Stock Day Trading
In order to trade stocks during the day, you need to know what to look for in the stocks you are buying or selling. The attributes that you should be concerned with are liquidity, volume, volatility and price transparency.
Liquidity is important to a trader who requires fast executions a predictable prices, It is based on factors such as the volume of transactions in the market, the number of shares outstanding, the breadth of ownership and the number of market makers.
Any stocks on NASDAQ and the NYSE usually have a sufficient degree of liquidity to make them potential day trading candidates, especially those included in the major indexes such as the Dow Jones Industrials or NASDAQ 100. On the other hand, relatively few small-cap companies would have sufficient liquidity to be attractive to most day traders.
Volume and volatility are also important considerations. Volume can be measured in terms of a good day trading stocks should be around 500,000 or more shares. High volume stocks allow for buying and selling without affecting the price. Volatility is the up or down movement of the price of stocks. If a stock isnt moving, it isnt considered a good day trading stock.
Finally, price transparency is the ability to get information of the flow of any particular stock. It is also known as market depth. The NASDAQ II quote system gives a good picture on bids and the quantities of stocks being offered. Day traders often have NASDAQ Level II quote screens available to help assess strength and weakness of a particular stock.
Day Trading provides detailed information on Day Trading, Forex Day Trading, Stock Day Trading, Online Day Trading and more. Day Trading is affiliated with Futures Trading Software.
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