This beginner’s guide covers how to select the best stocks for day trading when to trade during market hours, how to choose a reliable brokerage, how to avoid overtrading, and how to Master Intraday Trading in less time. Learn key tips for maximizing profits in active intraday trading.
Table of contents
Finding the Best Stocks for Day Trading
When you’re first getting started with day trading, one of the most important decisions is choosing the right stocks to trade. Here are some tips for selecting the best stocks for day trading:
- Look for stocks with high volume – You want stocks that have high daily trading volume, meaning a high number of shares are being bought and sold each day. High-volume stocks are more liquid, making it easier to get in and out of trades at the price you want.
- Consider stocks with high volatility – Volatile stocks experience big price swings, which creates more opportunities to profit from short-term trades. Analyze historical charts to find stocks that regularly have large daily price movements.
- Focus on stocks you’re familiar with – It helps to trade stocks in industries you understand or companies you actively follow. You’ll have an easier time analyzing how news and earnings reports may impact the stock price.
- Use stock screeners – Screening tools like Yahoo Finance and Finviz allow you to filter stocks by criteria like volume, volatility, price, and more. You can scan for stocks that fit your preferences.
- Stick to major exchanges – As a beginner, focus on major exchanges like the NYSE and NASDAQ which have high liquidity. Avoid over-the-counter stocks which tend to be riskier.
How to Pick the Best Day Trading Times
Timing your day trades is key to maximizing your profit potential. Here are some tips for picking the best times to day trade:
- The first hour of the trading day – There is often a surge in volume and volatility right after the stock market opens. This creates opportunities for quick profits if you can catch price swings.
- Last hour before market close – Like the opening hour, the closing hour often sees an uptick in volume as institutional investors square away positions. The increased liquidity can lead to more trading opportunities.
- After economic data or news releases – Big economic reports like jobs data and interest rate decisions can produce large price movements, as can major corporate news events like earnings. Be ready to trade around these catalysts.
- During Fed announcements – Announcements from the Federal Reserve can cause market-moving reactions. Trading around these events can generate profits, but also carries more risk.
- When volume and volatility pick up intraday – Check for surges in volume and volatility at other times during the day as these are signs of increased trader activity. More volume makes it easier to get your orders filled.
Finding a Reliable Stock Broker for Day Trading
To start day trading stocks, you’ll need a brokerage account that allows instant order execution. Here’s what to look for in a stockbroker:
- Low commissions – The fees charged on trades can quickly eat into profits when doing high-volume day trading. Look for brokers offering competitively priced trades.
- Lightning-fast order execution – Ensure the broker has advanced technology to enter and exit positions seamlessly in real time during market hours. Delayed executions can result in missed profits.
- Level II quotes access – Level II quotes show market depth data including bid/ask spreads and order sizes. This info helps day traders analyze liquidity and market momentum.
- Direct access trading – Direct access brokers route your order straight to the exchange for the quickest execution without any intermediary. This enables fully automated trading.
- Charting and analysis tools – Brokers usually provide free access to charting platforms like TradingView to do technical analysis. Look for robust tools.
- Educational resources – Select a broker that offers market news, research reports, trading guides, and webinars to continuously build your trading knowledge.
Some of the most popular brokers for active day traders include TD Ameritrade, E*TRADE, Charles Schwab, Interactive Brokers, TradeStation, and Fidelity.
How Many Hours Per Day Should You Trade?
When intraday trading stocks, it’s better to focus your efforts in smaller time windows for maximum effectiveness. Staring at charts and positions all day long can quickly lead to overtrading and mistakes. Here are some tips:
- Trade only during peak market hours – Limit your trading to when volume and volatility are highest, generally the first 2-3 hours after opening and before closing. Don’t trade outside of regular session 9:30 am – 4 pm EST.
- Take regular breaks – Step away from the screens regularly to remain sharp and avoid emotional decisions. Breaks also help you evaluate trades with a fresh perspective.
- Stop trading after 2-3 losing trades – Walk away for the day if you’ve had a few consecutive losers. Continuing to trade when frustrated usually results in more losses.
- Analyze your trades at the end of the day – Spend time reviewing your trades to solidify your knowledge. Identify what worked and what didn’t. Focus on improving.
- Develop a plan and stick to it – Outline a trading strategy including setups, risk management rules, profit targets, and daily time commitment. Following a plan avoids overtrading.
Start with just 1-2 hours a day focusing only on high probability setups. As you gain experience, increase your trading time gradually. Remember, longevity as a trader requires proper rest and detachment from the markets.
Day trading offers the opportunity to profit from short-term price movements but also comes with risks. By picking the right stocks, trading at optimal times, using a trusted broker, and avoiding overtrading, you can improve your chances of success. Start slowly, learn from your mistakes, and always stick to proven trading strategies. With the right foundation, day trading can be an exciting way to participate in the financial markets.