Best way to day trade penny stocks
It will also offer you some invaluable rules for day trading stocks to follow. Day trading stocks today is dynamic and exhilarating. On top of that, they are easy to buy and sell. With the world of technology, the market is readily accessible. The liquidity in markets means speculating on prices going up or down in the short term is absolutely viable.
Also, stocks are relatively straightforward to understand and follow. Whilst day trading in the complex technical world of cryptocurrencies or forex may leave you scratching your head, you can get to grips with the triumphs and potential pitfalls of Google and Facebook far easier.
Before you start day trading stocks, you should consider whether it definitely suits your circumstances. For example, intraday trading usually requires at least a couple of hours each day. One of those hours will often have to be early in the morning when the market opens. Longer term stock investing, however, normally takes up less time.
This is because you have more flexibility as to when you do your research and analysis. In addition, intraday trading returns can exceed those of long-term investing.
This in part is due to leverage. This allows you to borrow money to capitalise on opportunities trade on margin. However, with increased profit potential also comes a greater risk of losses. On top of that, you will also invest more time into day trading for those returns. You could also argue short-term trading is harder unless you focus on day trading one stock only. This is because interpreting the stock ticker and spotting gaps over the long term are far easier. However, this also means intraday trading can provide a more exciting environment to work in.
There is no easy way to make money in a falling market using traditional methods. Day traders, however, can trade regardless of whether they think the value will rise or fall. Overall, there is no right answer in terms of day trading vs long-term stocks. Spotting trends and growth stocks in some ways may be more straightforward when long-term investing. Having said that, intraday trading may bring you greater returns. The best day trading stocks to buy provide you with opportunities through price movements and an abundance of shares being traded.
This will enable you to enter and exit those opportunities swiftly. These factors are known as volatility and volume. Volume is concerned simply with the total number of shares traded in a security or market during a specific period. Each transaction contributes to the total volume. If just twenty transactions were made that day, the volume for that day would be twenty. How is that used by a day trader making his stock picks? Volume acts as an indicator giving weight to a market move. If there is a sudden spike, the strength of that movement is dependant on the volume during that time period.
If you have a substantial capital behind you, you need stocks with significant volume. Whilst your brokerage account will likely provide you with a list of the top stocks, one of the best day trading stocks tips is to broaden your search a little wider.
Look for stocks with a spike in volume. If a stock usually trades 2. If your chosen platform fails to offer a rigorous screener for high volume stocks, utilise these alternatives:. If it has a high volatility the value could be spread over a large range of values.
This would mean the price of the security could change drastically in a short space of time, making it ideal for the fast-moving day trader. One way to establish the volatility of a particular stock is to use beta. A stock with a beta value of 1. On the flip side, a stock with a beta of just. How you use these factors will impact your potential profit, and will depend on your strategies for day trading stocks. Now you have an idea of what to look for in a stock and where to find them. Below is a breakdown of some of the most popular day trading stock picks.
Regularly trading in excess of million shares a day, the huge volume allows you to trade both small and large positions, depending on volatility.
You could also start day trading Australian stocks, Chinese stocks, Japanese stocks, Canadian stocks, Indian stocks, plus a range of European stocks. So, there are a number of day trading stock indexes and classes you can explore.
Furthermore, you can find everything from cheap foreign stocks to expensive picks. All of the strategies and tips below can be utilised regardless of where you choose to day trade stocks. Timing is everything in the day trading game. With that in mind:. The pennant is often the first thing you see when you open up a pdf of chart patterns. The converging lines bring the pennant shape to life.
You should see a breakout movement taking place alongside the large stock shift. You will then see substantial volume when the stock initially starts to move.
Finally, the volume in the pennant section will decrease and then the volume at the breakout will spike. You will normally find the triangle appears during an upward trend and is regarded as a continuation pattern.
Less often it is created in response to a reversal at the end of a downward trend. Whenever they do occur, ascending triangles are bullish patterns when the small black candlestick is followed by a big white candlestick that totally engulfs the previous candlestick. Although often a bearish pattern, the descending triangle is a continuation of a downtrend. Less frequently it can be observed as a reversal during an upward trend.
Just a quick glance at the chart and you can gauge how this pattern got its name. Usually, the right-hand side of the chart shows low trading volume which can last for a significant length of time. Straightforward to spot, the shape comes to life as both trendlines converge. There are traders and investors who buy penny stocks just because they are cheap as compared to big socks and that itself is the biggest mistake committed by them. Penny stocks lack liquidity and very less outstanding shares are available for traders to buy.
So, it may happen that you wish to sell them off when they are falling heavily; but no one wants to buy them because of the fear of the stock crashing to even lower levels.
So, one must be extremely careful while dealing in penny stocks and trade with less amounts to avoid losses. Having said this, penny stocks are capable of doubling or tripling your investments within a year if you invest at the right stock and at the right levels.
Now, let us know how to identify the best penny stocks for day trading. Identifying Stocks for Day Trading Recent Movements For investing in penny stocks, it is important that you track the recent movements in these. See whether the stock is in an uptrend, continuous uptrend or a downtrend. Try to relate the company's financial performance with its stock price to get a clear idea of what the future stock price would be.
Choose a Safer Sector For day trading penny stocks, you should choose a relatively safer sector which is not affected much by fluctuations in the market. Stocks of such sector would be safer bets than the one which is in news constantly.
Investor sentiment for different sectors can be different at different time of the year and hence you need to study it carefully to know stocks of which sector are in demand. Avoid Over Valued Penny Stocks The best penny stocks to buy would be those which are fairly valued as compared to their peers.
Valuations are always a matter of concern in the case of penny stocks because these stocks react very sharply to any kind of news. So, finding out their fair value with the help of valuation ratios such as price to earnings ratio or net profit ratio would be a good idea.
Sell on Up Moves A common suggestion for all those adventurous traders indulging in day trading stocks would be to book profits at higher levels in these stocks. You would naturally want to earn money when you are getting a better valuations and this can happen only when you exit all your positions.
So, be attentive and develop your reflexes such that you do not miss a single profit booking opportunity. Day trading penny stocks can be done only with systematic stop losses and good stock research. You can also take help from processional traders and brokers in this regard. So, give it a try if your pocket allows you and reap the benefits. This article is just for reference purposes and does not recommend any stock market transactions. Day Trading for a Living.
How to Day Trade Stocks Successfully. What is Intraday Trading. Pros and Cons of Investing in Penny Stocks.