According to one study, over a twelve-year period, there is a 75% chance that the stock market will go up.
By those statistics, you’ll have a high chance of making money off day trading stocks in the market. But finding stocks to trade and knowing how to make a profit can be difficult.
Keep reading this article to learn how to find stocks to day trade and make a profit on them!
1. Find Ones That Has a High Liquidity
One of the first things you need to do is find stocks that have high liquidity.
If you aren’t familiar with liquid stocks, they’re stocks that can be traded more easily than other stocks. These stocks also come with a higher discount, which makes them cheaper than other stocks that you could buy.
If a company has a higher market capitalization, they’ll have stocks that are more liquid. This happens because they can find buyers and sellers more easily for their stocks.
2. Wake up Early
If you’re not a morning person, this may not be the job for you.
If you want to get into day trading, you’ll have to come to terms with the fact that you’ll have to get up earlier than you would for your regular 9 to 5. There are so many stocks that you can choose from, so you’ll have to spend a lot of your time just doing research to make sure you’re trading the right ones.
Wake up around 7 and start doing some research on all the different stocks out there. The market doesn’t actually open until 9:30, but you want to be ready to go with Smarttrader.com armed with all the knowledge you could need before you start the trading day.
3. Shoot for Average Volatility
Another thing to consider when looking for stocks is to find ones that have average volatility. If you get a stock with high volatility, they become even harder to predict, making them harder to invest in.
Volatility is the rate that a stock’s price changes or varies over time. This will help you to determine the risks that are attached to investing in a particular stock. Even the most experienced day traders tend to stick with stocks that have medium volatility.
With average volatility, the stocks will only change by about 5% from day to day. In the stock world, many traders use a measurement called Beta to figure out how volatile a stock is.
4. Follow the Sector
When doing research for which stocks to invest in, you need to make sure that you follow the sector. The sector is the index group of stocks, and the sectors normally move in correlation with the stock prices.
This is good for you because if a sector that you have equity in goes up, then you can predict that your stocks in that sector will also go up and start making your trades.
There are many different sectors, but it’d be better for you to devote your time to really understanding one of them and becoming an expert in that field.
However, there are times when your gut will tell you not to follow the trends of the sectors. While they normally do correlate, there are a few rare instances where they don’t. So if you have a bad feeling for some reason, it might be wise to listen to it.
5. Consider the Volume
Make sure that you also consider the volume when you start trading stocks. Volume is the number of shares traded over a specific set of time.
Every transaction people make will help add more to the stock’s volume. For example, if fifty transactions were made in one day with a stock, the volume for the day would be fifty.
You can look at volume to help you determine if one market is being more active than another one. If there’s a spike in the volume, the moves will be more significant and important than ones with a lower volume.
6. Do Your Research
Doing research is important, but what kind of research should you focus your time on?
You can try practicing day trading under a simulated condition if you’re really new. But if you have some knowledge about it, you’ll just have to jump in head first to really understand it all.
Before you start, however, make sure that you come up with some kind of strategy. You don’t want to put yourself in a position where you end up losing all of your money. If that does happen, make sure that you have some kind of back up plan so that you don’t start making irrational or emotional decisions.
One of the best types of research you can do is to read everything you can get your hands on. Read all of the news, read about the markets, read whatever companies are saying, and read what’s happening in the industry you specialize in.
Having all this knowledge will help you make the best decisions.
7. Be Patient
Many new day traders end up messing up because they aren’t patient.
You have to be calm and calculated when it comes to dealing with stocks, or you’ll make a costly mistake.
Stick to what you know and don’t trade something if you’re not familiar or comfortable with it. Just be patient because the market is always changing, so it’s only a matter of time until it changes in your favor.
Learn More About How to Find Stocks to Day Trade
These are only a few things to know about how to find stocks to day trade, but there’s a lot more you’ll have to learn before you can really get started in this job.
We know that it can be a difficult job, but thankfully you don’t have to figure it out on your own. We’re here to help you!
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