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How to pick the best stocks for day trading

How to pick the best stocks for day trading

Day trading can be potentially effective trading style for those who seeking to take advantage of real-time opportunities in the market, and profit from short-term price movements.

Tyreece Bauer
Jan 13, 2022

Table of Contents

Day trading can be potentially effective trading style for those who seeking to take advantage of real-time opportunities in the market, and profit from short-term price movements.

Along with currencies and indices, stocks are one of the most popular asset classes for day traders, who buy and sell stocks within short timeframes, from a few minutes to several hours. While stocks can be bought and sold without leverage through traditional online share dealers, day traders often look for derivative financial products like a CFD (Contract for Difference) to quickly buy and sell stocks with leverage, allowing them to take advantage of all market conditions.

When utilizing Contracts for Difference to trade stocks, day traders do not own the underlying stocks, which means that they aren’t shareholders. It is possible, however, to take advantage of rising markets (with a long or buying position), as well as bearish markets (with a short or short-selling position) - an option that isn’t possible when buying and selling actual shares. Another advantage of stock trading with a CFD is that you can use margin trading and leverage to increase your exposure to the stock market, by trading with a larger sum than your deposit. Bear in mind that leverage can magnify losses as well as gains, so it’s imperative to follow solid risk management practices at all times.

So, how can you pick the best stocks for day trading? Technical, fundamental, and quantitative analysis are three popular ways to analyze the market! Let’s take a look at them now.

Technical Analysis

Technical analysis solely relies on the price action and the use of mathematical and technical indicators to determine when to buy and sell stock. For technical traders, all available and relevant information is included in a security’s price, which means that there is no additional research to do. The only thing that needs to be done is the analysis of a stock price to determine its future direction and the best time to enter/exit a trade.

Fundamental Analysis

Fundamental analysis relies on the analysis of economic, political, social, as well as financial data to decide whether a company is a buy or sell. The goal here is to determine the intrinsic value of a stock and to compare it to its market value to see if the stock is undervalued or overvalued by market participants, according to its fundamentals. Most fundamental day traders also use an economic calendar to follow major statistics that can trigger higher volatility that could alter the offer/demand relationship for a given stock.

Quantitative Analysis

Quantitative analysis relies on big data, statistical methods, as well as programming to identify trading opportunities by creating models that will help determine the highest probability of certain outcomes. You can use this type of analysis as a filter to evaluate different parameters to spot the stocks that meet your pre-determined criteria and then buy/sell these stocks, but you can also automate your trading, so then a trading robot opens/closes positions for you.

Final word

Regardless of the method you use to identify the best stocks when day trading, you should focus on high liquidity stocks, so that you can easily and quickly buy and sell them at the required price without your operation having a significant impact on the stock’s price.

Tyreece Bauer | Analyst and photographer in the field of technology. When I'm not working on my laptop, I like to go surfing, hiking with friends, and go karting or play soccer with my nephew. I enjoy traveling and am excited to visit Tokyo this summer. What are your plans for your next trip?


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