Best Stocks to Day Trade

The post Best Stocks to Day Trade by Dan Schmidt appeared first on Benzinga. Visit Benzinga to get more great content like this.

Day trading might seem like a fast-paced and exciting way to make money, but the truth is more mundane. Day trading is a grind, requiring participants to spend long hours in front of screens watching the market or studying data. Selecting the right stocks is Paramount to success, so day traders look for certain characteristics that could indicate an opportunity. In this article, we’ll review potential stocks for day trading purposes and what metrics to use to identify the best ones. Remember, day trading is a tough business; you’ll need a rules-based system and a little intuition to succeed.

Quick Look at Best Stocks for Day Trading:

Nvidia Corp. (NVDA)

Day traders looking for a powerhouse tech stock can set their sights on NVIDIA Corp., the chipmaker currently dominating the U.S. stock market. NVDA shares have been on a tear since the market bottomed in late 2022 and have recently been jockeying with Microsoft Inc. and Apple Inc. for the title of the world’s biggest stock by market cap. 

NVIDIA’s dominance in graphics processing units has fueled this massive rally, and its products are a crucial component for everything from gaming consoles to AI servers. And if you follow financial media, you know NVIDIA’s earning reports have been the stock market Super Bowl for the last 18 months. From a trading perspective, NVDA boasts high daily volume and plenty of option activity, signifying substantial share demand. With its impressive growth trajectory and highflying stock price, NVDA is a compelling choice for day traders.

ProShares UltraPro Short (SQQQ)

Day traders need volatility to thrive, and for bearish traders looking to capitalize on a potential market downturn, ProShares UltraPro Short ETF offers a tempting option. This exchange-traded fund uses a combination of derivatives to deliver the inverse of the Nasdaq 100’s daily performance, which rises when the tech-heavy index falls. However, the real draw for day traders is the outsized leverage the fund utilizes to amplify its returns by a factor of three. If the Nasdaq 100 drops by 1% in a day, then ideally, SQQQ would rise 3% that day. 

While this aggressive strategy can be lucrative in a bearish market, day traders should remember it requires high-risk tolerance and constant monitoring. SQQQ (and its brother TQQQ, the 3x long Nasdaq 100 ETF) are complex financial instruments with high expenses that frequently suffer tracking errors. Be sure you understand how these instruments function before day trading them.

Tesla Inc. (TSLA)

After being left for dead earlier this year, TSLA shares have roared to life and recently turned positive on the year thanks to a massive 27% gain in the last month. Despite Cybertruck’s delayed production and ongoing recalls, substantial delivery numbers in Q2 have fueled a big rally. The stock hit a 9-month high, defying expectations amid a broader electric vehicle sales growth slowdown. 

Tesla’s recent performance highlights its potential for short-term gains, especially with the upcoming July earnings call and the Robotaxi hype. While the Cybertruck is still problematic, positive news and future catalysts may continue to push up TSLA shares. Day trading strategies have long favored TSLA’s volatile stock, and it appears another opportunity has arrived as average share volume has been nearly double the three-month average this week.

Marathon Digital Holdings (MARA)

MARA is an enticing day trading option since the cryptocurrency market heavily influences its price. As a Bitcoin miner, MARA’s price swings wildly alongside the digital currency. This volatility makes it attractive to day traders who can capitalize on short-term price movements. Unlike buying Bitcoin directly, MARA offers exposure to cryptocurrency through a publicly traded company. 

However, this also means additional risks: day traders must be aware of the headwinds of the mining industry, such as operational costs and regulations. Additionally, MARA shares have a beta of 5.57, meaning they are more than 5x more volatile than the S&P 500. MARA is a stock for trading, not investing.

GameStop Corp. (GME)

GameStop is the quintessential day trading vehicle. In 2021, the stock gained worldwide notoriety as the first of the ‘meme stocks.’ Fueled by a perfect storm of social media hype, a passionate online community, and some large hedge funds joining the fray, GME shares underwent a massive short squeeze and parabolic price increase. GME’s soaring price exposed the vulnerability of several hedge funds with substantial short positions, who quickly had to cover their shorts to prevent catastrophic losses. 

While the initial frenzy has subsided, GME’s volatility persists. Day traders are drawn to its potential for sharp price swings, driven by anything from company news to a well-timed cat meme from a Reddit trader. The stock price has a 52-week range of $9.95 to $64.83, highlighting the potential for huge sustained swings. However, these same forces can trigger rapid declines as company fundamentals look poor. Volatility abounds, but GME’s online community often hypes the shares beyond reasonability.

Invesco QQQ Trust (QQQ)

Regular ETFs can be day trading vehicles, too! QQQ tracks the NASDAQ-100, a basket of the 100 largest nonfinancial companies on the Nasdaq composite. Since the QQQ reflects the performance of major tech giants, big up days in the tech sector can lead to significant gains for the ETF. QQQ is a gigantic fund with over $286 billion in assets and 35 million shares traded daily, offering excellent liquidity and low bid/ask spreads. A 0.20% expense rate for a tech ETF isn’t a bad deal.

Traders who believe the tech sector is primed to surge can hop on QQQ to amplify their potential returns across a broad base of stocks. However, the QQQ inherits tech volatility, meaning sharp downturns can inflict heavy losses. Day traders should be comfortable with this and have a clear strategy before putting money into the QQQ.

iShares MSCI Brazil ETF (EWZ)

Day trading doesn’t just mean riding waves on domestic stocks; sometimes, emerging markets can provide volatility that few sectors in the U.S. can. EWZ tracks Brazilian stocks, offering a chance to own large swaths of the Brazilian stock market. EWZ holds some of Brazil’s largest public companies, such as Vale SA and Petroleo Brasileiro SA, and boasts more than $4 billion in net assets. 

Recently, investing in Brazil has meant attempting to profit from a downturn as Brazilian stocks have struggled amid economic and political turmoil. However, Brazil’s market can be volatile, with the potential for sharp swings in either direction. This risk demands close attention, and day traders must stay aware of new and current events in the volatile country. (One benefit: EWZ pays a 7.8% dividend yield to compensate for the risk of these companies.)

Paramount Global (PARA)

Shares of PARA have been lighting up the market lately thanks to the recent merger agreement with Skydance Media, a production company backed by Oracle co-founder Larry Ellison. Under Ellison’s leadership, investors see the potential for improved profitability and a boost to Paramount’s digital platforms. 

This positive news and unusually high trading volume have created a dynamic market environment for day traders. Share volume has topped 20 million recently, and PARA’s ongoing merger negotiations could present opportunities for short-term gains. However, day traders should know that the stock still faces analyst skepticism, and the merger’s finalization could cause fluctuations.

AST Spacemobile (ASTS)

Here’s a far-out idea: AST SpaceMobile aims to create the first space-based cellular broadband network. While it’s a theory with plenty of potential, the network’s success hinges on overcoming technical hurdles and securing partnerships with mobile network operators. Despite this uncertainty, ASTS shares have seen wild swings in recent months. Positive news can trigger significant price jumps, making it attractive to day traders with a high tolerance for risk, but even minor setbacks can cause the stock to plummet. ASTS has a market cap of just over $3 billion and trades about 10.8 million shares daily on average.

Iris Energy (IREN)

Iris Energy is another high-risk, high-reward stock play for day traders with the right mindset. IREN is volatile in the green energy sector, focusing on sustainable Bitcoin mining with renewables. Combining cryptocurrency with renewable energy might seem like a pie-in-the-sky idea, but it’s a hot issue that can cause sharp price swings. Day traders can capitalize on these movements if they can stomach the risk. However, IREN is a young company with a sub-$3 billion market cap and a still-developing track record, having only incorporated in 2018 and launching an IPO in late 2021.

What Makes a Good Day Trading Stock and ETF?

How do you locate good stocks and ETFs for day trading? It depends on your style, technical prowess, and profit goal, but there are a few common characteristics to watch out for. Here are five critical factors for finding day trading stocks.

• Liquidity — Having liquid shares is vital for day traders for several reasons. First, it enables easy entry and exit points since there’s no shortage of buyers or sellers in the market. Additionally, liquidity prevents price cascades when unloading prominent positions. There are few worse feelings than attempting to exit a day trade and getting only a partial order filled.

• Volatility — You might not want volatility if you’re using a 60/40 investment strategy, but for day traders, it’s a necessary evil for making money. Volatile stocks make significant moves in small time frames, allowing day traders to enter and exit positions in a matter of hours (or even minutes) and still earn worthwhile returns.

• Tight Bid/Ask Spreads — The spread is the difference between buy and sell prices on public exchanges. When you buy a stock, you pay a little more than the person selling it receives; the difference goes to the market maker for facilitating the transaction. While most spreads are merely pennies, high spreads can eat into profits and often signal illiquid securities.

• Upcoming Catalyst — Whether it’s an earnings report, product launch, or technical trading signal, good day traders often benefit from a catalyst that creates outsized demand. Good-day traders identify these catalysts before the rest of the market and profit when retail traders pour in.

• Market Capitalization — Market cap also plays a role in a day trading strategy. Large-cap stocks have the most liquidity, but it’s hard to create volatility when their cap is measured in hundreds of billions (unless you’re NVDA). Day traders might prefer small or large-cap stocks depending on their strategy, but both have pros and cons.

Being armed with information is essential, but day trading isn’t a skill you can master overnight. These characteristics will get you started; however, they’re only one component of a comprehensive trading strategy. Day trading carries significant risk, so don’t dive into volatile stocks unless you’re confident you can handle them.

Choosing the Right Brokerage for Day Trading Stocks & ETFs

Picking the right day trading broker is an important step as well. Consider the following when selecting a broker for your trading strategy:

• Intuitive Trading Platform — Day trading often requires quick action, so you’ll want to pick a broker whose trading platform makes you feel comfortable and confident.

• Robust Charting Tools — To find the best entry and exit points, you’ll need to understand technical analysis, which means studying charts and finding signals. Not every online broker provides extensive charting tools, so make sure your choice has the necessary features.

• Diverse Order Types — Any day trader must Utilize an array of order types. Depending on the complexity of your strategy, make sure you can place limit orders, stop-loss orders, trailing stops, and multi-leg orders.

• Costs and Available Assets — Does your broker offer commission-free stocks and ETFs? What about options? Are all the stocks you’re looking for available to trade? Find out the answers to these questions before opening an account.

Here’s a quick comparison of some of our favorite day trading brokers:

Claim Exclusive Offers

Best For

Active and Global Traders

Overall Rating

Read Review

get started securely through Interactive Brokers’s website

More Details

Best For

Active and Global Traders

N/A

1 Minute Review

Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 150 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.  

IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.

Best For

• Access to international markets
• Active traders
• Detailed mobile app that makes trading simple
• Wide range of available account types and tradeable assets

Pros

• IB SmartRouting provides significant price improvement vs. industry
• Fractional trading allows investing regardless of share price
• Industry’s lowest margin rates
• Earn more by lending your fuly-paid shares

Cons

• Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources

Best For

Leveraged Trading

Overall Rating

Read Review

get started securely through Plus500’s website

More Details

Disclosure: 81% of retail accounts lose money

Best For

Leveraged Trading

N/A

1 Minute Review

81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Plus500 is an online CFD broker focusing on contracts for difference (CFDs). CFDs are similar to binary options in the U.S. where traders take all-or-nothing speculation on the prices of certain securities like indices, commodities or currencies. While not legal to trade in the U.S., CFDs are legal in many jurisdictions across the globe and Plus500 offers a wide array of tradable markets using these instruments. 

Plus500 doesn’t charge commission and only profits off the spread, which is the difference between the buy and sell price of a specific security. But Plus500 is not a broker for beginners — the education materials are sparse and CFDs are risky derivatives capable of sapping out all of an investor’s capital. Only trade these instruments if you understand how they operate and the risks involved with buying them.

The Plus500 CFD platform is for CFDs. The Plus500 Futures platform offers futures for U.S. customers, and Plus500 Invest offers stock trading.

Best For

• Traders looking for a smooth mobile experience

Pros

• Great mobile app
• Low spreads and commissions
• Unlimited demo account
• Plus500 offers three platforms: Plus500 Futures, Plus500 Invest and Plus500 CFD.

Cons

• Only derivatives are available
• Futures are available to U.S. residents while CFDs are not available for U.S. residents.

Best For

Trading Ideas

Overall Rating

Read Review

get started securely through public.com’s website

More Details

Best For

Trading Ideas

N/A

1 Minute Review

Public is the only investing platform that lets you trade stocks, ETFs, crypto, bonds, options and alternative assets—like fine art and collectibles—all in one place. Public also provides access to custom company metrics, live shows about the markets, and insights from a community of millions of investors, creators, and analysts.

Today, Public provides more ways to create a diversified portfolio than nearly any other online broker. Members can engage in sophisticated investing strategies and access a wealth of investing insights—from company-specific analysis to live audio shows and town hall-style Q&As. In addition, Public offers a premium membership tier with unique company KPIs, detailed performance metrics, and institutional-grade research. 

Best For

• Stock and ETF investors
• Crypto investors
• Investors looking to diversify with alternative assets or bonds and options

Pros

• Commission-free stock and ETF trading
• Fractional share investing
• Advanced data, tools, and insights with Public Premium

Cons

• You can’t transfer crypto to another wallet
• No mutual funds or precious metals
• At this time, only offers individual brokerage accounts and not IRAs

Best For

Commission-Free Mobile Trading

Overall Rating

Read Review

get started securely through Robinhood’s website

More Details

Best For

Commission-Free Mobile Trading

N/A

1 Minute Review

Robinhood is a popular trading platform known for its commission-free trades and user-friendly mobile app. Ideal for novice investors, Robinhood makes it easy to buy and sell stocks, ETFs and cryptocurrencies. The platform offers a straightforward, no-frills experience, making it accessible for users new to investing. With features like fractional shares and a sleek interface, Robinhood lowers the barriers to entry for investing, allowing users to start with just a few dollars. It lacks the advanced tools and research options that more experienced investors might seek. Overall, Robinhood is a great choice for beginners seeking a simple way to invest.

Best For

• Beginners looking for simplicity
• Mobile-first investors
• Commission-free trades

Pros

• User-friendly mobile app
• Instant double
• Cash management
• Access to cryptocurrencies

Cons

• Limited research tools
• No mutual funds available
• Basic customer support options

Best For

Active Short Sellers

Overall Rating

Read Review

get started securely through TradeZero’s website

More Details

Best For

Active Short Sellers

N/A

1 Minute Review

TradeZero is an online broker and free stock trading platform that provides everything you need to successfully share and trade, including round-the-clock customer support. TradeZero provides four different trading state-of-the-art software programs with its services, a locator for sourcing shares for shorting, commission-free trades, and real-time streaming, to name a few of the features promoted on their website. The software is a unique and (potentially) affordable option for anyone interested in stock trading.

Best For

• Traders seeking high transparency and mobility in a stock trading program
• Those attracted to commission-free trades
• Those seeking a free version of a high-quality trading program

Pros

• 24/7 live customer support
• Uses ZeroWeb technology, a powerful level 2 online platform with direct market access
• Mobile app allows users to access stocks and trade in real-time while on the go

Cons

• Enforces Pattern Day Trading restrictions (accounts need to maintain a daily equity balance of at least $25k)
• Mobile app could offer more features

Frequently Asked Questions

Best Stocks & ETFs to Day Trade Methodology

Benzinga analyzed a range of stocks & ETFs to determine the best for day trading, considering trade volume, price movement, newsworthiness, and market volatility. It compiled a list of stocks, including Tesla, NVIDIA, and Invesco QQQ. Traders should compare these stocks to their portfolio, monitor performance, review news, diversify their portfolio, and stay updated on current events. Day trading carries risks, and traders should conduct thorough research and manage risk effectively.

The post Best Stocks to Day Trade by Dan Schmidt appeared first on Benzinga. Visit Benzinga to get more great content like this.