I know many day traders who spend hours looking for the perfect stock to trade, or a stock that is poised to breakout and make them a fortune.  How is that working out???  This is an inefficient way to trade the stock market.  Moves happen everyday, in all stocks and if we know how to capture that movement it doesn’t matter what we trade.  That said, we may as well play stocks that are moving a lot…but this does not require much research.

If you are looking to day trade in stocks, keep it simple.  Day traders often look for stocks poised to move, instead of stocks which are already moving.  Possibly this is because they feel they have missed some movement already.  Who cares!  Profits are profits.  Things in motion tend to stay in motion, things at rest tend to stay at rest.

Here is a simple method for finding stocks which are almost guaranteed to move:

Run a screen once a week for stocks that have an average daily range (high- low, we don’t care about gap opens) over 5% (50+ day average).  Set a price filter and volume filter.

For this particular strategy I only trade stocks with over 4 million average (30 days) volume and actually generally trade stocks that have a 6%+ average daily range.

Very simple screen!  Presto, you have stocks which have a tendency to move a large amount each day AFTER the open!  Run this screen once a week and pick the best 2-5 stocks, and day trade those all week.

One note about the price filter – day traders often gravitate to very cheap stocks or relatively expensive stocks…I generally stay away from both these.  Run your screen with a $10 range, for instance $30-$40.  This will keep the result you get back to a smaller amount.

Day trading requires a sound method of attack.  But now you will have a handful of stocks you know will move so you can put your methods to more fruitful use.  We don’t know the direction these stocks will go on a particular day, we only know that they move a lot.  So be nimble and prey on the volatility.  Have a trending strategy and a ranging strategy in order to take advantage of the volatility.

Get too many search results?  Increase the filter criteria.  Volume is good, so increase the average volume, or increase the average daily percent (the higher the better in my opinion).

Too few results?  Relax the criteria.  Try a different price first, then slightly reduce the volume or the average daily range.  Still no hits?  Weird.  But if that is the case, wait to good stocks to come up on the list.  We don’t want to sacrifice too much volume or trade stocks which won’t move (unless we want that).

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Day trade the day lights out of it,

Cory Mitchell, CMT
Chief Market Strategist
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