How to Pick Stocks for Day Trading

woman picking stocks for day trading

Day trading is a trading style where a trader buys and sells a tradeable asset multiple times within the same trading day. The goal is to profit on an asset’s price volatility or its small short-term price fluctuations. There are a few basic guidelines to follow to determine weak stocks or strong stocks and to know when to trade stocks effectively.

While day trading does not require a lot of equipment or tools to get started, it is inherently a high-risk investment technique that requires knowledge, time, and patience.

An essential part of this strategy is knowing how to pick stocks for day trading.

Use a Stock Screener

In the United States, a single trading day for the U.S. equities markets officially begins at 9:30 a.m. EST (Eastern Standard Time). However, many traders begin scanning stocks before the market opens. Alton Hill, a co-founder of, recommends starting your prep work at 8:00 a.m. By starting before the market opens, you will be able to identify pre-market moves, select your stocks, and solidify your trading plan.

A stock screener is an essential resource for how to scan stocks for day trading. A few pre-market scans include NASDAQ Pre-Market Activity, Stock Market Analysis, and Stock Market Watch. A day trader’s goal is to use a stock screener to scan and identify two to four stocks that fit the following general criteria.

High Volume

An individual stock’s volume is the number of shares that trade hands in a given day from a real seller to a real buyer. Naturally, more volume indicates a greater interest in a stock. An increase in a stock’s volume may be indicative of potential price movement.

Day traders may view the Trade Volume Index or TVI at various points in a security’s price chart before buying and selling the security. TVI is a technical indicator that reflects a simultaneous substantial price change and volume difference.

Alternatively, other volume indicators include the volume weighted average price (VWAP), the Intraday Intensity Index, the Positive and Negative Volume Indexes, and the Chaiken’s Money Flow.

It is essential to pick individual stocks that have enough volume so that you can alter your position based on volatility. For example, a stock might be up 6% in the pre-market but only open up 2% at 9:30 a.m. Thin volume can carry a stock outside the trading day. As a result, avoid stocks with charts that have horizontal dashes, which indicate low volume.

Apple (AAPL) is an excellent example of a stock with high volume and great price action as well.

High Float

A stock’s outstanding share count is the total shares that exist for the company. Float is the number of shares that are available for trading when you exclude restricted shares.

Stocks with low float are more volatile and have more significant price moves. As a result, low float stocks are not for everyone and may not be a good long-term investment strategy.

On the other hand, the best stocks with high float are less prone to explosive moves. If you have these stocks on your radar during your pre-morning screening, you may be able to take advantage of these candidates for an opening range breakout.

Medium Volatility

An individual stock’s price volatility is the number of price changes a stock undergoes in a given time as well as how explosive the range between the asset’s prices is. High volatility is extremely risky because of the extreme price movements. Medium volatility is one criterion on how to pick stocks for day trading.

Medium volatility lowers your trading risk and allows for smaller price movements to make a profit. Therefore, before you start trading and throughout the trading day, look for stocks that are moving big or moving well.

In order to profit through varying levels of volatility, it is crucial to alter your position size. For example, if one stock is especially volatile one day, you may consider taking a smaller position size and trade with somewhat larger stop losses and targets. On the other hand, if the tradeable asset is less volatile, you may increase your position to make up for the smaller stop losses and targets in your other trades.

Scanners will not be able to predict increased volatility due to announcements. As a result, be sure to monitor your economic calendar and earnings calendar each morning, to know which trades to exit before the scheduled major announcement. After the report, there is usually a price spike or drop and liquidity will dry up. Therefore, placing a trade before an announcement or holding trades through the announcement is incredibly risky.

Instead, use these announcements as sources of information. With earnings reports, you know which stocks are likely movers, which you can then add to your watchlist.

Tesla Motors Inc (TSLA) is a great example of a stock with volatility. Moreover, Netflix (NFLX) has also seen significant price swings with its company’s bold decisions.

man picking stocks for day trading 

Create a Watchlist

A watchlist is a list of securities that you have carefully curated and actively monitored for potential trading or investment opportunities. Consider your watchlist a compiled list of what you believe to be some of the best stocks and your homework before you actually start trading them.

Start your watchlist by selecting one or two sectors. Sectoral performance is just as important as stock performance because if a sector is performing poorly, its stocks may not fetch good returns. In fact, sectors are responsible for approximately 70% of individual stock movements. In fact, assets in the same industry group have a very strong correlation to one another.

While you should not put all your eggs in one basket, sectorial news, in a macroeconomic sense, can be used to trade specific stocks. Consider at most ten stocks in a sector to watch. In total, if you are monitoring one to two sectors at a time, you should have a maximum of ten to twenty stocks on your watchlist.

By familiarizing yourself with these stocks and sectors, you can understand how a particular market moves as well as identify overall patterns. For example, using your watchlist, you will likely be able to identify which tech stocks to invest in despite the more than usual volatility in this sector.

Find Your Stock Soulmate

Most traders have a stock soulmate if you will, or one particular security that they gravitate towards. For some traders, a few stocks may continually pop up in their list of trades.

By reviewing your trade history, you may find a few you can categorize as the best stocks. You have essentially become an expert on them. Being an expert on a few stocks can save you time and research because you know what you will be trading stocks the next day as well as confidence that they will likely yield regular profit.

After working with these stocks, you have probably already learned their trading patterns and the best technical indicators for this security. As a result, these stocks are likely less stressful trades and a welcomed break from your riskier trades. Of course, becoming an expert in a particular stock will take time as well as trial and error. However, it can make the process of how to pick stocks for day trading and determining the best strategy much easier when you have at least one stock that you feel comfortable and confident within your portfolio.

Social Media

With the emergence of social media such as Twitter and Facebook, the atmosphere of day trading and trading stocks has changed. Recent studies have shown that social media affects the mass psychology of traders. As a result, “trending stocks” may trade with heavier volumes and good price movements.

However, social media should not replace your trading plan. Instead, you can use the information as a method to validate how much interest there is in a certain stock. For instance, if you see a stock up 10% in your scanning but there are only two recent tweets, this stock may not be in play.

One example of a social media tool is StockTwits. This social media platform is a great way to keep up with your watchlist and find out what is currently happening with your stocks and what members are actively discussing. You can also see a market sentiment factor for each stock.


Day trading is strongly based on technical analysis and sophisticated chart systems. This does not necessarily mean you need eight different computer screens and the most powerful scanners on the market.

Instead, it is crucial for these investors to have a trading plan and know how to pick stocks for day trading. This strategy requires understanding the asset’s price movements or volatility, volume, float, and sentiment.

When day traders can identify and understand these trading signals, they can efficiently evaluate a security’s strength and weakness to determine when to buy and sell the asset. Fortunately, day traders do not need to worry too much about stocks overnight. By preparing well before the market opens and perfecting your trading strategy, you can be ready with high-quality trade setups that hopefully result in efficient profitable trades.

For more stock trading and day trading secrets by Michael Robinson, a Venture Capital veteran and Pulitzer-price nominated writer, subscribe to Nova-X Report.

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