The stock market has had an incredible ride this year, and with many workers now stuck and home and with sports events cancelled or delayed indefinitely, chances are the ride will stay wild.
That’s because this year’s events have resulted in a confluence of new investors.
Whether they’re simply folks finding more free time during working hours or someone finally willing to try out the stock market with a stimulus (or unemployment) check, there’s been an explosion in small retail investors this year. A few are even skipping straight to futures or options trading, more obscure corners of the financial markets.
That’s given rise to a level and popularity in day trading not seen since 1999. It also doesn’t help that nearly every trading app and tradestation eliminated their trading fees in the past year, reducing one potential large cost to a portfolio.
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Under the pattern day trader rule, any investor who makes four or more round-trip day trades (open and closed the same day) within five successive business days is a day trader. That may not be you, but with a little knowledge of what’s involved with successful day trading, it could be.
As the popularity of retail investors playing the game of “let’s trade stocks” looks like it’s here to stay for a while, here are five of the best stocks for day traders to keep an eye on right now. Some are large and widely-known, but others aren’t… at least for now.
Best Day Trading Stock #1: Moderna (MRNA)
Moderna has been one of the hot biotech names of 2020, as the company has been working to develop a vaccine candidate for Covid-19. That’s allowed shares to skyrocket from $20 to $95 since the start of the year, and rallying while the rest of the stock market has faltered.
Although the company is still in early stages and is not yet profitable, Moderna has a cash-rich balance sheet with over $1.1 billion in net cash. And with the rally going on right now, the company could issue more shares if needed.
The company’s focus on therapeutics and vaccines for infectious diseases, rare diseases, and cardiovascular diseases gives it a much broader base to work from than just a potential Covid-19 vaccine.
That’s why, even with the company’s monster rally in shares, there’s still a lot more potential for investors and day traders alike going forward, which explains why it’s one of the most popular companies for retail investors to hold. Data from Robinhood suggests that over 314,000 shareholders on that app alone own shares, and the number keeps rising, despite any volatility in the stock price.
Best Day Trading Stock #2: Tesla Motors (TSLA)
The poster child for day trading, the electric car manufacturer, run by eccentric billionaire Elon Musk, has seen shares explode in the past year, soaring from $180 at their low to over $1,700 in intraaday trading according to its stock chart.
The company just had its 4th quarter in a row of profit, surprising many analysts and traders. The company is now eligible to become a member of the S&P 500 Index. Many traders are betting that will happen, and that passive mutual funds and ETFs that buy the index will be forced to buy shares, sending them higher.
Meanwhile, shares remain volatile as there’s a large minority of traders who see shares trading in a bubble, citing the company’s production numbers and admittedly-high valuation of nearly 200 times earnings. Over 30 percent of the company’s float, or outstanding shares not subject to being locked up, remain held short. It’s possible that these shorts could be forced to sell out on a move higher, and such a squeeze could lead to a massive jump in the share price from here.
Best Day Trading Stock #3: iShares Silver Trust (SLV)
Precious metals have been a top performer this year. They usually are at times of economic uncertainty, and when government and central banks start spending money like crazy as they are now. While gold is usually seen as a safe-haven, right now it’s seen as a way to avoid the massive amounts of money printing going on right now.
So it’s no surprise that traders are rushing into silver. That makes sense. While gold finally hit new all-time highs for the first time since 2011, the lesser metal trades for around $24, only half the price of its peak of $49 set in 2011.
Many traders see this as a place with room to run, and they’re starting to pile into the space. With all the money being created today, the relative stable quantity of silver makes the iShares Silver Trust (SLV) a solid trading vehicle for playing this trend.
There’s definitely a lot of potential upside here, and day traders would be wise to have this and other silver names on their radar for the continued precious metals rally underway before the market makers in the space are overwhelmed with buy orders.
Best Day Trading Stock #4: Virgin Galactic (SPCE)
Who wants to own a piece of the final frontier? Day traders. Virgin Galactic, the space tourism startup from billionaire Richard Branson, has been one of the best day trading stocks all year. And it’s easy to see why. The company has gone from being little more than a dream and turned into a potentially viable operation following a series of test flights so far this year.
While space tourism numbers look a little shaky—be prepared to shell out a quarter-million dollars for a sub-orbital flight that will give you a brief feeling of weightlessness—all technologies at first rely on expensive prototypes funded by the wealthy before efficiencies can be found that can reduce the price enough for the middle class to enjoy.
That day may be a long way off, but the idea is there and it’s in progress. And with the company’s small market cap relative to the potential value of space tourism (to say nothing of other applications like space mining), there’s a potential long-term winner here akin to buying shares of Tesla Motors before the first electric vehicle came off the assembly line.
Best Day Trading Stock #5: Intel (INTC)
Day traders recently started piling into the tech giant after it reported solid earnings, but had to delay its 7nm chip series past 2021. Shares took a 16 percent dive on the news, and traders did what they’ve bene trained to do—they bought the dip.
Intel is one of the more traditional names on the list of best day trading stocks, but the move of traders into the name right now shows that there’s a wisdom at play here. At current prices, Intel may be undervalued, even with lowered expectations ahead.
The drop in shares has pushed the company’s PE ratio to under 10, making it a value play. And it sports a dividend yield of 2.7 percent, a reasonable return from a growing company in the tech space. Looking at all these factors, it’s easy to see why day traders are jumping into shares now, and it’s likely that there’s some upside ahead to anyone buying shares and collecting the dividends, using options trading, betting on a partial rebound from the dire news that sent shares down in the first place.
How Do I Find the Best Stocks to Day Trade?
When it comes to day trading, you want to look where the action is. That means looking for stocks with high trading volume. That’s an easy data point to screen for on just about any financial or trading platform.
Ideally, you also want to find not just high volume, but a high level of investor interest. If just one player is buying shares, the minute they stop, the rally in that stock may be over. So it’s best to use a site like Robintrack, which shows trends on the Robinhood platform, about how many users own a certain stock. Following that trend of total investor growth in a company can be a great screening tool for day trading opportunities.
A pattern day trader will also find and screen for opportunities that fit a well-known stock pattern, setting up a stock alert when such an opportunity arises. There are dozens of well-known stock patterns that give a high degree of confidence that a stock will either rise or fall. And many brokerage platforms can set up trading alerts to let you know when it’s time to buy or sell, if you don’t already put in a limit order to do so.
There are also plenty of free and paid day trading courses that you can find, or even a trading academy to help you understand and master the basics before starting out with real money.
What Percentage of Day Traders are Successful?
About 1 in 20 is a statistic commonly cited for successful day trading. In other words, only about 5 percent of traders are successful, whereas 95 percent fail.
Why so low? Probably for a few reasons. First, successful day traders need to ensure they have enough capital to handle market volatility, take a big loss, and survive another day. So they set strict limits on the risk they’re willing to take in any single position, no matter the size of their portfolio.
Second, these day traders set tight stop losses, recognizing that they’re following patterns, not owning stocks that they like for the long term. That allows them to minimize losses. When stock trading, if you let your winners ride and cut your losers quickly, you can be wrong most of the time and still make a profit!
Finally, successful traders set a trade alert in advance so they can take profits when there’s still some money left on the table, but when the risk to reward ratio is starting to move out of their favor.
How Much Can You Make as a Day Trader?
It really depends on your portfolio size and how much risk you’re willing to take. If you have a modest portfolio of $10,000, you may be able to consistently make a few hundred dollars per day after you learn how to control your risk and use high-powered tools like stock options, futures contracts, or forex trading rather than the underlying shares themselves.
For traders just sticking with stocks, they can still make a profit over time, but it will be a bit slower as there’s lower volatility. On the plus side, that also means any drops won’t be magnified by the power of options, so it’s not a bad spot to be in. But day trading can be consistently successful and profitable even in non-volatile stocks.
Can You Start Day Trading With $1,000?
Absolutely! Just don’t expect it to double anytime soon. With that kind of starting capital, it would be ideal to build a few positions in the $100 range each, learn what does and doesn’t work for you and your comfort level, and go from here. As this list has shown, you can day trade with some giant, well-known stocks, and don’t need to go down to risky, low-volume penny stocks to find winners every day.
And, of course, the more you can add to your portfolio at any given time, the larger you can start making your trades as you get successful.
What is the Best Strategy for Day Trading?
From following chart patterns to looking for swing trading opportunities, from momentum trading, to futures trading, to warrior trading, there are many paths to success in this area. A pure day trader looks to start and end the day in cash, and may spend more time looking at technical analysis than swing traders looking for a stock likely to beat the market over a few weeks to a few months.
The best day trading strategy is the one that works for you and your comfort level, including the decision to use options instead of just stocks. Like most things in investing, there are only guidelines, no hard and fast day trading rules. Just find the trading setup that works for you, while starting small and with trial and error, and soon you’ll be putting the odds on your side.