HOW TO START DAY TRADING A FUNDED ACCOUNT?
Chapter 2
Stock Picking
How do I choose the right stock to trade?
Deciding what stock to trade on a particular day is among the most important things for a trader. For any beginner, it’s therefore among the most important things to learn. A good trader may have an excellent trading plan and have great potential but without the ability to choose the right stock, chances are he or she is doomed to eventually fail.
What you need to always keep in mind when choosing a “stock picking” is that you need to see momentum and volatility.
When choosing a stock, you really want to see volume, which indicates market interest and volatility, which can allow price movement and profitable trades. The rule of thumb when stock picking is to give priority to stock of companies that have just released results, made announcements or have been the center of important news – as well as stock of companies who are expected to do any of that imminently.
Some of the news that can alter the price of a stock are periodic and are released at certain intervals of time while others are “a little less expected”, shall we say.
Major movements in price can often be caused by news such as:- Earnings report.
- Guidance raised.
- FDA approval.
- FDA decline.
- Company Investigation.
- Analyst upgrade.
- Analyst downgrade.
- Company Partnership.
- Introduction of a new product or service.
- Stock gap up/down 3% with increased pre-market volume.
- The stock price should be $10 or more
- The average volume in the last 30 days should be at least a million shares
- The ATR of the stock should be above 0.75 cents
- The stock should be accompanied by “hot news”
- The stock should gap up or down at least 3% in the pre-market
Following these criteria will maximize your trading opportunities by helping you choose stocks with the highest probabilities of volume, momentum and volatility.