Day trading requires traders to be quick and nimble. However, if the trade plan does not fit the stock, losses will ensue regardless of skill level. The term “day trading” is used loosely, but literally means that traders do not carry positions overnight. This reality requires the best day trading stocks to move intraday.
Stocks have their own personalities based on earnings, share price, liquidity, and other factors. It makes sense that the best stocks for day trading have large ranges and ample liquidity. This allows traders to capture price movement with enough size to make serious money.
Best Day Trading Stocks For Magnitude
Magnitude measures the amount the stock moves day to day. It is also called average true range (ATR). A day trader could be correct in predicting the direction of a stock. However, he must get a large enough move during market hours to make it worth the time. Making 1 point on 100 is less expensive than making $.10 on 1000 shares.
Alibaba Group Holding Limited (NYSE : BABA) operates as an online and mobile commerce company in the People’s Republic of China and internationally. This is a foreign company, but trades over 21 million shares daily primarily on the NYSE. This name is a momentum (momo) stock, meaning that it does not move only company news or fundamentals. The short term price is often dictated by speculators trading the stock for pure profit. This is precisely what day traders need to thrive.
The company has an ATR of almost $7. Its ATR coupled with its massive daily trading volume make is a favorite momo candidate among traders. The company does not offer a dividend. This alleviates the notion that funds may be buying or selling large quantities of stock for dividend purposes. Absence of large investors allows price to move more violently, which is what day traders need.
Netflix, Inc. (NASDAQ : NFLX) an Internet television network, engages in the Internet delivery of television (TV) shows and movies on various Internet-connected screens. The company has an ATR of over $10 and daily trading volume of 8 million shares.
What sets NFLX apart from other best day trading stocks is its niche services. Few publicly traded company exist like it, making company news more significant. If a trader believes a quarterly report is bullish, he may be able to trade that single piece of news daily until the next quarter’s release.
Best Day Trading Stocks Under $100
Some traders cannot trade names with large ATRs, because they are often more expensive. Below we discuss some cheaper names that still have liquidity and large moves.
Overstock.com, Inc. (NASDAQ : OSTK) operates as an online retailer in the United States. The company recently entered the initial coin offering (ICO) business. This unique business strategy caused shares to skyrocket recently, as new investors and momentum traders compete for prices.
The stock has an ATR of $7, and eye-popping 32% short interest. Short interest tells us what percentage of the float is held by short sellers. High short interest stocks have abnormal moves since so many competing parties exist. If this best day trading stocks releases positive news, shorts are forced to buy shares, and new longs come to the stock. This is called a “short squeeze” and is extremely profitable for longs.
iRobot Corporation (NASDAQ : IRBT) designs, builds, and sells robots for the consumer market worldwide. The company is most well-known through its higher echelon vacuum robots. Traders are uncertain how to value this company based on its unique and innovative products. This uncertainty creates large sustained moves in the stock price.
In addition, this best day trading stock in 2018 has an ATR over $5 and short interest of over 21%. High short interest does not only benefit longs. For example, negative news causes the bears to strike, and longs feel the need to liquidate. This causes abnormal moves to the downside and creates profitable day trading setups.
Best Day Trading Stocks With High Valuation
The best stocks for day trading require high levels of participation from others. It is paramount that a stock move during the day, and it is the traders job to identify these stocks. Stocks with high price-to-earnings ratio (P/E) are expensive, causing some value traders to stay away. Conversely, momentum traders chase price higher. This causes dramatic moves in already expensive names, making them more expensive.
Adobe Systems Incorporated (NASDAQ : ADBE) operates as a diversified software company worldwide. This high valued day trading stock has been around since 1981, surviving the dotcom crash. The company shows a P/E ratio of 57, pricing it at over 2x that of the general market. It averages movement of over $5 and 2 million shares every day.
Additionally, relative high fliers like ADBE attract only one side of the market for periods at a time. This makes the stock trend cleaner, making it easier for day traders to profit.
Caterpillar Inc. (NYSE : CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines and industrial markets. This company shows a P/E of over 120, making it one of the most expensive stocks in the market. Momentum traders trade in the direction of the momentum. When the stock stops going up, momentum traders will sell, accompanying the mean reversion traders. This is yet another profitable scenario for day traders.
Lastly, CAT has an ATR of over $5 and a beta of over 1, meaning it moves further than the market. It is stocks with these attributes that allow day traders to generate large profits.
These best day trading stocks today provide traders with edge every day. It is important to note why these type of stocks are ideal for day trading. As a result, traders identify new stocks to trade and generate profits. These setups are used everyday despite whether a trader relies on a momentum or mean-reversion trading.
The names discussed in this article are liquid enough to trade large positions and be flat by the close. Therefore day traders take minimal overnight risk while achieving large returns intraday. In addition to selecting the right names, traders must also become familiar with rules of day trading. Day trades are most simple when the market is one sided, as discussed above.