How To Screen Stocks For Day Trading?

There are different kinds of traders who trade in the stock market. Some would get in and out of the trades in seconds, while others would be holding on to their stocks for years together.

Whatever type of a trader you are it is important to know how to pick up stocks to trade in them. With thousands of stocks listed on the exchange and also actively traded, it would definitely not make sense to analyze each one of them for an intraday or a positional trade.

So how do you go about screening for stocks to trade in?

Screening stocks or day trading

A day trader will place many trades on a single day and get in and out of the trades fast. He would, however, square off all his positions at the end of the day and not carry forward any positions overnight.

Day trading is a risky business and thus should be done with care. A few things should be kept in mind when you are day trading. To select the stocks today, the trade makes sure that you keep these parameters in mind.

Trade stocks those are very liquid

Liquidity is a very crucial thing that you should consider Hendry trading. The stocks that are liquid have huge volumes and thus you can buy and sell a large quantity at one time. Your orders get filled easily when the stock is liquid. The stocks that are illiquid will do not have enough buyers and sellers so you would not be able to get in and out of the trade quickly. If the stock is very illiquid then you would have to hold on to the trade for days together. When trading intraday one could limit the stocks to only blue-chip stocks which are very liquid.

Volatile stocks should not be considered

Stocks that have a very low volume or stocks that have some news during the day tend to be very volatile. Some stocks may be volatile after the news is announced. It is best to stay away from these stocks for an intraday trader. The reason for this is that you may be stopped out unnecessarily because of the volatility. The movement will be very chaotic and your trade rules may not work out.

Pick up stocks that follow the index trend

Once you have narrowed down the stocks that are liquid and not very volatile, you may still be left with many stocks to screen through. To narrow down the search further look at the broad market trend. Analyze what the index would be doing the next day. Then go ahead and screen stocks that are following the index trend. This will increase the probability of the trade being profitable.