For highly liquid stocks. They either do not move much at all or the move up or down often feel "manufactured". It is also more unpredictable due to the number of players involved and their wide array of actions. For example AAPL could be down 10 days in a row but I still feel hesitant to short it long term because the big boyz could reverse course at any moment notice (I'm a conservative & part time trader btw). Than the art of evaluation and anticipation come into play. But once you, more or less, correctly deduce the time and strength of the move, it is very rewarding as you can go in and out without much slippage. On some days, the larger stocks will move according to the indexes movement so it can also be rewarding if you have a general feel to the overall market as well.
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How do you choose stocks for daytrading?
- Thread starter zbojnik
- Start date
For highly liquid stocks. They either do not move much at all or the move up or down often feel "manufactured". It is also more unpredictable due to the number of players involved and their wide array of actions. For example AAPL could be down 10 days in a row but I still feel hesitant to short it long term because the big boyz could reverse course at any moment notice (I'm a conservative & part time trader btw). Than the art of evaluation and anticipation come into play. But once you, more or less, correctly deduce the time and strength of the move, it is very rewarding as you can go in and out without much slippage. On some days, the larger stocks will move according to the indexes movement so it can also be rewarding if you have a general feel to the overall market as well.
Pick a sector you know.
I prefer the NASDAQ100, then come up with a strategy for it.
Ignore the correlations. It's fine for the stocks in the sector to be correlated, because it makes directional betting easier and more consistent.
Also, don't look for anymore than 500 symbols to negate the element of randomness in any of your backtesting. Beyond 500, the stocks are equivalent to random lists, and your results will reflect the stochasticity. Be aware that survivorship bias exists because data is not accessible whenever instruments are delisted. Don't let survivorship bias deter you. If your backtest is profitable, on average the results of your strategy won't be much different than in your original assumptions. Also, particularly when using dip buying methods, don't ever buy on the open. Code those cases out, and your results will eliminate the possiblity of buying really sharp falling knives. Most knives fall prior to the open or after the close, so if you're consistent this is one way to eliminate that part of dip buying strategies particularly.
Lastly, use or develop automation, especially for large watchlists.
Never trade without a backtest or stopping point for every trade. Stopping points should be calculated based on the probabilities of your backtests, and that will improve expectancy. The presence of stopping points for trades without backtests are discretionary bets that don't necessarily reflect the risk per trade you choose because you don't know how well your gut instinct works. Usually it's real bad, and many traders blow out, so use discipline in selecting the stocks to trade by preparing a backtest before trading live.
I prefer the NASDAQ100, then come up with a strategy for it.
Ignore the correlations. It's fine for the stocks in the sector to be correlated, because it makes directional betting easier and more consistent.
Also, don't look for anymore than 500 symbols to negate the element of randomness in any of your backtesting. Beyond 500, the stocks are equivalent to random lists, and your results will reflect the stochasticity. Be aware that survivorship bias exists because data is not accessible whenever instruments are delisted. Don't let survivorship bias deter you. If your backtest is profitable, on average the results of your strategy won't be much different than in your original assumptions. Also, particularly when using dip buying methods, don't ever buy on the open. Code those cases out, and your results will eliminate the possiblity of buying really sharp falling knives. Most knives fall prior to the open or after the close, so if you're consistent this is one way to eliminate that part of dip buying strategies particularly.
Lastly, use or develop automation, especially for large watchlists.
Never trade without a backtest or stopping point for every trade. Stopping points should be calculated based on the probabilities of your backtests, and that will improve expectancy. The presence of stopping points for trades without backtests are discretionary bets that don't necessarily reflect the risk per trade you choose because you don't know how well your gut instinct works. Usually it's real bad, and many traders blow out, so use discipline in selecting the stocks to trade by preparing a backtest before trading live.
Quote from SteveNYC:
I can 2.
If I like, I buy.
If I don't like, I sell.
2 sentences. Viola. Done. EZ.
Yes, that simple.
When the day starts, I don't ever buy until Cramer tells me what and when to do so.
Lol.
Sometimes it takes 2 seconds longer to buy his six stocks in sixty seconds after he makes the recommendation to buy. Still not fast enough.
Everyone has there own strategies and has a feel for what they do.
I like to look for the worst performers at the end of each day. At 12:30 pm I look at the catalyst for the drop. If i determine it was a panic sell. The next morning (the honeymooners period) longs come in cost to dollar averaging and shorts usually take profits as well as they no they got lucky to successfully short a panic sell. I like to buy at open and close with a 1% gain as my philosophy of trading is taking highly reasonable profit targets with minimum downside. The reason the next morning has minimum downside is by now it was obvious to investors that panic had taken over. Also the stock was beat up so bad that really it's recovering in the hospital.
The bounce may be a dead cat bounce so we are looking for a reasonable profit target. 1% is mine. This is key as the stock may lose it's momentum and start to fall again. The chance of the bounce though is incredibly high. The chance of a 1% profit the same.
I personally look for a chart that during the intra day period that closed higher then the low of the day. Which shows some short covering and confirms that the stock has started to recover. This to me is important. I like to wait for conformation that the shorts and panic sellers have left the building. This is the reason i day trade the day after the crash.
Hedged to the downside with a probable upside bounce with a reasonable profit target= success.
The above was my first strategy which works in any type of market conditions. With 4 years of research nothings changed.
I actually like to buy 5 or so dogs at close and sell at open. I set a 1% profit order after hours and pre market if it doesn't hit i just sell at open. Like i said before usually the stock opens higher or even rather then down. It's so nice to take a profit after hours or pre market which happens 70% of the time. You just have to know how liquid the stock your trading is.
Mainly though:
I highly believe in a few very high probable intra day trades verse super high frequency trading. Especially if the profit is the same.
My favorite day trading method only includes daily charts and limit orders. No noisy tick chart or 5 minute chart etc.
Kind of like trapping the trade. If price touches this level this is highly likely type of thing. You will be amazed how this type of trading can change your life.
1% risk per trade 1 to 3 trades a day with stops and take profits set using limit orders and daily charts. With very little stressing due to a 80% win rate compounding profits daily weekly or monthly whatever your comfortable with.
I can get away with 2% per trade with a reasonable draw down relative to profit. This though obviously ads unneeded risk as it only takes a little extra time to become filthy rich with 1% risk per trade.
Almost like an algorithm with human intervention daily.
Looking for a coder though!
This is what i do! You should have an idea with the other posts that profitable traders back test there own ideas to see if the strategy is profitable or not.
Any how good luck! If you want a little tip PM me.
I like to look for the worst performers at the end of each day. At 12:30 pm I look at the catalyst for the drop. If i determine it was a panic sell. The next morning (the honeymooners period) longs come in cost to dollar averaging and shorts usually take profits as well as they no they got lucky to successfully short a panic sell. I like to buy at open and close with a 1% gain as my philosophy of trading is taking highly reasonable profit targets with minimum downside. The reason the next morning has minimum downside is by now it was obvious to investors that panic had taken over. Also the stock was beat up so bad that really it's recovering in the hospital.
The bounce may be a dead cat bounce so we are looking for a reasonable profit target. 1% is mine. This is key as the stock may lose it's momentum and start to fall again. The chance of the bounce though is incredibly high. The chance of a 1% profit the same.
I personally look for a chart that during the intra day period that closed higher then the low of the day. Which shows some short covering and confirms that the stock has started to recover. This to me is important. I like to wait for conformation that the shorts and panic sellers have left the building. This is the reason i day trade the day after the crash.
Hedged to the downside with a probable upside bounce with a reasonable profit target= success.
The above was my first strategy which works in any type of market conditions. With 4 years of research nothings changed.
I actually like to buy 5 or so dogs at close and sell at open. I set a 1% profit order after hours and pre market if it doesn't hit i just sell at open. Like i said before usually the stock opens higher or even rather then down. It's so nice to take a profit after hours or pre market which happens 70% of the time. You just have to know how liquid the stock your trading is.
Mainly though:
I highly believe in a few very high probable intra day trades verse super high frequency trading. Especially if the profit is the same.
My favorite day trading method only includes daily charts and limit orders. No noisy tick chart or 5 minute chart etc.
Kind of like trapping the trade. If price touches this level this is highly likely type of thing. You will be amazed how this type of trading can change your life.
1% risk per trade 1 to 3 trades a day with stops and take profits set using limit orders and daily charts. With very little stressing due to a 80% win rate compounding profits daily weekly or monthly whatever your comfortable with.
I can get away with 2% per trade with a reasonable draw down relative to profit. This though obviously ads unneeded risk as it only takes a little extra time to become filthy rich with 1% risk per trade.
Almost like an algorithm with human intervention daily.
Looking for a coder though!
This is what i do! You should have an idea with the other posts that profitable traders back test there own ideas to see if the strategy is profitable or not.
Any how good luck! If you want a little tip PM me.
Quote from Mr Super Trader:
Sounds good to me!
I don't get why such simplicity isn't looked on with derision. Such trading approaches are rarely if ever profitable.
The tact is a baseless approach, and only by trading quantitatively will you ever be able to find success in the markets.
As with a normal job, too, if your measure of success isn't in dollars, there are plenty of losses to clue you in to your unprofitable methods.
I think the applause is unwarranted, as with any "trader" who has no backtests.
Such simplicity will not make money long term. If the first 50% drawdown doesn't stop you, the next 50% draw soon after probably will.
Quote from bwolinsky:
I don't get why such simplicity isn't looked on with derision. Such trading approaches are rarely if ever profitable.
The tact is a baseless approach, and only by trading quantitatively will you ever be able to find success in the markets.
As with a normal job, too, if your measure of success isn't in dollars, there are plenty of losses to clue you in to your unprofitable methods.
I think the applause is unwarranted, as with any "trader" who has no backtests.
Such simplicity will not make money long term. If the first 50% drawdown doesn't stop you, the next 50% draw soon after probably will.
Yeah i was just joking. I believe there was some sort of sarcasm in Steve's reply as was mine originally. Just messing around!
At the same time I don't rule out possibilities.
Obviously by my previous post i back test my strategies. I don't use any indicators just simply looking at naked charts and finding probable trading strategies.
They say a pictures worth a thousand words. Well i believe a stock chart is worth a billion strategies.
I promise you you are so wrong about simplicity! Or maybe things are just simple after you figure them out. Either way after you figure it out it's simple.
Also my first draw down was 100%. That really got me thinking!