Basic guidelines for day trading of highly volatile stocks

Finding High-Volatility Stocks to Day-Trade

Highly volatile assets are appealing to traders due to their profit potential. Such stocks are exchanged in large volumes, allowing you to derive quick gains. As price shifts are significant, a well-timed position can result in sizable returns. Here are the fundamentals of harnessing high volatility within the day scenario.

Where to Find

Which stocks fall into the category? To answer this question, take advantage of available online tools. Some of these are free, others paid. They fall into two categories:

● stock screeners;

● stock filters.

The trading platform you are using may have embedded screening tools. Sorting may be adjusted by different criteria. Therefore, finding stocks with high volatility and high volumes at the same time is a piece of cake. It is also possible to see these:

● the most volatile stocks on a certain day;

● stocks with the highest volatility in a certain part of the day.

Hence, you can zoom in on certain time frames. Here are three more tips to make your search comprehensive. Filtering takes time, but it may boost your profits immensely. Luckily, with modern tools, filtering takes fractions of a second.

Monitor the Media

Another way to spot trading opportunities is to keep track of news reports. Make it your morning habit to check how famous stocks are doing. When corporations release earnings reports, the figures may affect their stock drastically. This is usually announced in advance, so you will know when the big news will be broken.

Once the quarterly profit or loss is published, the markets will react. Therefore, a trader should act quickly. Capitalize on volatility before your peers join in. Can be used on any convenient financial calendar for monitoring or use convenient tools from ForexTime.com.

Analyze Stocks Daily

It is possible to use stocks most likely to experience dramatic changes each day. Here, the range will be based on the prior session. Set the volumes filter according to day trading requirements. This means at least 1,000,000 shares exchanged daily. Next, take into account either of these:

● high volatility during the session;

● high percentage gains or losses.

Monitor Intraday Volatility

Changes observed throughout the day can be just as useful. The data may be accessed in real-time through trading platform FXTM. Free screeners are also helpful. Identify the biggest changes during the day and work with these assets.

Which shifts are large enough? Imagine that stock starts at 11% down and the price levels off. This is hardly a good candidate in terms of profit potential. But what if the same stock kept dropping gradually — say, by 12%, then 14% and 15%? Here, you would know there was movement and a solid usable trend.

Setting up the Filters

If you are looking for a stock with volatile patterns, adjust the search accordingly. Here is a list of criteria that should be included. These are basic suggestions which may be altered if necessary.

1. The average day range should exceed 5%.

2. The optimal number of days is between 50 and 100.

3. The average volume should exceed 4,000,000 (for the last 30 days).

4. Choose the optimal price range of $10-$100 (can be adapted to your preferences).

If you are looking for an individual stock, make sure the exchange is not Amex. On the other hand, ETFs (exchange-traded funds) require Amex. It is a leveraged tool based on a cluster of indices or stocks.

Using the Data

The frequency of checks depends on your trading behaviour. Here is a summary of an optimal approach. This ensures highly volatile stocks are found regularly, and search results are used properly.

A good approach is to run the filtering tool every weekend. Based on the resulting listing, pick 2-3 assets. Try trading them throughout the week and assess the outcome. Repeat if necessary. This way, you will see which criteria need adjustment to suit your personal strategic objectives.

The Bottom Line

Overall, assets with high volatility and high volumes may prove extremely profitable. Success in the field requires the right aids and thoughtful methods.

To spot the best stocks, you need a focused and organized approach. Fortunately, with modern digital screeners, filtering is a matter of seconds. Thus, arm yourself with the right sorting tools, set the right values, and let trading commence.

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