Stock selection as mentioned previously is essential to the long term survival of any equities trader. If you don't select stocks properly, the risk you bare don't compensate the reward. These risks can be found in a post I wrote here.
The main thing you need when selecting stocks is a stock screener, with 7000 stocks in the NYSE & NASDAQ, one can easily get lost. It is key to filter these stocks to trade only those that are the best and below is a list of what I look for when looking for tradeable stocks:
1- The first thing you want to do is select stocks that are in the USA by clicking on country which is the tab in the far right corner. The reason you want stocks in the USA is that they tend to gap much less then other stocks when trading in the NYSE & NASDAQ. For example, if your trading a Brazilian stock and news from Brazil came out before the NYSE & NASDAQ open then stock would gap. This happens alot with international stocks just look at Toyota.
2- You want the price to be over $10, personally I find cheap stocks cheap for a good reason. Their cheap because investors are un-willing to pay up into those stocks, and if the big boys aren't interest, why should you? Of course there are exceptions to tradeable cheap stocks like RIMM and Sprint.
3- Third, and this is an important one, you want stocks with average volume of over 1 million. You need stocks that trade, where buyers and sellers are active on any given day for liquidity purposes. You don't want to be stuck in a non liquid stock where it barely trades and barely moves. The risks on those stocks far out-weight the rewards to traders.
4- Fourth, you want stocks and just stocks. You don't want to trade instruments you don't understand. On the tab named industry, select "stocks only" to trade.
5- If your a trader, you want stocks with a high ATR (average true range) stocks with high ATR's have bigger ranges than low ATR stocks and hence move more! Make sure to click on the Technical tab to select an ATR of stocks that are above 0.5 ATR, 0.5 ATR simply means that the stock moves 50 cents on average per day.
Once the above is complete, you have about 530 stocks to trade. Stocks that are liquid, difficult to manipulate and stocks that move! These stocks also provide a base for further analysis. Some of the technical things I might play with are highlighted in the second screenshot.
The main thing you need when selecting stocks is a stock screener, with 7000 stocks in the NYSE & NASDAQ, one can easily get lost. It is key to filter these stocks to trade only those that are the best and below is a list of what I look for when looking for tradeable stocks:
1- The first thing you want to do is select stocks that are in the USA by clicking on country which is the tab in the far right corner. The reason you want stocks in the USA is that they tend to gap much less then other stocks when trading in the NYSE & NASDAQ. For example, if your trading a Brazilian stock and news from Brazil came out before the NYSE & NASDAQ open then stock would gap. This happens alot with international stocks just look at Toyota.
2- You want the price to be over $10, personally I find cheap stocks cheap for a good reason. Their cheap because investors are un-willing to pay up into those stocks, and if the big boys aren't interest, why should you? Of course there are exceptions to tradeable cheap stocks like RIMM and Sprint.
3- Third, and this is an important one, you want stocks with average volume of over 1 million. You need stocks that trade, where buyers and sellers are active on any given day for liquidity purposes. You don't want to be stuck in a non liquid stock where it barely trades and barely moves. The risks on those stocks far out-weight the rewards to traders.
4- Fourth, you want stocks and just stocks. You don't want to trade instruments you don't understand. On the tab named industry, select "stocks only" to trade.
5- If your a trader, you want stocks with a high ATR (average true range) stocks with high ATR's have bigger ranges than low ATR stocks and hence move more! Make sure to click on the Technical tab to select an ATR of stocks that are above 0.5 ATR, 0.5 ATR simply means that the stock moves 50 cents on average per day.
Once the above is complete, you have about 530 stocks to trade. Stocks that are liquid, difficult to manipulate and stocks that move! These stocks also provide a base for further analysis. Some of the technical things I might play with are highlighted in the second screenshot.
Attached Image(s) (click to enlarge)
