This is for learning how to scan for Large and Medium Cap stocks. I will cover Small Cap stocks in a separate article!
As an active day trader, having a solid screening process to find stocks with high profit potential is crucial. The right stocks will provide the necessary volatility, liquidity, and momentum to allow you to get in and out of trades quickly.
In this brief guide, I'll walk you through the key metrics and tools to utilize when scanning for stocks optimized for day trading. Follow these tips and you'll be able to consistently identify quality setups every morning.
This is just a beginner's guide. Once you understand a little more about the niche of day trading you're comfortable with, you'll start to make your own adjustments.
Leverage Stock Screening Tools
The first step is having access to platforms that allow you to scan the entire market efficiently using custom filters. Here are some of my favorite stock screening resources.
| Site | Key Features |
|---|---|
| Finviz | Heatmaps, prebuilt screens, custom criteria builder |
| TradingView | Charting and scanning together, global markets |
| Trade-Ideas | Prebuilt screens, price/volume charts |
These sites allow you to scan by technical indicators, fundamentals data, recent market activity, and more. I always have multiple stock screeners open to approach scanning from different angles.
Search for Volume and Liquidity
As a day trader, volume is everything. The higher the daily volume and liquidity, the easier it will be get into and out of positions with ideal entry and exit prices. Here are some key volume metrics to factor into scans:
- Average Volume - 50,000 to 500,000+ shares per day
- Relative Volume - Above 1.5 to 2x average volume
- Float - Preferably over $10 million
Stocks hitting these minimum volume and float thresholds check the box for adequate intraday liquidity.
Identify Stocks with High Volatility
Volatility creates the price fluctuations needed for quick profits as a day trader. I typically scan for stocks exhibiting the following volatility indicators:
- Beta - Above 1.0
- ATR - Higher than average (~0.5%+)
- Volatility Percentile - Over 50%
Beta, average true range (ATR), and volatility percentile compared to the past year are great metrics to find unusually volatile stocks. The higher the better when day trading.
Check the Trend and Momentum
In addition to volatility, you want to find stocks exhibiting strong short-term trends and momentum. Here are must-have indicators for momentum:
- RSI - 50-70 for uptrends, 30-50 for downtrends
- Moving Averages - Price crossing and holding above/below key daily moving averages
- Breakouts - Gapping above or below channels, flags, prior highs/lows
I scan patterns like moving average crossovers, oversold bounces, breakouts from consolidation indicating a stock is picking up momentum. Then I analyze the price charts visually to confirm.
Research Recent News and Catalysts
Don't just rely on technical stock scans. Before trading any stock lead your due diligence by checking:
- Earnings Reports - EPS surprises, guidance changes
- FDA Decisions - Drug/device approvals or rejections
- Analyst Ratings Changes - Upgrades and downgrades
Earnings reports, clinical trial data, analyst actions - news events like these frequently catalyze breakouts or breakdowns. Use them to anticipate volatility.
Case Study: Screening for Momentum Stocks
Let's walk through an example scan using the criteria outlined above to find momentum stocks.
- Go to Finviz and click "Scan" in the top menu
- Go down the list and apply these filters:
- Current Volume - Over 400,000
- Average Volume - Over 300,000
- Relative Volume - Over 2
- Float - Over 20 million
- Beta (5y Monthly) - Over 1.25
- ATR - Over 0.75%
- RSI (14) - Between 50 and 70
- Price - Between $10 and $100
- Hit Scan and filter through the best candidates
This returns a list of stocks like CAR, DKNG, RCL with heavy volume, relative strength, high betas, and technical momentum. Analyze charts individually from here to find optimal entry points.
Follow this blueprint before every trading session to routinely find quality stocks exhibiting explosive short-term trends.
Trade-Ideas is the scanner I'm currently using, and right now it's probably the best stock screener for beginners and advanced traders.
Key Takeaways
Here are the most important criteria to factor when screening for stocks to day trade:
- High relative volume and liquidity
- Strong volatility based on beta, ATR, volatility percentile
- Momentum metrics like RSI, moving average crosses, breakouts
- Catalysts from news, earnings, analyst actions
And remember, combine quantitative scanning with individual chart analysis. Not every stock that pops on a scan is going to be tradable. Review charts with indicators like support/resistance, candle patterns, and trendlines to confirm quality setups.
By mastering the scanning process, you'll be able to routinely spot day trading opportunities in a market with over 7,000 stocks. Stay disciplined applying these metrics and you'll avoid overtrading while focusing only on the best positions each day.
