How to find the right stocks for Day Trading
Pick the wrong stocks and day trading will turn into a never-ending horror movie. Day Trading is a popular and exciting way for individual traders to make some decent money. However, you shouldn’t go into it blind-sighted.
This article will help you determine how best to tackle Day Trading. Important factors that affect a day trader are average day range and price volatility. Patience is very important but the experience will make you a great day trader. Liquidity and volume are also very important because you have to be able to enter and exit given trades as quickly as possible if you are to enjoy any profits.
Let’s have a look at other helpful tips:
Keep emotions at bay as much as possible. This way, you avoid making decisions based on them. Stocks should be able to come and go as you trade. Avoid getting attached to them. Just because you make it big from a given stock, doesn’t mean you should hold on to it for the rest of the week or month! Simply follow the pattern and if it’s time to let go of the stock, let it go!
On the other hand, if a given stock messes you off, learn to move away from the bad experience as fast as possible. Loosing on a given stock shouldn’t be the end of the world. This is why it is important not to use the money you would miss if you lost. Have money set aside for potential risks associated with trading.
As touched on before, liquidity is very important in day trading. This is because, with the large volumes up for trading, a trader can quickly enter and exit a given transaction.
You want to steer clear of stocks that have high volatility. Not only do such stocks have limited liquidity, but they also have low daily volumes. Always remember, as a day trader, you need the stock to move. In terms of percentages, good stocks to go for should be on 3% or more platforms. In terms of a dollar amount, they should average at least $1.5 on any given day.
Follow the trend
Finding and sticking to your path is good. However, as a day trader, it sometimes pays to follow the trend. Regardless of whether you choose to trade only the weakest or strongest stocks of the day, you should do some simple research. Check out the stock market and determine stocks that have the potential to rise and those that are most likely to decline.
Research is very important when day trading. Research may be tedious but it does pay in finding the best stocks to invest in. You need to identify the index and then proceed to find the most interesting sector to invest in. Remember to always opt for stocks that can be easily liquidated. During your research, you should do a fundamental and technical analysis of potential stocks.
With the pointers above, you should be in a better position to finding the right stocks for your day trading.