A better day trading watch list means better trades, and better trades mean bigger profits.
The stock market is a busy place. If you don’t have a focused watch list you’ll flip from stock to stock without stopping to make a trade. To maximize your profits, spend at least 30 minutes sorting out a watch list prior to the market open. Here are 10 quick tips to help you find the best stocks to day trade.
1. Keep It Small
There are thousands of stocks. Narrow your list down to 10-20 potential movers. You can’t possibly watch 100 or more stocks, so don’t bother trying. It’s wasted energy and you’re likely to miss some important moves in the quality stocks you should have put in a concise watch list.
2. Scanners
Scanners search the stock market for stocks that fit criteria you’ve entered. You can use scanners to help you find stocks that have made significant technical moves. Some common events to look for are major MA crossovers; the 20 SMA crossing over the 200 SMA is a popular example.
Another major technical signal is sudden volume coming into a stock. You can set up a screen to pick up on “unusual volume.” This is a solid indication that something interesting is happening with that stock.
3. Heat Maps
Heat maps are a tool that will help you find hot markets, sectors and stocks. They are basically visual screeners that narrow your choices down using factors like biggest losers/gainers, unusual volume, and quantity of news items.
4. News
Learn to identify significant types of news. Major news will usually get a stock moving. Significant news items include upgrades/downgrades, mergers and acquisitions, company officer changes, and earnings.
5. Earnings
This is technically a news item, but earnings season is a phenomenon all its own. Positive or negative earnings make a stock move. The more positive or negative, the better. Find the stocks that are the biggest surprises and wait for them to make a move in one direction or the other. Most earning announcements are made in after hours or before the morning session which often leads to the next group…
6. Gappers
Gaps are usually caused by news/earnings. Find the gappers and watch for obvious gap set-ups. Don’t necessarily fall for the “gaps always fill” mantra, but know that a lot of eyes are on gappers and they frequently make predicable moves which make for profitable trades.
7. Set a Price Range
You can eliminate a lot of stocks by simply setting a price range. I use a range of $15-150. This cuts out a little noise at either end, and these are the stocks that will generally get the kind of movement we’re looking for. This isn’t a set-in-stone rule though; if something big is happening beyond either end, it might be worth investigating.
8. Daily Movement Range
In order for you to find the stocks that have the most potential for big profitable moves, you’re going to want to check out its daily movement range. This is pretty easy to determine when you check out a stock’s daily chart. You typically want to find stocks that have a movement range of a point or more. This will ensure that when you catch a move, you will be able to make some solid money.
9. Volume
You want to find stocks that typically have a lot of volume or that have recently come into a lot of volume. Volume means a lot of shares are exchanging hands. This causes stocks to create move in predictable patterns. Stocks with thin volume behave erratically in the short time-frames used by a day trader. Look for stocks with a volume of a million shares or more.
In addition to using a screener to look for “unusual volume,” you can set one up to look for average daily volume.
10. Turn Your Scanners Off!
Once the day begins, don’t spend your time chasing alarms. You can’t profit if you don’t make any trades, and you can’t trade if you’re following bells. Stick with your list. If you get word of a moving stock, it’s probably too late to catch the move. You do have to set up alerts at significant price levels on the stocks within your watch list, but the broad market scanners have to go.
These are some basic ideas to help you hone your watch list. You will notice that some stocks will pop up with more than one of these checks; the more, the better. Put those stocks at the top of your list because they are cash cows.
Can you think of anything you’d add to the list? Maybe there’s something up there you’d eliminate or modify. Let us know by leaving a comment!
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{ 5 comments… read them below or add one }
i day trade using intraday high or low breakout,suggest me how to select more accurate and profitable candidate from the long list by using percent gain / loss ,volume or price of stock.
Hi Sumeet,
I suggest you read my article about free ways to find stocks to trade – http://chartshark.com/1224/find-stocks-to-trade-for-free/
Your best bet, for what you’re looking for, is going to be the free Finviz stock screener found here – http://www.finviz.com/
Here is how I created my list to day trade. The scan yields about 140-170 stocks. You don’t need to use them all, but it gives you a nice base to start with.
Average Day Point Range > 1.80
Average Volume(90) > 700,000
Daily Volume(90) > 400,000
Some good ideas here. Tough to trade the news but certainly try these different methods out and decide what works best for you
True – it’s tough to trade the news if it occurs during the trading day. It’s also tough to predict exactly how pre-market news will make a stock react.
What I recommend is finding stocks that have released important pre-market news, waiting to see how the stock and the market react to it, and then jumping in on the trend once it’s made its choice. Also kind of tough, but easier than attempting the other two methods which unfortunately a lot of people attempt and they end up getting steamrolled.