What to Look for in Day Trading Stock
Getting involved with stock trading isn’t simple. After all, there are thousands of stocks to choose from, and if you’re new to the market, it can seem like an impossible feat separating the winners from the losers. Even with a StockTwits review to help you make your decision, you’re going to need some extra help if you want to avoid spending money on a lost cause. The more time you spend in the world of trading, the more you’ll be able to develop your skills and strategies that will help you to make positive decisions for the future of your financial health. However, when you’re just getting started in the day trading world, there a few simple things that you should always look for when assessing any stock.
Volume
The first thing to look at when you’re examining stocks for your day trading strategy is volume. An active day trader needs plenty of stock volume so that they can exit and enter trades on demand. The higher the volume of stock, the easier it will be to exit positions at the end of your day trading session, without having to worry about slippage. For those new to the market, slippage refers to when the market order or stop loss fills at a price that’s separate to what you expected. While preferences differ, most day traders will only trade stocks with around 1,000,000 in daily volume, though many prefer several million.
Volatility
Volatility is another major component to consider with your day trading strategy. Many day traders approach stocks which have a significant amount of movement each day. Each share comes with its own volatility personality. While some stocks move on an average of 1%, others move up to 5% per day. The stocks you choose to trade will depend on the kind of trading style that works best for you. However, most people prefer the smaller movements between 0.5 and 2% a day. Bigger swings of 5% a day can be tough to handle, particularly when you’re new to the market, and you’ll need very quick reflexes and an excellent knowledge of the market to win big with these assets.
Trend or Range
Finally, trend or range is another major component that’s worth considering for your day trading strategy. There are both trend traders and range traders on the market today, as well as those who know how to alter between both plans. The best way to figure out which stocks suit the method that you prefer to use is to use a stock screener. Stock screeners help to filter out the thousands of stocks that appear on the market each day, so you’re not wasting time changing commodities that aren’t right for you. Stock screeners also help to isolate stocks in ranges or trends, so you have a list of stocks to get started with when you’re ready to begin trading. Remember, finding stocks that consistently conform to your trading method is going to take some time and effort. However, it’s something you should take seriously, as it will help you to earn the most significant return on investment.