Over the past decade, day trading has gone from something only done by employees of brokerages and trading houses to a practice used by many ordinary investors on a regular basis.
Of course, this rise in day trading has come hand-in-hand with the increase in connectivity and the availability of trading apps, software and investing information.
Day trading is not a complicated concept. It’s simply the buying and selling of securities with the intent of taking advantage of intra-day price movements. Unlike more traditional, buy-and-hold investing, day traders are not looking to capitalize on long-term market trends.
Instead, day traders are looking to make short-term trades – usually within regular trading hours – in an attempt to pounce on opportunities created by up-and-down price movements for a given security that can materialize during a trading session.
While that may sound complicated, the reality of day trading is simple: Things happen during the course of a day that can make certain securities have a significant move in share price. Day traders look to spot these opportunities and exploit them for maximum potential gain.
Among the news events that can trigger short-term moves in the prices of securities are:
- Corporate earnings announcements
- Company news announcements or press releases
- Release of economic statistics (such as unemployment, inflation, etc.)
- Interest rate announcements.
When considering which stocks to focus on when day trading, it’s important – especially for those new to day trading – to look for popular stocks that can regularly fluctuate in price throughout the trading day.
The very best stocks for day trading purposes often have three distinct traits:
1) Consistently high volume – It’s important that the stocks are liquid enough for you to buy and sell without impacting the price or being affected by an ability to make trades quickly.
2) An easy understanding – You must have a basic familiarity with the company and its business to anticipate how a market event could impact its price. If the company is involved in a business you don’t understand, it’s best to look elsewhere for day trading opportunities.
3) A bit of volatility – An ideal day trading stock is one whose price changes frequently…but also does not have wild, potentially dangerous price swings. What you want is a bit of consistent movement that allows for regular opportunity.
A Quick Word of Advice Before You Begin Day Trading
One thing to keep in mind as you begin your day trading journey is that in many cases you’ll be competing against professional traders who have the advantage of several years of experience.
In addition, they may have in-depth knowledge of the marketplace as well as a deep understanding of technical analysis that can give them a significant advantage.
But that doesn’t mean that you can’t make money as a day trader. It’s important to learn as much as you can about the stocks you plan to trade – and gain a basic knowledge of technical analysis as well.
Most importantly, you should begin with only risk capital that you can afford to lose. The most prudent course is to begin slowly and then increase your pace – and the size of your investments – only when your experience and comfort level has grown.
What follows is a list of 5 stocks that have ideal characteristics and appear to be the best stocks for day trading potential over the next several weeks and months.
As always, be sure to do your own due diligence before investing in any stock to make sure it’s right for your financial situation and that it is consistent with your acceptable level of risk.
1. Tesla, Inc. (Nasdaq: TSLA)
Telsa, Inc. (Nasdaq: TSLA) is one of the world’s leading manufacturers of electric vehicles, solar panels and energy generation and storage systems.
The surge in demand for clean energy – as well as the media coverage of both electric vehicles and company founder Elon Musk – makes this a company that is much talked-about. This constant presence in the news cycle helps create many different trading opportunities for Tesla, Inc. stock.
The company operates in two segments, Automotive, and Energy Generation and Storage. The Automotive segment offers electric vehicles, as well as sells automotive regulatory credits. It provides sedans and sport utility vehicles through direct and used vehicle sales, a network of Tesla Superchargers, and in-app upgrades; and purchase financing and leasing services.
This segment is also involved in the provision of non-warranty after-sales vehicle services, sale of used vehicles, retail merchandise, and vehicle insurance, as well as sale of products to third party customers; services for electric vehicles through its company-owned service locations, and Tesla mobile service technicians; and vehicle limited warranties and extended service plans.
The Energy Generation and Storage segment engages in the design, manufacture, installation, sale, and leasing of solar energy generation and energy storage products, and related services to residential, commercial, and industrial customers and utilities through its website, stores, and galleries, as well as through a network of channel partners. This segment also offers service and repairs to its energy product customers, including under warranty; and various financing options to its solar customers.
2. NVIDIA Corporation (Nasdaq: NVDA)
NVIDIA Corporation (Nasdaq: NVDA) provides graphics, and compute and networking solutions in the United States, Taiwan, China, and internationally.
The tech sector is one where there is a steady stream of news, and NVIDIA Corporation is a remarkably liquid stock, with an average volume of 55.8 million shares traded daily.
The company’s Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building 3D designs and virtual worlds.
Its Compute & Networking segment provides Data Center platforms and systems for AI, HPC, and accelerated computing; Mellanox networking and interconnect solutions; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; cryptocurrency mining processors; Jetson for robotics and other embedded platforms; and NVIDIA AI Enterprise and other software.
3. Apple Inc. (Nasdaq: AAPL)
Apple Inc. (Nasdaq: AAPL) is one of the world’s most famous companies. It designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. It also sells various related services.
With more than 70 million shares traded per day – and a constant stream of new product announcements, production estimates and other news – there are also frequent trading opportunities created.
The company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; AirPods Max, an over-ear wireless headphone; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, HomePod, and iPod touch.
Further, it provides AppleCare support services; cloud services store services; and operates various platforms, including the App Store that allow customers to discover and download applications and digital content, such as books, music, video, games, and podcasts.
4. Netflix, Inc. (Nasdaq: NFLX)
Netflix, Inc. (Nasdaq: NFLX) is the world’s most popular online media-streaming platform.
With consumers “cutting the cord” more frequently, the long-awaited shift from cable television to streaming entertainment is well underway. For Netflix, this means opportunity but it also has meant increasing competition.
For this reason, the company remains a frequent subject of news stories as consumers seek out the entertainment model that works best for them…and this will continue to evolve over the next several years, triggering frequent day trading opportunities.
Netflix offers TV series, documentaries, feature films, and mobile games across various genres and languages. The company provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices.
5. Etsy, Inc. (Nasdaq: ETSY)
Established in 2005, Etsy Inc. (Nasdaq: ETSY) is a fast-growing e-commerce company primarily dealing with handmade products. Etsy Inc. offers a wide range of products such as bags, jewelry, clothing, home decoration, furniture, and many more.
The Covid-19 pandemic triggered a massive growth surge for the company, as many people set up their own shops during their time at home. The company’s appeal as a day trading stock comes primarily from its volatility, as there are frequent price swings of roughly 5% within a trading day.
The company operates two-sided online marketplaces that connect buyers and sellers primarily in the United States, the United Kingdom, Germany, Canada, Australia, France, and India. Its primary marketplace is Etsy.com that connects artisans and entrepreneurs with various consumers.