Daytrading Stock Picking Advice

[cpatte7372]

Can someone advise me on the what I should look for when picking stocks as a daytrader. Coventional wisdom says I should seek stocks with high volatility, and high liquidity. Is there anything else one should look for?

Cheers

Carlton

[Digs]

This is a gem...

I have my own personal customer scanner...

1) stock watch One : 25 stocks based on average true range of the last 5 days...thats very wide high and lows with volume > $4M average per day.
2) Stocks from briefing.com or realtime traders.com
3) After 60 mins trading time ( ie 10.30am ) run my scan, and get stocks with a 2 or 3 times volume for the first 60 mins compared to the previous 2 days.

Thats about 75 to 100 stocks I can view in a couple of minutes for easy picks...

Good luck, You may want to goto http://www.elitetrader.com/ for more advice...

[cpatte7372]

Digs,

Thanks a lot mate.

Carlton

[michaelm]

I have no idea on your trading experience. My suggestion would be to pick 2 or 3 stocks that have high liquidity. While it may be easy to scan for numerous stocks to trade, daytrading is a whole 'nuther game. "Watch" and paper-trade these 2 or 3 stocks for awhile until you feel comfortable enough with your daytrading strategies. If you don't seem to get a feel for one, or more, of those selected, then replace it with another and try again.

Plus, you'll have to decide if you prefer daytrading Nasdaq or NYSE stocks (I wouldn't even bother with AMEX...notoriously horrid fills for daytraders, or any trader for that matter). If NYSE, look into trading platforms that have "autoex" capabilities against the specialist. While it's not a sure fire way to get out, it's alot better than rifling it to the specialist...and waiting, and waiting. Some specialists are better than others, that's one reason for "watching" and paper-trading.
If Nasdaq, I'd look into trading via Island, or any ECN that has various means of executing trades virtually instantly.

Hope it helps, and good luck.

[cpatte7372]

Michael,

Thanks for the tip.

Can I ask you question? I have been using MSN's "Stock Screener" to scan for exactly the kind of stocks that you have just mentioned. As a matter of fact I'm paper trading LU right down. I'm using the following criteria:

Last Volume: Higest as possible
Beta: Highest Possible
Last Price: <= 5
Liquidity Ratio: Highest Possible.


Have you ever used anything like MSN's stock screener? Could you take look at it and let me know what you think?

I would appreciate it mate.

Cheers

Carlton

[michaelm]

I have seen it. Quite a lot of info to choose from, both fundamental (mainly) and technical (somewhat).

I can't tell you to trade, or not trade, LU. That will be up to you. I have stayed away (except for a couple times) from daytrading stocks <$25...that's just me. Usually not too much range, which translates to trading more size, which equals more commissions, plus being right.

Is there a reason you are considering daytrading stocks under $5?

[michaelm]

FWIW, I believe this thread should be under "Trading Strategies > US Stocks", rather than in EFS Studies...just for future reference.

[cpatte7372]

Michael,

Thanks for getting back to me. I'm trading $5 stocks because thats all I can afford at the moment.

Thanks

Carlton

[JayF]

Moving the thread to the US Stocks forum. Thanks michaelm for the suggestion!

[cpatte7372]

Linus,

Thanks for the feedback - I really appreciate it.

I think I'm going to take your advice and not bother with LU.

Once again, thanks a lot mate.

Carlton

[Doji3333]

Trading Strategies..

Carlton,

I like to trade stock in the $5~20 range too. I have a bit of a different style than most (I guess).

When I first started trading, it was thru a broker and I lost money in my account. Then, I vowed to only invest when I knew what I was doing. So, I started learning as much as I could.

Then, I started trading the metals again, then the S&P and Grains. While following the grains, I learned the importance of the Weekly charts and follow them for signs of major trend reversals. I pretty much concentrate on weekly charts for my initial trend consideration, then move to daily for support/resistance and other technical indicators. If the weekly is setup properly, then the daily should follow-thru.

Now, I look for stocks on a weekly basis that have the following conditions.

1. Have formed a base (a prior major bottom).
2. Have rallied to new recent highs and pulled back.
3. Have low stochastic values (%K & %D below 20~30%).
4. Are showing signs of a new potential rally (on the weekly chart).

Often, I'm able to pick up 10%~40% (depending on the move) in a time-frame of 1 week to maybe 4 weeks.

Of course, there are other times when I'm buying something because I missed the initial signal and am trying to catch a small percentage of the rally (maybe 8~15%).

I wanted to get into LU also, but I was pretty much invested in other stocks. If the market news pushes some of these "telecom" stock a little lower (a pullback), I might try for a quick 10+% in LU. But time will tell.

Generally, I don't find much of a problem with stocks less than $10. You just have to make sure the average daily volume and volatility is enough that you can effectively trade it.

Just my 2 cents.

Brad

[michaelm]

Brad,

Do you daytrade? I think this is what Carlton was asking about.

[cpatte7372]

Brad,

As Michael mentioned, I would really like to hear comments on daytrading. Can you suggestion be applied to daytrading? Thanks for you comments anyway.

I would like to hear the opinions of other people on daytrading stocks under $5.

Cheers

Carlton

[cpatte7372]

Linus71

Thanks for your comments.

I would like to hear the comments from others on daytrading.

Thanks

Carlton

[Doji3333]

Posible Solution...

After a little looking for something that MIGHT help you, I fell back to one of my old favorites - Stochastics. Now, I'm sure that many of you know the faults of stochastics (staying in overbought and oversold levels thru a trend), but here is something that may help you.

I used a test symbol of SUNW, but I'm sure others will chime in with potential issues to this simple system.

Here are the basic rules...

1. At 6:30, wait for the first bar to complete forming, then determing the stochastic values...
1a. if StoK > StoD, then go Long
1b. if StoK < StoD, then do Short

2. Now, Establish proir support/resistance for our initial trade. Look in the past on the stochastic indicator and identify the following.
2a. if Long (now), look for the most recent downward sloping Stos (where StoK < StoD) and identify the lowest price low of that down-slope in the Stos. This is our support level and we should look to reverse if this level is broken.
2a.1. Repeat this process with each change in the Sto indicator (in this case, only if long).

2b. if Short (now), look for the most recent upward sloping Stos (where StoK > StoD) and identify the highest price high of that upslope in the Stos. This is our resistance level and we should look to reverse (Long) if this level is broken.
2b.1. Repeat this process with each change in the Sto indicator (in this case, only if short).

Now, I'm not saying this is the "Best" tool for you to use, but is does seem to have some strengths.

On this day with SUNW (1/2/04), here were the trades..

1. Long @ 6:35 AM @ 4.52 (roughly).
2. Rev Short @ 11:30 AM @ 4.65 (Roughly) - Profit $0.13.
3. Rev Long @ 12:40 PM @ 4.62 (Roughly) - Profit $0.03.
4. EOD CLose @ 12:58 (or there abouts) @ 4.68 - Profit $0.05.

Three Total Trades on this day with $0.21 gain (roughly). Like I said, I'm sure you'll find days where it does not work so well, but this is something you might want to consider.

I was using 10,3,3 Stos and have included a chart for you to review. You'll see where I marked the Support/Resistance levels from the stochastics indicator.

If you have any other questions, please let me know if I can help.

Brad