Best Stocks for Day Trading

"What are the best stocks for day trading?" It's a common question asked by day traders and it's a good question because there are certain characteristics that set apart the better choices from the weaker ones. In this article, we'll take a look at those characteristics. There is also a YouTube video posted at the bottom of this page that reviews one of the day trades that meets many of these criteria.

Characteristics of The Best Stocks for Day Trading

1. Volatility. Volatility simply means that a stock is moving. It is going someplace. I don't care if it's moving up or down, but it's kind of difficult to day trade a stock that isn't going anywhere at all! So, one of our first criteria for the best stocks for day trading is that price is moving.

2. News. This volatile price movement can be caused by a variety of factors. In the example given in the video below, the volatility was caused by the news that OMER (a biotech company) had passed certain Phase II clinical trials on a new drug. For biotech stocks, this is a huge milestone and it is often met by a hungry market ready to swoop in and buy "the next big thing".

The news that can cause volatility can also be in the form of earnings reports, merger rumors, a change in the C-Suite, etc. So, while I don't chase stocks that are in the news, it is helpful to know what is causing that day's price volatility.

3. Volume. One of the scans I run each morning is for stocks that have gapped up or down by a certain percentage and that also meet certain volume criteria. This one scan incorporates two of my criteria for the best stocks for day trading. - volatility and volume. The scan helps me create a short watch list which I can place in front of myself and the members of Day Trading Pro chat room. It narrows my focus to a small group of 20-30 stocks each day so we're not scrambling around and looking for something to trade after the market opens each morning.

4. Sectors. I've already mentioned the biotech sector. It is perhaps the most volatile sector in the market right now, but other sectors can also produce a good list of "best stocks for day trading" while some sectors and stocks provide little opportunity. Other sectors that are showing plenty of volatility as I write this article are mining stocks (gold, silver, copper, etc.) and oil stocks. 

Chart of Omer

Here's the chart for OMER that I mentioned earlier in this article. This is the stock that I also analyze in the video posted below. There were actually four different times that I posted a buy alert for this stock in this morning's chat room (8-18-2015). And that didn't include the opportunity for shorting this stock as well as taking it long.

While I don't consider "short availability" a requirement, it is nice when a stock is available for trading it long or short. This can often increase the volatility and the number of day trades that can be executed on a single stock.

You might be interested in my trading service Ichimoku Trend Trader. While our primary focus is on swing trading for that service, we produce a watch list each day of the stocks and ETFs that are showing strong trends - either bullish or bearish. Such a list also helps the day trader by narrowing his/her focus on a smaller list of stocks and it beats running around and trying to find something to trade. You can learn more about this service via this link:  best stocks for day trading with Ichimoku.

Here's the YouTube video I mentioned earlier:

You might also be interested in this related article at Investopedia:  click here.