As a stock day trader, there are various stock types you can choose. Some traders usually choose stocks that break out of the pattern, meanwhile, other traders choose stocks that are consistently volatile. Some other traders even trade one or two same stocks all the time. Since day trader doesn’t need to always find new stocks, thus the last strategy usually works better. If you plan to constantly day trade one or two stocks, then here are things to consider in your day trading stock.
Volume
Active day traders need to always find stocks with adequate volume to enter and exit trades. Stocks with higher volume will relatively be easier to enter and exit compared to stocks with lower volume.
Besides, you can also avoid slippage with high volume stocks. Slippage is what most traders want to avoid. It is when the market order or stop loss fills at a different price, not the one they expected. It usually happens to a bigger order than the number of shares normally offer or bid.
The preferences are varied. But most day traders trade stocks that have, at least, 1,000, daily volume.
Other than that, to narrow the number of stocks to a manageable size you can use a stock screener. If you still get too many stocks in the list, then, consider those that do three million or more in daily average volume.
Volatility
Commonly, day traders trade stocks that have strong movements during the day. Stocks have different volatility levels. Some stocks move on an average of 5% per day, some move around 1% per day, while another moves more than 5% per day.
The best stock for you relies on your trading styles, reflexes, personality, and a broker. Most day traders think that stocks that move around 0.5% to 2% per day are tolerable.
Some other traders, also think that stocks that move 5% per day are too difficult to be handled. That volatile stocks require instant trade execution and fast reflect.
The best suggestion for your day trading is trade stocks which move at a particular percentage, like around 1% to 2%. Unless you are an experienced day trader, do not try more volatile stocks.
There are also day traders who like to trade stocks on big news events. That news will significantly affect the stock volatility.
Trend or Range
This may sound simple, but remember, you have to always trade in accordance with your trading method. If you like to trade range, then choose stocks with a tendency to range.
If you use a trending strategy, on the other hand, then trade those stocks with trending tendency.