The world of day trading stocks has a powerful combination of risks and rewards. One of the most impressive cases of day trading ever involved a trader who earned more than $30 million in a single day. At the same time, about 40% of the traders decide to quit within the first month.
Especially when starting out, many traders find it challenging to choose the best day trading stock options. Some day traders even make serious mistakes when starting out that cost them a lot of money.
It can take a lot of time learning from experience and the insights of others before you can join the most successful day traders. However, following the right tips can help you minimize your losses and learn quickly. So what can you do to maximize your success when first trading stock?
Read on to learn the most vital tips for finding the best day trading stocks!
1. The Best Day Trading Stocks Are Liquid
When you first learn how to start stock trading, one of the most important things to pay attention to is how liquid stocks are. That goes double when it comes to day trading.
Liquid stocks are often easier to buy and sell with little notice. Being able to trade a stock quickly can be of the utmost importance when it comes to day trading.
Some people imagine that they can sell a stock at any price at any time. This is true only in a rough sense. At the end of the day, there must always be another person out there who is prepared to buy any stock that you want to sell.
2. Look for Volatile Price Moves
When you are day trading, you need to find stocks that are lower during one part of the day and higher during another. Of course, all stocks move to a certain extent. At the same time, some stocks have much more volatile changes in price in a single day.
If you are playing it safe, you can also sell a stock as soon as it becomes even the slightest bit profitable to do so. The bane of day trading is a stock ending on a consistent downward trend.
However, if you are dealing with a volatile stock, it will probably move up and down even as it goes through downward trends. If you try to hold on to such stock and wait out the downward trend, you risk it going further down, increasing your losses. On the other hand, if you sell it as soon as it goes even slightly above the price you bought it, you can avoid this trap.
If you are working with a stock that does not have volatile price swings, it may be impossible to wait for a short upward swing to sell and avoid a loss. However, it is also important to remember that volatile stocks can be riskier to buy and sell. That is often the nature of day trading.
3. Try Trading Stocks in the News
Sometimes, the people who make the most off of a stock swing are the ones who react fastest to a piece of news. For example, when Elon Musk talks about dogecoin, its price increases. If you are the first person to hear him mention this cryptocurrency again, you can quickly buy in and sell as soon as the coin goes up in value.
The same basic principle applies to trading stocks. One of the best ways to find potential stocks for day trading is to watch for news headlines about companies listed on the stock market.
It can be difficult to know whether a piece of news will make a stock go up or down. However, there are instances in which it seems clear that a piece of news will make a stock more or less valuable, at least in the short term. When it comes to day trading, that is all you need.
4. Emphasize Low Fees in Your Trading Strategy
One of the most important things to focus on when it comes to day trading is keeping your fees as low as possible. Day traders often end up making many more transactions than other investors. That can lead to paying much more money in transaction fees.
Especially when starting out, some day traders make the mistake of only calculating their profits and losses based on the value of a stock when they buy and sell it. However, even if you make a profit according to this calculation, you may actually be losing money when you account for trading fees. Try to find stocks that have no fees for transactions whenever possible.
5. Find Stocks With Good Fundamentals
If a stock has done well in the past, that increases the chance it will do well on a given day. That means that looking for generally strong stocks can also help you pick stocks for day trading.
However, there is much more to learn about finding the right stocks for your day trading strategy. Check out My Investing Club to learn more about how you can choose the stocks that will help you grow your wealth.
Know How to Find the Best Day Trading Stock
It can take a lot of experience and study to learn how to pick the best day trading stock on a consistent basis. However, there is no denying that many people achieve incredible success by day trading. At the same time, being among the most successful day traders can require skill, dedication, and luck.
To learn more about the latest information in stock trading, finance, and more, take a look at our other articles.