightly down. Usually, the right-hand side of the chart shows low trading volume which can last for a significant length of time.
Head & Shoulders Top
Straightforward to spot, the shape comes to life as both trendlines converge. They come together at the peaks and troughs. The lines create a clear barrier. If the price breaks through you know to anticipate a sudden price movement.
You’ll find different stock patterns for day trading in every pdf you open. Rather than using everyone you find, get excellent at a few.
The patterns above and strategies below can be applied to everything from small and microcap stocks to Microsoft and Tesla stocks.
If you like candlestick trading strategies you should like this twist. A candlestick chart tells you four numbers, open, close, high and low. But you use information from the previous candles to create your Heikin-Ashi chart.
- Close price – The Heikin-Ashi candle calculates an average across the open, close, low and high price.
- Open price – The candle will be the average of both the open and close of the preceding candle.
- High price – The high price you see in your Heikin-Ashi candle is selected from the highest value of either the high, open and close price.
- Low price – This time the high price in the candle is selected from either the high, open and close price, but this time of the lowest value.
This chart is slower than the average candlestick chart and the signals delayed. This is part of its popularity as it comes in handy when volatile price action strikes.
The strategy also employs the use of momentum indicators. A simple stochastic oscillator with settings (14,7,3) should do the trick. If you see that two candles, either bearish or bullish have fully completed on your daily chart, then you know the pattern is valid.
- Short setup – If after a number of green candles, the price creates two consecutive red candles, the uptrend has exhausted and a reversal is on the cards. Short positions should be used.
- Long setup – If after a series of red candles, the price creates two consecutive green candles, the downtrend is exhausted and a reversal again is likely. You should consider long positions.
- Filters – You also need to use other filters to prevent false signals and to enhance performance.
These charts, patterns and strategies may all prove useful when buying and selling traditional stocks. However, they may also come in handy if you are interested in the less well-known form of stock trading discussed below.
Every day thousands of people turn on their computers in the hope of day trading penny stocks online for a living. But what exactly are they? The Securities and Exchange Commissions’ (SEC) define penny stocks as those stocks priced at $5 or under. However, the majority of the trading community agree ‘penny stocks’ are any stocks that are traded on over-the-counter bulletin board (OTCBB) or pink sheets.
Benefits & Drawbacks
To help you decide whether day trading on penny stocks is for you, consider the benefits and drawbacks listed below.
- Excitement – There is no denying day trading with penny stocks can be exciting. The possibility of large wins and big losses make for an appealing market.
- Speed – Whilst many on your penny stock list may remain relatively steady, some prices will shift significantly in a short space of time. This can result in substantial profit potential for switched on day traders.
- Initial capital – Less than a thousand dollars may only allow you to buy several shares of large companies. However, you can buy thousands of shares of the penny stocks you are interested in.
Unfortunately, many of the day trading penny stocks advertising videos fail to point out a number of potential pitfalls:
- Low-quality companies – No matter how effective your strategies, you will need to account for the low quality of the majority of penny stocks. This means companies in terrible financial positions, with worrying balance sheets, generating significant losses.
- Risky markets – There are some regulated penny stocks on the New York Stock Exchange, American Stock Exchange, and the NASDAQ. However, those traded on the Pink Sheets, OTC, or OTCQX will often lack sufficient oversight. Unfortunately, there simply aren’t strict penny stocks rules. This means listing fees, requirements and reporting regulations can be virtually non-existent.
- Broker fees – With traditional day trading vs penny stocks, you must also take into account the less favourable price structures brokers offer. Many will charge higher commission rates for penny stocks, if they offer it at all. Plenty also won’t allow special trading orders, such as stop-losses.
- Low volume – Volume is essential if you want to generate decent profits. Yet penny stocks can see just a few thousand shares exchanged each day, and some even less. Large companies, however, may trade tens of millions of shares in a single day.
- Scams – Head over to a penny stocks day trading forum and you will quickly come across stories of lies, scams, pumps and dumps. Unfortunately, there is a wealth of disinformation available, so making the right investment decision can be extremely challenging.
- Selling – As a result of being traded at such low volumes, finding a buyer when you want to sell can be difficult. This is a serious problem, especially when making a profit often relies on buying and selling at precisely the right time.
Spotting A Winner
As you can see above, penny stock reviews highlight a number of serious concerns when these instruments are used for intraday trading. Perhaps then, focussing on traditional stocks would be a more prudent investment decision.
However, there are some individuals out there generating profits from penny stocks. So, if you do want to join this minority club, you will need to make sure you know what a good penny stock looks like.
To do that, consider the following:
- Is the company profitable?
- How many shares are currently outstanding?
- Are stock splits and stock options diluting shares?
- Can the company realistically turn a profit based on its current business structure?
- Does the current management team depend on issuing new shares to raise capital?
- Can the company effectively compete in its sector?
On top of that, when it comes to penny stocks for dummies, knowing where to look can also give you a head start. For example, the metals and mining sectors are well-known for the high numbers of companies trading in pennies.
Final Word on Day Trading Penny Stocks
Overall, penny stocks are possibly not suitable for active day traders. This is because even the best day trading stocks under $5 can lack the volume, regulation, and accurate information required to make informed investment decisions. However, if you are keen to explore further, there are a number of day trading penny stocks books and training videos available.
Stocks For Kids
This is a popular niche. Picking stocks for children. Here, the focus is on growth over the much longer term. “Day trading” does not really apply. When looking for long term ‘buy and hold’ growth (and to pass down to future generations), the key test for any stock – is time.
Time filters almost everything, great ideas, great books, great music – the best of them ‘stand the test of time’. Stocks (or companies) are similar. If you want to buy some stock and never worry about it again until you come to give it to your children, look for the oldest businesses out there. Tech stocks are simply too new to know if they are ‘classics’ just yet. A company that has been running for 100 years has seen (and survived) more booms and busts than any hotshot trader. Let time be your guide.
Day Trading Stock Tips
From above you should now have a plan of when you will trade and what you will trade. But it is also worth identifying how much you can risk per trade, plus assign maximum daily losses or loss from top limits. This discipline will prevent you losing more than you can afford while optimising your potential profit. So, think of these as general rules when you’re day trading stocks:
- Keep it simple – If you’re new to the game, focus on just one or two securities to start with. This straightforward approach is ideal for those who haven’t got sixteen hours a day to spend glued to the screen. If you trade the same couple of securities daily, you’ll become an expert much quicker.
- Know your costs – Day traders frequently end up paying huge amounts in commission fees, simply through volume. Tax on income might be another cost, depending on location and whether day trading is your ‘job’. Throw in that you’re competing against sophisticated algorithms that can enter and exit positions in a fraction of a second, and you’ll realise the importance of effective money management strategies for day trading stocks.
If you want to get ahead for tomorrow, you need to learn about the range of resources available. It is particularly important for beginners to utilise the tools below:
- Blogs and forums – These provide a fantastic opportunity to learn from experienced traders. Traders may offer techniques for scanning potential stocks. In addition, you can learn the secrets of profiting from short, sharp price fluctuations. You could even get day trading stock picks for free.
- Courses – There is now an abundance of online and face-to-face courses available. These can teach you everything from the basics of day trading stocks to in-depth technical stock market analysis. On top of that, you will often discover the risks of certain strategies and how to avoid them. All can help you steer clear of the most common mistakes made by intraday stock traders.
- Tutorials – These can come in the form of training videos, PDFs, or other written documents. They can walk you through getting set up with new software for stock selection and creating stock alerts. All of which may help you capitalise on the most volatile stocks and increase that overall salary.
- Newsletters – Online stock picks newsletters can prove useful. They often do the scanning for potential stocks for you, while displaying stock charts to support their findings. If you’re looking for the best stocks right now, they can often be worth exploring.
- Stock websites – These sites are another great place to go for hot stocks and recommendations. Often, they also offer useful definitions for beginners and help you define criteria when searching for opportunities.
- Books – Day trading stock market books are another fantastic resource. They can help you do everything from identifying hot oil stocks to avoiding illiquid stocks. You will also find niche books. So, if you were interested in day trading penny stocks, for example, the right book could help you identify the best day trading stocks under $5.
Stock Picking Software
You may want to start full-time day trading stocks, however, with so many different securities and markets available, how do you know what to choose? Do you want to start day trading gold stocks, bank stocks, low priced stocks, or perhaps Hong Kong stocks?
This is where a stock picking service can prove useful. But what precisely does it do and how exactly can it help? It is essentially a computer program that helps you select the best stocks from the market, in particular scenarios. It can then help in the following ways:
- The software usually streamlines the process of pouring through large amounts of data and finding potential opportunities that fit within certain criteria.
- You will often get real-time email and text alerts when new trade opportunities arise.
- Many stock pickers have an active and helpful chat room that will help you learn how to start screening for the stocks you’re interested in.
- Plenty of providers offer market outlooks at the beginning of the day, plus stock ideas and techniques for capitalising on day trading the most active stocks.
- The software is often versatile. So, it can be used to help you start day trading dividend stocks, IPO stocks, and blue-chip stocks.
Overall, such software can be useful if used correctly. It can swiftly create a stock watch list, allowing you to focus your time on crafting a strategy. However, it’s important to note such systems should only be used to supplement your strategy and not as comprehensive day trading stock advisors.
A day trading stock simulator that’s free is a fantastic way to learn about the markets. So, how does it work? Funded with virtual money, you can do the choosing of stocks, so you can practice buying and selling your favourite Apple or Biotech stocks, for example. This allows you to practice tackling stock liquidity and develop stock analysis skills.
Because you practice against real historical data, you can develop specific strategies that will be best for the NASDAQ or NYSE, for example. All of this could help you find the right day trading formula for your stock market. Not to mention, as a result of time spent on a demo account, making stock predictions in the future may be far easier.
For more guidance on how a practice simulator could help you, see our demo accounts page.
Remember – if you want to make $100 a day trading stocks, whether you are from Canada, India, Singapore, Australia, or the Philippines, you will need to utilise as many of the resources above as possible.
Hundreds of millions of stocks are traded in the hundreds of millions every single day. This makes the stock market an exciting and action-packed place to be. When you’re day trading, look for stock patterns that indicate encouraging volume and opportunistic volatility. There are several user-friendly screeners to watch day trading stocks on and to help you identify which ones to buy. Savvy stock day traders will also have a clear strategy. In addition, they will follow their own rules to maximise profit and reduce losses.