Explaining The Beginner's Basics
- up minimum of 15% on the day
- Biggest percentage gainers
- Find reason
- Price between 2 and 20 Dollars
- Want high volume
- High demand, low float
- Wait for break of pre market high
- 9 AM EST start looking (this will change as you get more experience)
- Invest in candle sticks that are touching, not large gaps
- WAIT FOR ONE CLOSED CANDLE
The list above is what I call "The Beginner's Basics." When I first started day-trading, my friend sent me this list. The list above is the best set of guidelines to follow when you start. It will limit your risk the most while still offering big gains. In this post I will briefly explain each bullet point.
Up minimum of 15% on the day: As a beginner looking at the pre-market movers, you should only watch stocks that are up 15% on the day. As you get better at trading, that number will go down. In a later post, I will go over how to pick stocks, and that will further highlight this point.
Biggest percent gainers: This is a follow up on the previous point, but when looking at TradingView, focus on the biggest gainers.
**note the image was taken during "Regular hours," normally you should start looking for stocks in the "Pre-market"
Find reason: This simply means "try and justify why the stock price went up." It could be either the company got good news back from the FDA, they reported excellent earnings, and many other options.
Price between 2 and 20 Dollars: As a beginner, I would recommend to look for stocks in this price range. As you become a better day-trader, your range will expand, but it is best to start in a (relatively) narrow range. If you stay within the range of 2-20 for the first couple months, you can manage risk the best, because you will be creating another constant factor. Also this is where you normally see the biggest percentage movement among stocks.
Want high volume: Before making a trade, you need to make sure the stock currently has a high volume. High volume means that a lot of people are trading it. Because day-traders are buying and selling stocks quickly, it is important that their is someone to buy a stock from, or sell a stock to.
High demand, low float: This piggy-backs off of the previous point. Float, which is the total shares in a company - shares held by insiders (company executives, directors, and other large shareholders). Low float normally means high volatility, and high float normally means low volatility. High demand and low float provides the best opportunities to buy stocks, and then be able to sell them.
Wait for break of pre market high: Before making a trade, make sure it breaks its pre-market high. This is a baseline a like to use to minimize risk. If a stock breaks its pre-market high, their is a much higher chance that it continues its upward trend. Once it breaks the pre-market high, the pre-market high becomes the floor, rather than it previous being a ceiling.
9AM EST Start Looking: This will change over time, as you began to trade pre-market, but when you begin you should start looking about 30 minutes before the market opens.
Invest in candle sticks that are touching, not large gaps: This is just a step to make sure that the stock has a high volume. If their is a gap in candles, it means that no trading occurred in the time frame the candle represents.
WAIT FOR ONE CLOSED CANDLE: Basically, don't buy in the first minute the market opens. Sometimes if a stock was up a lot in the pre-market, it will crash right when the market opens, as many people want to sell it.