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. However, day trading is not a get-rich-quick scheme that will change your life overnight. You’re looking to build a portfolio that can provide you with long-term results but also short-term gains. That's why you need to know the best stocks to day trade.
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. At the same time, you need to do a full battery of research every time you plan to day trade.
Quick Look at the Best Stocks to Day Trade:
- Tesla, Inc.
- Meta Platforms
- Peloton Interactive
- SPDR Select Sector Fund
- Invesco QQQ
- Marathon Digital Holdings
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. At the same time, that does not mean that every investment will last forever and that day traders don’t also exit positions when they are no longer profitable or wise.
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. This means that you know you can get some action on the day you plan to trade. If not, you will likely be sitting on a long-term position that doesn’t match the needs of your day trading portfolio.
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. However, the earning announcement also gives you an idea of what might come next, allowing you to push your trades to another time.
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. When you look through these stocks, you must:
- Compare them to your current portfolio
- Determine if they fit into your budget
- Decide if you want to hold or swing trade
- Monitor the performance of each asset
- Review current news items on each asset
- Determine if your portfolio can maintain its diversity
- Exit positions that aren’t helping your financial situation
- Review your performance and look for trends in your trading
- Diverse your revenue streams so that you’re not solely relying on day trading
- Review current events and trends surrounding the asset
- When a certain person or news item is dragging down a stock, you may want to move on
The Best Stocks to Day Trade
The best day trading stocks feature significant volatility and substantial volume to drive daily price actions. Take a look at some of the best stocks for your investment portfolio.
- Tesla Inc. (NASDAQ: TSLA)
- Carvana (NYSE: CVNA)
- Meta Platforms (NASDAQ: META)
- Peloton Interactive (NASDAQ: PTON)
- Haliburton (NYSE: HAL)
- SPDR Select Sector Fund (XLF)
- Invesco QQQ (NASDAQ: QQQ)
- Marathon Digital Holdings (NASDAQ: MARA)
- Block Inc (NYSE: SQ)
Remember, when you choose these stocks, day trading does not need to be a career. This might be something you do on your days off to build another revenue stream for yourself or your family.
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.
Carvana (NYSE: CVNA)
Carvana Co is an e-commerce platform for buying and selling used cars. The company derives revenue from used vehicle sales, wholesale vehicle sales and other sales and revenues. The other sales and revenues include sales of loans originated and sold in securitization transactions or to financing partners, commissions received on VSCs and sales of GAP waiver coverage.
Meta Platforms (NASDAQ: META)
Meta is the world's largest online social network, with 2.5 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Meta refers to this as Facebook Watch. The firm's ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktops. Advertising revenue represents more than 90% of the firm's total revenue, with 50% coming from the U.S. and Canada and 25% from Europe. With gross margins above 80%, Meta operates at a 30%-plus margin.
Peloton Interactive (NASDAQ: PTON)
Peloton Interactive Inc operates an interactive fitness platform. It operates its business in two reportable segments: Connected Fitness Products and Subscription. Connected Fitness Product revenue consists of sales of bike and tread and related accessories, associated fees for delivery and installation, and extended warranty agreements. Subscription revenue consists of revenue generated from monthly Connected Fitness Subscription and Digital Subscription. The company generates the majority of the revenue from the sale of Connected Fitness Products.
Haliburton (NYSE: HAL)
Halliburton is one of the three largest oilfield service firms in the world, offering superior expertise in a number of business lines, including completion fluids, wireline services, cementing, and countless others. It's the number one pressure pumper in North America, and has been a leading innovator in hydraulic fracturing over the last two decades.
As an S&P 500 component, Haliburton was founded in Oklahoma at the turn of the 20th Century as the American oil industry almost boomed out of control. While the firm has been the subject of controversy in the past, it lives in an industry that has long been at the forefront of the world economy.
SPDR Select Sector Fund (XLF)
The SPDR Select Sector Fund handles financial firms, investing in large operations like Berkshire Hathaway and Wells Fargo, offering diversity and exposure to large cap stocks that many investors cannot afford.
Invesco QQQ (NASDAQ: QQQ)
QQQ is an exchange-traded fund that aims to deliver exposure for investors that brings them in touch with companies that, as they say, “are at the forefront of transformative, long-term themes such as Augmented Reality, Cloud Computing, Big Data, Mobile Payments, Streaming Services, Electric Vehicles, and more.” The idea behind the fund is to offer cutting-edge tech investing opportunities without forcing investors to by these stocks on their own, especially because many of the stocks held by the fund are rather expensive. The top, featured holdings for the QQQ fund include:
- Apple Inc
- Microsoft Corp
- Amazon.com Inc
- NVIDIA Corp
- Alphabet Inc Class C
- Alphabet Inc Class A
- Tesla Inc
- Meta Platforms Inc Class A
- Broadcom Inc
Marathon Digital Holdings (NASDAQ: MARA)
Marathon Digital Holdings Inc focuses on mining digital assets. It owns crypto-currency mining machines and a data center to mine digital assets. The Company currently operates in the Digital Currency Blockchain segment. The Company's Crypto-currency Machines are located in the United States.
Block Inc (NYSE: SQ)
Founded in 2009, Block provides payment acquiring services to merchants, along with related services. The company also launched Cash App, a person-to-person payment network. Block has operations in Canada, Japan, Australia, and the United Kingdom; about 5% of revenue is generated outside the U.S.
Founded in 2008, Airbnb has positioned itself as the top solution for short and long-stay rentals, providing consumers with a method to rent their homes, or even rooms within their homes, to the public.
Benefits of Day Trading
Day trading can be advantageous when approached the right way. However, you may be new to the day trading scene, and you need some pointers that make it easier for you to get into the groove and build a portfolio. Yes, there are significant advantages that make day trading attractive, but you must balance these advantages with drawbacks that could make it difficult to profit consistently.
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 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.
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.
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.
- IBKR StocksMore DetailsBest ForActive and Global Traders
- MagnifiMore DetailsBest ForAI-Assisted Investing
- ETRADEMore DetailsBest ForMobile Traders
- CenterPoint SecuritiesMore DetailsBest ForMomentum traders
- WebullMore DetailsBest ForIntermediate Traders and Investors
- TD AmeritradeMore DetailsBest ForOptions Trading
- RobinhoodMore DetailsBest ForBeginners
Frequently Asked Questions
Can day traders get rich?
Yes. Day traders can get rich. Day trading has made many people wealthy. Ross Cameron and Brett N. Steenbarger are some examples.
Is day trading expensive?
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.