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How To Identify The Best Day Trading Stocks: A Step-by-step Guide

You must identify the best day trading stock before online trading on Dominion Markets. This article talks about how you can identify the best day trading stock by giving you a step-by-step approach.


Let us first look at day trading stocks on Dominion Markets. Day trading entails buying and selling many stocks in a single day or even seconds. It has nothing to do with traditional investment. It capitalizes on the inescapable price fluctuations that happen during a trading day. Day traders pay close attention to what causes short-term market changes.

One common approach is trading in response to news. Planned events, like economic data releases, corporate earnings reports, or announcements about interest rates, are affected by what the market anticipates and how people feel about it. That is, markets react when expectations are not met or surpassed, frequently with fast, big moves that benefit day traders considerably.



Selecting the right stock will determine the amount of profit you make. If you trade stocks of high volatility and liquidity, you will easily get buyers and sellers when you want to exit trades. It means you will capitalize on all viable opportunities. Exiting a trade at the right time could mean a lot of profit.

If you choose a stock of low liquidity and volatility, getting buyers and sellers when you want to exit trades can be difficult. This difficulty means you will miss many opportunities, thus reducing the number of profitable trades.

Risk tolerance

Risk differs with the type of stock. For example, penny stocks are generally considered more risky than large-cap stocks. They are risky because traders rarely trade them, and little information exists. Risk tolerance is important when selecting the type of stock to trade on Dominion Markets. Choosing the risky penny stock would not be wise if you have a small risk tolerance.

Trading experience

The equities you trade also impact your overall trading experience. For example, if you trade equities that are difficult to understand or evaluate, you may find the trading process irritating and stressful.

However, if you trade equities you understand well and are simple to analyze, you may find the trading experience more pleasurable and gratifying.


Understanding market trends and volatility is important in day trading stocks. Let us examine some things you can focus on to understand the markets.


Setting detailed day trading goals can increase one's earning potential when trading in stocks. Below are some of the necessary trading goals to have.

Make a certain profit per day: You should set a certain percentage that you aim to gain each time you place a trade.

Trade a certain number of times per day: To remain disciplined, you must have a set number of trades that you must place daily.

Win a certain percentage of your trades: You should set a certain percentage win rate. It will help you to learn from your mistakes and improve your trading skills.


Here are some of the parameters for stock liquidity analysis.

  1. The total number of shares exchanged within a certain period is called trading volume. In general, high trade volume indicates strong liquidity.
  2. The bid-ask spread is the gap between the highest price a buyer will pay for an item and the lowest price a seller is ready to sell it for. A low bid-ask spread suggests that the asset is reasonably easy to buy and sell, yet another indicator of strong liquidity.
  3. Market depth is the quantity of purchase and sale orders at various prices. High market depth shows that the asset is popular, making it easier to purchase and sell.
  4. Turnover ratio: The number of shares exchanged in a particular period divided by the average number of outstanding shares. A high turnover ratio suggests that people highly trade the asset, another indicator of high liquidity.


By beta index, you might identify a volatile stock. This index considers the influence of stock market variations on a single share price and compares it to changes in the benchmark index. Shares with a beta value of one are generally secure investments because market fluctuations are comparable to changes reported by large corporations.

A beta value of less than one indicates relatively reliable security. A beta greater than one suggests significant volatility in parallel with market moves. As a result, it is a dangerous investment tool.


From a wide perspective, fundamental analysis looks at all information that could affect how people see a company's worth or stock price. It covers everything except for how to trade the stock. As the name suggests, it involves going back to the fundamental aspects.

Fundamental analysis focuses on developing a corporate portrait, determining the fundamental worth of its shares, and then buying or selling the stock based on that knowledge. Some of the indicators typically used to evaluate a company's fundamentals are:

Return on assets

Cash flow

History of profit retention for funding future growth

Conservative gearing


Technical analysis attempts to forecast price movements by looking at previous data, primarily price and volume.

It uses approaches such as statistical analysis and behavioral economics to assist traders and investors in navigating the gap between intrinsic value and market pricing. Technical analysis can assist traders in predicting what is most likely to happen based on prior data. Most investors base their judgments on both technical and fundamental analysis.

There are two approaches to technical analysis. The top-down and the bottom-up techniques are the most common. Short-term traders frequently use a top-down technique, whereas long-term investors use a bottom-up one.

The top-down strategy is a macroeconomic analysis that begins with the general economy and progresses to individual securities. An equity trader would initially focus on economies, then sectors, and last, firms. The bottom-up method, on the other hand, focuses on individual equities rather than a macroeconomic perspective. It entails looking for prospective stock entry points and exit points in a fundamentally interesting stock.


Risk management is critical for FX trading success. Some of the most essential risk management tactics are as follows:

  1. Make use of stop-loss orders. A stop-loss order instructs your broker to close your trade at a specific price level. If the market moves against you, this can assist you in reducing your losses.
  2. Make use of take-profit orders. A take-profit order instructs you to close your trade at a specific price level. It can assist you in securing gains when the market turns in your favor.
  3. Each trade should only include a modest fraction of your account balance. A decent rule of thumb is never putting more than 2% of your account balance at risk on any deal.
  4. Use leverage with caution. Leverage can increase your profits, but it can also increase your losses. It is critical to employ leverage with caution and understand the associated hazards.


Diversification is a risk management approach that involves incorporating a variety of items into a portfolio. A diversified portfolio incorporates a mix of distinct asset types and investment vehicles to restrict exposure to any particular asset or risk.

The idea behind this approach is that creating a portfolio with various assets yields better long-term profits while reducing the risk of holding onto a single investment.


Day trading software is a computer program typically offered by brokerage firms to assist clients in carrying out their day trading activities efficiently and on time.

Any day-trading software should have three essential features:

  1. Functionality allows the trading system to exist with a trading strategy (based on technical indicators, news, trade signals, or pattern recognition).
  2. Once the stock meets the set parameters, an automated order-placing feature (typically with Direct Market Access) is activated.
  3. Analytical tools to continue assessing existing holdings (if any), market trends, and features to act properly.


Here are some of the common mistakes that you should avoid in-stock selection

  1. Lack of goals- One common mistake in global stock markets is unclear investment goals. To succeed, you must define your investment aims and select the best tools to reach them.
  2. Trying to time the market - Trying to time the market is a common mistake in stock trading. It takes time to time the market, and even seasoned investors frequently make mistakes.


Day traders need to adjust to how the stock market keeps changing. Here are some tips:

  1. Change your trading style as needed. Feel free to adjust your plan based on what's happening in the market. You should trade less often and with smaller amounts if it's unstable.
  2. Pay attention to the news and economic information. These things affect the stock market. Being informed can help you get ready for market ups and downs.
  3. Use technical analysis to find trends and patterns. It can help you see where the market is going and be a helpful tool in your trading.


Identifying the best day trading stock is crucial in developing your trading career. You should follow the instructions above keenly to choose the right stock.

Join Dominion Markets, the best forex trading company, today and select the best stock for day trading. Dominion Markets offers numerous stocks to choose from.