Best Stocks to Day Trade • (Volatility and Substantial Volume Stocks) – Benzinga

Day trading is an alternative investment strategy focusing on intraday stock price action to return significant short-term profits. When done right, the short-term gains can balloon into considerable wealth that could set you up for life.

On the face of it, investors can trade just about any stock daily. However, not all stocks on Wall Street can deliver enough temporary daily supply or demand inefficiencies for day traders to capitalize on and earn profits. And let’s face it, the core aim of investing is to make money. 

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While some stocks can deliver substantial price action on the intraday chart, others cannot. The former category of stocks is known as day trading stocks. They are the ideal investment vehicle for investors who want to make a living on the stock market as day traders. 

The best day trading stock is one with enough volume and volatility. When a stock trades often and in high volumes with a reasonable price fluctuation, it presents an opportunity for investors to enter and exit positions quickly. Additionally, a day trading stock must be newsworthy. 

The reason is that media coverage creates volatility and liquidity by getting people hyped and interested in buying some company’s stock. Such stocks trade or move familiarly. For instance, some are triggered by earning reports, and investors usually take advantage of earning announcements to trade them.

Benzinga reviews some of the best stocks to day trade, providing insights into how these stocks can help you as a day trader build your portfolio in no time.

The Best Stocks to Day Trade

The best day trading stocks feature significant volatility and substantial volume to drive daily price actions. A look at some of the best stocks to day trade for your investment portfolio.

  • Tesla Inc. (NASDAQ: TSLA)
  • Advanced Micro Devices Inc. (NASDAQ: AMD)
  • Apple Inc. (NASDAQ: AAPL)
  • Etsy Inc. (NASDAQ: ETSY)
  • AMC Entertainment Holdings Inc. (NYSE: AMC)
  • Farfetch Ltd. (NYSE: FTCH)

Tesla Inc. (NASDAQ: TSLA)

Tesla is an American multinational electric vehicle (EV) company headquartered in Austin, Texas. It is the largest manufacturer of EVs worldwide. Besides EVs, Tesla also makes house-powering batteries. With a current market valuation of more than $950 billion, the company is one of the largest in the world. The overwhelming global focus on clean energy will continue to be a massive boost as the company solidifies its position as an environmental champion. 

Despite a recent drop in average daily trade volume, Tesla remains an outstanding day trading stock. The IBD’s accumulation and distribution rating for Tesla is B +, meaning that the company’s stock is still in high demand. Tesla recently completed a 3-for-1 stock split to ramp up demand further — a bullish move. Tesla stock’s Bollinger Bands analysis indicates an overall increase in demand for the company’s shares, with the current trading price edging closer to Tesla Inc’s upper band over the next 90 days. As a result, the stock’s trade volume has increased noticeably.

Another critical factor that drives Tesla’s relevance as a day trading stock is the perpetual media coverage of the company and its activities. The company’s CEO, Elon Musk, is famous for his eccentric persona and confrontational approach toward financial regulators. There’s always something about the company on the news. And a mere positive or negative speculation arising from news can cause the price to move significantly, making it one of the best stocks to buy for day trading.

Advanced Micro Devices Inc. (NASDAQ: AMD)

Advanced Micro Devices (AMD) is a global semiconductor manufacturer that designs microprocessors for the computer and consumer electronics markets. The company’s core revenue comes from personal computers and data center markets through CPU and GPU. Since its inception in 1969, the company has become synonymous with everything electronic, from microprocessors to graphics processors and motherboard chipsets used by top game consoles like Sony PlayStation and Microsoft Xbox. AMD’s acquisitions in recent years have positioned it as a significant competitor in the semiconductor market. 

The pandemic-driven semiconductor squeeze catapulted AMD into the big time, making the stocks a great pandemic play as its share price ballooned. However, the share price has declined amid a broad sell-off in high-growth tech stocks. For the last five years, AMD has consistently returned profits. The stock has an average daily volume of over 72 million, meaning there’s a significant daily demand for this stock. Its beta is 1.99, which means it is highly volatile and presents an opportunity for day traders. 

AMD’s share price frequently experiences peaks and troughs of 5% to 10% over a day or a week. Additionally, the presence of so many competitors in the semiconductor industry means that there’s no lack of news and media coverage.

Apple Inc. (NASDAQ: AAPL)

Apple is a tech giant, an iconic brand, and the most valuable company in the world, with a market capitalization of $2.470 trillion. The company’s radical innovation is evident in its suites of products, including iPhones, iPads, MacBooks, and wearable devices. About 40% of the company’s revenue comes from the U.S. The rest comes from earnings abroad.

For the last 10 years, Apple’s earnings have grown by about 15.3% year-on-year. The company is known to beat analysts’ revenue and earnings-per-share (EPS) forecasts consistently. The company has been so consistently profitable that it has become a model for its peers and other big companies globally. 

The primary factor driving Apple’s relevance as a profitable day trading stock is its average daily trading volume. There are at least 75 million Apple shares changing hands every day. Its beta is 1.24 and implies that the stock is reasonably volatile and the shares typically fluctuate a few dollars a day, making it possible to profit in a day trade without leveraging your position.

Additionally, Apple has a significantly higher floor and lower risk than many other stocks from its widespread popularity and media coverage. 

Etsy Inc. (NASDAQ: ETSY)

Founded in 2005, ETSY is a fast-growing e-commerce platform focused on facilitating sales of handmade products. The platform primarily connects buyers and sellers in the U.S., the U.K., Germany, Canada, Australia, France and India. It has become the average consumer’s go-to online store for vintage and unique items.

During the 2020 coronavirus pandemic, Etsy was among the top earners in the e-commerce boom. The company’s stock price gained over 250% value, reaching as high as $300 per share. However, like most pandemic darlings, it hasn’t been able to sustain the gains. Nevertheless, e-commerce has come to stay, and Etsy remains profitable. 

Etsy has an average daily trade volume of over 2 million, which is excellent for a mid-cap company. Additionally, it has a beta of 1.83. These factors make the stock ideal for day traders as they can easily leverage its volatility.

AMC Entertainment Holdings Inc.  (NYSE: AMC)

Founded in 1920, AMC Entertainment Holdings is a Kansas-based entertainment company best known for its movie theatres, often executed via its subsidiaries. The company owns, operates or has a stake in theatres throughout the U.S. and Europe. It provides amenities like power recliners, full bars, AMC Dine-In Theatres and premium presentation. As of March 2020, the company operated 10,600 screens and 950 theaters. The U.S. remains its primary source of revenue.

AMC’s average daily trade volume is staggering for a mid-cap company of its size. Over 45 million shares of the company change hands daily. So the demand for this stock is high, which is a good thing. The stock is also volatile, as indicated by its five-month beta of 1.78. AMC has been more volatile than 90% of U.S. stocks over the past three months, typically moving ±19% weekly. 

While the stock’s high volatility poses a significant risk for long-term holders, it is a day trader’s dream. A daily price movement of up to ±10.64% is not uncommon, and so day traders stand to earn a lot from AMC.

6. Farfetch Ltd. (NYSE: FTCH)

Founded in 2008, Farfetch is an online platform connecting sellers and buyers of personal luxury goods in the U.S., U.K. and globally. The company operates in three segments: the Digital Platform, the Brand Platform, and the In-Store. Its online marketplace is Farfetch.com, and the mobile platform — Farfetch App, is for retailers and brands. Furthermore, Farfetch offers web design and development and retail distribution services for brands and retailers. 

Being at the forefront of the latest luxury fashion and lifestyle trends, the company is the subject of ample media coverage. Farfetch’s average volume for 10 days is over 10 million, which is high for a company with a market cap of roughly $3.5 billion. The stock’s five-month beta of 2.84 is almost three times that of the overall market. 

Its high volatility means that risk-averse and expert day traders can leverage this stock to make fortunes. If you’re an experienced day trader, you should consider this stock for its volatility, volume and trending nature. An average price swing of about  ±8.71% often happens daily. However, its high volatility means your invested capital can disappear within a short time frame. Overall, the stock is one of the best day trading stocks of 2022.

Benefits of Day Trading

Day trading can be advantageous when approached the right way.

Easy to get started

Like most types of trading, day trading requires no formal certification or training. You’re good to go with a basic understanding of the stock market setup, a laptop and an internet connection. Benzinga advises that you conduct constructive market research before diving in.

Potentially enormous profit

When done correctly, day trading can be highly profitable. It takes less time to generate significant profits with day trading than any other investment strategy. Of course, you can argue that it carries more risk than long-term investing. However, with substantial risk comes great potential for reward. Once you’ve mastered your trading strategy, you could be in for a world of money.

No overnight risks

The risks associated with holding a stock overnight are eliminated for a day trader who opens and closes positions before the trading day ends. Profits from traditional, long-term trading can vanish overnight if the market opens substantially lower or higher the next trading day. However, as a day trader, your profits from day trading are secure once you close your positions before the end of the trading day.

Success in bad market conditions

A day trader can take advantage of a struggling or lousy market situation by leveraging short-selling strategies. The ability to profit from the stock market during bear market conditions is a massive advantage for a skilled day trader.

Concerns for Day Traders

While there are numerous advantages to day trading, risks are also involved. Knowing some of the risks that characterize day trading can help you prepare better to adapt to them. 

Volatility

Volatility is a double-edged sword for day traders. A day trader relies on price fluctuations to lock in profit. On the other hand, because of the short action span of day trading and the unpredictability of the stock market, risk is higher. Therefore, it is essential to eliminate sentimental decisions as much as possible and consider your risk tolerance before making trades.

Margin Risks

Traders who use margin to improve their buying power take on increased risk when they buy stock with borrowed money. Suppose you’re leveraging margins to day trade. In that case, you have to understand that you’ll need to reload your account with fresh capital if the trade goes south to avoid liquidation. 

Suppose price action goes against your prediction but promptly recorrects to realign with your open position. In that case, an exaggerated margin might liquidate you once your balance can no longer support the initial price deviation. The implication is that you’ll be losing on two fronts — your invested capital and potential returns. It is, therefore, vital to ensure that you’re leveraging a feasible margin ratio to open your position.

Psychological Addiction

Day trading has the potential to develop into a psychological addiction. As with a gambling addiction, the potential to make large sums of money in a short time can create a desire to continue whether you’re on a roll or not. As a day trader, it is critical to be self-aware. Knowing when to call it a day could be the difference between career success and failure.

Best Online Brokers for Day Trading

Unlike other traditional investors, day traders require express market access. To help them fast-track decision-making before locking in trade, they require an excellent trading platform with robust tools and solid fundamental research. The best online brokers for day trading offer these features and much more. Here are some of the best online brokers you should consider for your day trading.

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Frequently Asked Questions

Questions & Answers

Q

Can day traders get rich?

A

Yes. Day traders can get rich. Day trading has made many people wealthy. Ross Cameron and Brett N. Steenbarger are some examples.

Q

Is day trading expensive?

A

Yes. Day trading is costly. According to the U.S. Securities and Exchange Commission (SEC) rules, day traders on the U.S. stock market must maintain a minimum account balance of $25,000 at all times.

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