Choosing the right stocks for day trading is important. You want to pick stocks that are moving more aggressively than the futures. You also want to pick stocks that have important news announcements coming up.
Volatility is a day trader’s best friend
Traders who rely on technical analysis are able to take advantage of volatility in the short-term to increase their odds of profit. But volatility can also lead to major price moves, and traders should be ready for this.
A lot of day traders rely on technical analysis to pick stocks. However, many traders overlook volatility, which can be helpful for trading in the short term.
For example, the average true range (ATR) is a useful measure of volatility. The ATR tells traders how much the stock moves on average.
Another helpful technical tool for measuring volatility is Bollinger bands. The bands are made up of a stock’s one standard deviation to the positive side and 20-day moving average. The bands expand when prices fluctuate.
Volatility can also be measured by the implied volatility of an option. This measure gives traders a sense of the future value of an option. In a hypothetical example, if an option has a 20% implied volatility, then it means there’s a 16% chance that the option will trade between $80-$120 in the next 30-days.
Buy stocks that move up more aggressively than the futures
Whether you’re an established investor or just starting out, you’ll want to keep a close eye on your stock ticker. One way to do this is by buying stocks that move up more than the market as a whole. By doing so, you’ll have a better shot at a profit in the long run. For example, you may have noticed that certain sectors such as telecommunications and automotive have been relatively strong for weeks on end. If you’re going to take the time to research your market and take advantage of these opportunities, you’ll be on the right track to a lucrative trade.
When it comes to buying stocks that move up more than the market, there’s no need to be a fool. It’s all about minimizing your risk and maximizing your rewards.
Draw an upward trendline
Using trendlines in your day trading strategy is a useful tool for identifying areas of potential support and resistance. However, it is important to keep in mind that the market isn’t always consistent in its movements. Therefore, it is important to adjust your trendline after any acceleration of the trend.
You can draw trendlines from your candlesticks or from major swing highs and lows. You can also use chart software to help you draw them.
In order to draw a valid trendline, you’ll need two points. For an upward trend, you’ll need two lower lows and two higher highs. You’ll also need to connect those lows and highs by drawing a line.
You can use trend lines to identify areas of increased supply or demand. They also help you identify potential buying and selling opportunities.