Each stock that I choose for my daily hit list as I like to call it goes through a filtering process that I’ve been using for several years now.
Another important factor that you should examine prior to entry is the daily trading range. When selecting the best stocks for day trading or swing trading make sure you follow these basic guidelines. Our Floor Traders Edge program does a great job of selecting stocks with the best relative strength and other criteria for day trading. GOVERNMENT REQUIRED RISK DISCLAIMER: FUTURES & FOREX TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK.
UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING.ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY.
Picking the wrong stocks can be a major contributing factor to why some trades don’t work out and others do. The daily trading volume largely influences the spread between the bid and the offer so make sure you trade stocks that have an average daily volume over 250,000. Some stocks have relatively small trading range that makes them bad candidates for day trading. Statistically sectors are responsible for roughly 70% of all movement of individual stocks.


SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. Once you begin using this type of method it will become second nature and you will find that whenever you look at stocks you will automatically begin analyzing and thinking if it fits your criteria subconsciously. Stocks that have low daily volume may exhibit strong volatility but the spreads will be so wide that your profit potential between the time you enter the trade and exit the trade will be wiped out due to the gap between the bid and the offer.
However, every stock at one point or another regardless of their typical characteristics goes through a range expansion period.
So knowing what other stocks in your chosen stocks sector are doing can be very important in determining if you want to add the stock to your daily hit list or not.
Remember if you are trading two stocks that are trading similarly you are doubling your risk instead of diversifying it. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Before you make your final decision to enter a position always check the bid and offer live and see how far apart the spread really is. This usually occurs when there are some fundamental news related to the particular business industry or the company itself  and has a significant effect on the daily trading range of the stock.
Take gold for example you can see by comparing these two separate stocks how they move in the same direction the majority of the time.


You goal in picking the best stocks for day trading is to find stocks that are not correlated to each other. Always look at correlation and sector analysis before selecting your stocks for your daily hit list. I find that higher priced stocks have more intra day price volatility than lower priced stocks. These range expansion periods are ideal periods for day trading so make sure you know how to determine if significant range expansion is taking place.
If you look at most sectors such as oil, semiconductors, as well as dozens of others you will see very strong correlation between individual stocks. You want to find stocks with strong volatility so always try to go for the higher priced stock if you have to choose between two different stocks. I recently participated in a seminar and noticed one trader who was holding four semiconductor stocks at the same time. In a nutshell the ATR measures the daily trading range and averages the total over a specified period of time.



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