How to Find Stocks to Day Trade: A Brief Guide for Beginners (+12 Trading Tips)

Day trading can generate serious profits due to intra-day price volatility and the short spans of one’s share ownership, despite posing high risks. Some basic procedures govern successful day trading. Applying these tips, rules, and procedures can burst the negativity bubble often associated with day trading, and help you profit off the natural volatility of stocks.

Simply listing the names of stocks we expect to profit from is very difficult if not impossible. Rather, let’s take a look at the procedures that can give you a higher probability of success in finding tradable stocks.

In other words, instead of providing you with a fish to eat, let’s teach you how to fish.

Want to find out how to find stocks to day trade? Don’t get carried away by colorful reports generated by gurus, salesmen, or bots. Instead, start here.

How to Find Stocks to Day Trade: A Brief Overview

Let’s take a peek at some of the fundamentals of finding profitable day trading stocks, whether you’re interested in trading stocks outright or buying and selling options such as puts or calls.

Tip 1: Stocks with High Beta Value

Market indices such as the Dow Jones or S&P 500 have a beta value equal to one. A beta of a share describes the change in the value of that share in response to a change in the market index. For day trading, always pick shares with a beta value greater than one.

The share price of a company with a 1.5 beta will move by a 50% greater degree. Don’t forget the flip side as shares with a beta of less than 1.0 will face a steeper decline in value too. Picking higher beta shares doesn’t guarantee you profitability in day trading. It is like choosing a vehicle with a turbo feature for faster acceleration when driving.

You don’t need to worry about calculating beta metrics for a share. This information is available in each company’s profile on the market’s website. For example, see below the beta for a company listed on NASDAQ:

Image depicting a beta value of a share on Yahoo Finance

Source: Yahoo Finance

Tip 2: High Share Volume

Stocks you aim to buy for day trading are not issued by the company every day. You buy when other investors sell. Day trading is only possible with shares having high volumes. A share with a very low volume is useless for day trading even if it shows a consistent price increase.

Tip 3: 5% Price Increase

Share prices include their opening price at the beginning of the day, as well as their lowest and highest price sold in a day. A good stock to day trade should gain or fall by at least a margin of 5% in share value in the majority of the last 15 to 30 days.

Tip 4: News Notifications

Predict a share’s behavior in the next few hours for profit. Base this anticipation on market news coming out from reliable sources. Subscribing to trading newsletters to get instant notification for important news is crucial for successful day trading. Without proper market information and insights, you’re essentially going in blind.

Tip 5: Do Your Research

Dig deeper and analyze short-run price trends for different companies. Do not rely on the top 10 high performers or decliners of the day appearing on the trading screen. There are some stocks with profit potential unnoticed by other day trade investors that you can discern by reading market analyses from Forbes, Bloomberg, and CNBC, among other reputable financial news outlets.

Tip 6: Watch for Brokerage Fees

Day trading is about capitalizing on the small price increase or decrease in a stock’s value within a single day. You buy and sell on the same day and pay the brokerage fee on both transactions. Also, if you day trade in different countries, local laws may apply a brokerage fee on the number of shares. If this is the case, then day trading in low-value shares will not be profitable.

Choosing a reputable day trading service can help you reduce the fees that can cut into your profits.

Tip 7: Mind Your Tax Obligations

Even though you flip the shares in a single day, the gain you earn will be taxable unless you trade within an IRA or tax-advantaged investment account. You may set off your losses before including the gain in your tax return. Local tax laws may allow you to exempt capital gains up to a certain limit during your lifetime, which can lead to more profitable day trading.

Tip 8: Look for Crucial Days

Some days of the week are bullish and stock prices climb quicker. Try to track these hours of the week by reviewing historical data. An example may be the first few hours on Friday as it is the last day of the trading week.

One of our favorite stock trading services, Monday Moversspecializes in finding profitable stocks to trade on big trading days such as Mondays and Fridays.

Tip 9: Emotional Awareness

Even highly skilled traders often fail to earn a profit despite good technical knowledge. This is due to emotional instability leading to picking stocks as a knee-jerk action. Being mindful is the key here to avoid reacting to impulses. Always trust your higher judgment, rather than your emotional instinct, which often leads to greed. 

Tip 10: Paper Trading

Chances are high that your investment might become a loss for you while day trading. What might be a loss for you, however, will be a profit for more savvy traders. Paper trading without real money allows you to simulate trading using software without investing funds. You practice trading in the real world with no loss or gain, in order to gain practical insights and experience.

Select a paper trade period of 30 to 45 days to check your potential. The rule of thumb is that you should aim to be profitable in at least 55% of your investments during this period.

Tip 11: Record Keeping

We cannot downplay the importance of trading software. They provide vital information and give an edge to a day trader. You might not invest in expensive software now. Prepare a basic spreadsheet to track shares purchased, sold, and profit/loss attained.

Tip 12: Take a Defensive Approach

We recommend taking a defensive approach to day trading. Go with the motto that a day without a loss is a successful day. Have clear entry and exit strategies and don’t aim too high before you cash out your profits. Always play within your pre-established profit and loss targets, as shown below:

Stock chart exemplifying stop targets

Source: Investors Underground 

Final Word of Advice: Take Caution and Keep Learning

If you are a beginner and want to know how to find stocks to day trade, you’ve got to be hungry to learn. It may sound pessimistic, but there is a high chance that you will lose money as a beginner. In most cases, this is an inevitability on the road to advancing as a trader.

In traditional stock trading, you can still learn trading skills after buying stocks. Day trading is fast and requires decision-making in a flash. Here, you need to do all your learning before making an entry into the market.

Our team has collected some important day-trading learning resources. We’ve compiled them into an easy-to-read guide to day trading for newcomers, which includes some day-trading risks, strategies, and platforms, as well as FAQs.

Next comes the need to select a brokerage company for day trading. You can sign up for services from one of the twelve top American stock trading brokers. Each of them offers a different combination of services that you can see at a glance, all of which are offered at reasonable rates.