How to find stocks for day trading

Large price movements may attract short-term traders that want to capitalise on big price swings. If a stock is volatile, it will often continue to be volatile as people continue to trade it. Day traders may choose to focus in on stocks that are moving a lot on a single day, or trade stocks that tend to move a lot most days.

Stocks that are the ‘Biggest Risers’ and ‘Biggest Fallers’, as well as ‘Price Movers’ can be found on our Next Generation trading platform. There are lists of stocks making the biggest moves that day, which may be of interest to short-term traders.

While volatility is sometimes viewed negatively for a day trader, it is generally positive since they can potentially profit from going short or long, multiple times each day, as the short-term trends change.

If a stock has very little price movement, there is less profit potential since there is likely to be only a small difference between the entry and exit prices. For a volatile stock, entries and exits have the potential to be wider apart, thereby offering more profit potential.

Volume and liquidity usually allows days traders to get in and out of their short-term positions with ease. Higher volume also typically equates to a tighter spread, which can benefit day traders. Therefore, traders may focus on stocks that trade at least one million or more shares per day, and often multiple millions.

Volume spikes can be used to find stocks that are seeing a lot of interest. The ‘Hot Products’ list in our product library highlights stocks that are trading at a higher trade volume than normal. Day traders monitor these stocks since the increased volume may provide opportunities to get in and out quickly. Higher-than-normal volume and volatility tend to be seen together.

See a list of hot stocks​ that are trending right now.

Technical analysis set-ups may provide day traders with insights into what to buy and sell, and when. For example, as a stock price approaches a support level, this may present a buying opportunity if it bounces off it or a short trade if it keeps falling through support. Resistance may provide a shorting opportunity or a buying opportunity if the price rallies through resistance, based on if the trader thinks it will continue the stock breakout​ or if it’s a false breakout.

Day traders may look for chart patterns such as ranges/rectangles, head and shoulders patterns, trend channels, triangles, or wedges to name a few (see 11 most essential stock chart patterns​). These patterns or other technical price action or indicator set-ups may all provide opportunities in the stocks that present them.

Stocks tend to be highly volatile after an earnings release. The highest-volume days for many stocks are the four days per year that a company reports earnings.

Day traders may seek to trade the aftermath of the announcement. Whether the earnings are better or worse than analyst estimates may provide some clues as to the price direction of the stock. However, this should not be relied on exclusively as sometimes traders buy the rumor and sell the news​.

Taking a trade before the announcement can be risky as the price may gap on the news. It’s possible for the price to even gap through a stop-loss, resulting in a bigger loss than anticipated.

Because of this, day traders tend to enter at least a few minutes after the earnings have been reported. That is when the spread begins to shrink again, but there is still lots of volatility and opportunities likely to occur over the following several hours.

Very active day trading stocks often have a lot of social media buzz around them. So-called meme stocks​, such as GameStop and AMC Entertainment, are examples of this. There are even websites that track how often stock names/tickers are mentioned on social media or by the Reddit subgroup called WallStreetBets.

Google Trends also provides data on web searches, which may highlight stocks that are receiving the most interest and, therefore, may be worthwhile taking into consideration for day trading.

Keep in mind that high interest can be a contrary indicator. For example, a peak in Google Trends web searches for a particular stock will often coincide with at least a short-term top in the stock price as well.