Stock Picking In Day Trading Stocks

In day trading stocks, you need to learn two very important skills. The first and the easy one is doing the right stock picking. The second is the most important and the difficult one. How to trade these stocks? What I mean by how to trade these stocks is the right entry and the right exit. Without this, you will never succeed at your day trading endeavor.

Finding good stocks for day trading is not difficult with more than 50,000 stocks listed in the US Stock Markets. The most important rule to remember is that you are not an investor. Rather you are a day trader who does not hold positions overnight. No need to think long term. Keeping this fact at the back of your mind, you should focus on the intraday price movements of your chosen stocks.

So you are only going to day trade stocks that have an average daily volume of something like one million shares or more. I am talking about average daily volume not about a one odd spike that gave a volume of one million shares traded on a single day.

This rule should be followed religiously by you in doing the stock picking for day trading. You should try to avoid low priced stocks with high volume as well as high priced stocks with low volume. I explain it more in the next paragraph.

The second important rule that you need to follow is that you are only going to choose stocks between $10 and $100 per share. A price above $10 indicates that the stock has some standing in the market, the company has good health and there are not severe liquidity issues. Below $10, you might find that the stock might not have a liquid market. The most common problem with penny stocks!

Stocks above $100 might be overpriced and can be highly volatile with wide retracing swings. Stocks between the range of $10 to $100 have a consistent intraday price patterns and are best suited for day trading. When you pick a stock in this price range, observe its intraday price swing. Study the past three days data and observe the intraday chart patterns to see the price bouncing back and forth between the intraday support and resistance levels. You want a stock that has a good intraday swing.

Don't trade stocks that are affected by government regulations. For example, a pharmaceutical stock or a biotech stock may not be good. Suppose, an approval is pending with FDA! You are trading that stock when FDA announces more tests are needed before giving the approval. You can imagine what can happen. In the same light, stay away from day trading stocks of companies that are in the process of merging.

However, in the end, I would like say that day trading forex is a much better option as compared to day trading stocks. Currency markets are huge. Daily more than 3 trillion dollars are transacted in the currency market. As compared to stocks where you have to sift through thousands of stocks, there are roughly six major currency pairs like USDEUR, USDJPY, USDGBP, USDCHF, EURGBP, USDAUD that account for roughly more than 90% of the trading volume. So by concentrating on only one or two of these major currency pairs, you can make a lot of pips.

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