A day trade occurs when a trader opens and closes an equity position in the same trading session. Day traders look at trades differently than investors and swing traders. The best day trading stocks are totally different from traditional investments. Before you start, know that day trading is high-stakes and high-stress. Profitable day trading requires extensive research and analysis, so it’s not for everyone. If you still want to jump in, here are a few pointers to help you succeed.
The best day trading stocks have two key attributes: liquidity and volatility. In day trading, the stakes are so high that a few cents in price movement can end up costing a lot of money. Higher volume means higher demand and tighter spreads, so traders know they can get out of there positions on short notice without losing more than a couple of cents off of market prices. That’s why high-volume stocks are so desirable for day trades. Look for stocks with an average volume of over 2 million to ensure your positions are liquid.
Volatility measures the average price movements in a stock over a given time frame. Highly volatile stocks are more desirable for day trading because they tend to exhibit more drastic price movement. Since day traders only hold stocks for one session, the best day trading stocks have high amounts of volatility that traders can use to maximize profits. Look for monthly volatility of over 4% to find stocks that are suitable for day trading.
There are a few other things to consider when day trading. Look for stocks that are hot topics in the news. Headlines are often a catalyst for movements and trendy stocks often move more dramatically because of the interest from retail investors. Also, stocks that have “gapped” (jumped up or down in price since the last session’s close) also make great candidates for day trades. A gap is a strong indication that a stock will continue to move in the same direction as the gap. All of these pointers will help you find the best day trading stocks yourself, and our best day trading stock picks are an example of how to apply that knowledge.
Best Day Trading Stocks
Twilio, Inc.(NYSE: TWLO) –
Twilio is a technology company that focusses on providing enterprise-level cloud services. For day trading purposes, this stock checks all the boxes. Shares of TWLO trade with an average volume of over 4 million, so the market for this stock is nice and liquid. Additionally, this stock has a tendency to move drastically, with a monthly volatility rating of over 4%. Share prices are currently trending upward and have gained over 47% since the beginning of 2019.
Tesla, Inc.(NSDQ: TSLA) –
One example of a trendy company that gets a lot of headlines, Tesla is a popular stock for short sellers and retail investors alike. On average, the stock trades with over 8.5 million shares in a given session. Volatility is slightly lower than our threshold of four, but Tesla’s ATR (average true range; a volatility metric) is over 10. ATR tracks the last 14 sessions, so Tesla has been especially volatile as of late. Additionally, there is an extremely high short interest in the stock, Over 20% of available shares of TSLA are currently being shorted. A high short ratio is often considered a bearish indicator of market sentiment. However, an unexpected rebound may lead to a short squeeze, where short sellers scramble to cover their shares. Short squeezes can be extremely profitable if you are positioned in the stock beforehand.
Etsy, Inc.(NSDQ: ETSY) –
If you haven’t heard of Etsy, it’s an e-commerce retailer that specializes in unique products from smaller vendors. Customers love Etsy for their distinctive product offerings that aren’t available on big competitors like Wal-Mart or Amazon. Etsy satisfies all of our “best day trade stocks” evaluation criteria. Its monthly volatility is about 4.6% and about 3 million shares are of ETSY are traded in an average session. ETSY also has momentum on its side, share prices are up over 42% for the year and over 14% for the month.
Best Stocks to Trade Today
Take advantage of stock screeners like Finviz.com to find hot stocks for a day trade. Look for things like high average volume (over 2 million), high volatility (over 4% monthly), and price gapping to filter down to the most suitable stocks. Here are two stocks we’re watching that are great candidates for day trading.
Advanced Micro Devices, Inc.(NSDQ: AMD) –
AMD has been on an incredible run in the past year. The stock is up over 100% since last year, and that’s highly unusual for a company that is as established as Advanced Micro. Day traders have been all over this stock this year and, even with the insane gains, this stock still has promise. AMD’s market place is highly liquid and, with an average daily volume of over 85.4 million shares, it’s the most traded stock out of our best day trade stocks. Monthly volatility for AMD is about 4.6%, so the stock exhibits enough movement to make it suitable for day trades. This stock has been in the news lately because of an agreement with Google (NASD: GOOG) to provide hardware for their new Stadia gaming platform, set to release later this year. Look for this stock to move whenever Stadia make headlines.
Roku, Inc.(NSDQ: ROKU) –
Roku makes streaming technology for consumers and smart TV manufacturers. The stock has been on one heck of a run in the past 12 months, and it’s now up over 100% since last year. This stock is a favorite among day traders because of its extremely high average volume of over 14 million. It also has a relatively high short share float of over 15%. As mentioned above, a short squeeze can be a good place to be, if you’re on the right side of it, so high short float isn’t always a bad thing.
Best Day Trading Stocks: The Bottom Line
These concepts are not, by any means, undisputed or universal. There are a million opinions on everything in the investing world, so day trading concepts can vary greatly depending on who you ask. This principles are relatively basic and are common tenants of most day trading methods, but it’s only the beginning of a very intricate investing strategy.
Making profitable day trades consistently takes tons of work. Hours of research and analysis can go into just one day trade. However, you don’t have to have tons of time on your hands to make winning day trades. Ultimate Stock Alerts give you a short cut to profitable day trading by vetting the best stocks for you. We research the most promising day trading stocks so you don’t have to. We’ll provide you with stock picks plus our reasons for making the call, so you can learn and profit at the same time! It’s like Cliff Notes for Stocks!!
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We want to hear from you! What do you think of our picks? What stocks do you day trade? Are you trading any on our list? How do you set your screeners to find the best day trade stocks? Let us know by commenting below!
