This week's lesson.
Today I want to talk about finding the right ticker to trade and also some tips on executing the hunt.
The first thing I do to narrow down my search is to look for the top percent gainers on my platform, and I recommend E*Trade Pearl, Interactive Broker, and TradeZero to do so.
Of course, there are other platforms to chose from, but you want to find the one that fits you best. Start your search by looking for a ticker that’s over 20% but under 200%; once you get out of that range and start seeing tickers that have percentages in the thousands, then it’s highly likely that the stock is in a reverse split.
Looking at volume
Volume is also incredibly important when looking for the right stocks to trade.
We want to see volume anywhere above one hundred thousand; however, trading anything with a volume under four million will make for difficult executions. Watching the pre-market can hint towards whether a stock can show potential because if there’s a thin volume before the stock opens, it’s likely to follow that trend, which makes it harder to predict.
On the other side, if a stock has too much volume, then you’re faced with crowded trades. The best way to think about crowded trades is like a competition. When you have high volume, there are too many people getting in, and if you have too many competitors, then your odds of making any money, or winning, get lower.
For beginners, I always recommend having background knowledge of the companies and their news.
When you can factor in data like that, it’s easy to see where their supply and demand lie. Supply and demand are crucial when picking stocks to trade because this alters your prices. If there’s too much demand for a small supply, then your stock prices go up, and if there’s too much supply, your demand and prices both go down; this is why low float will sometimes increase significantly compared to higher float.
Now, float also needs to be considered when picking the right trade. When you have a float between zero and two million, the stock may be manipulated by the company or one person in general.