There are thousands of stocks that you can trade on a daily basis. In the United States, there are over 6,000 publicly traded stocks. The New York Stock Exchange (NYSE) has over 2,585 companies while Nasdaq has over 3,785.
These numbers can frighten an inexperienced trader, confused by the abundance of symbols from which to search for the most profitable one. Luckily, there are some ways to highlight the ones that may interest us.
In this article, we will look at some of the easiest ways to find the best stocks to trade.
What are active stocks?
As mentioned, there are thousands of stocks that you can trade. However, in most cases, all these stocks are usually not all the same in terms of their performance and level of activity.
Some popular companies like Facebook, Microsoft, and Google are extremely actively traded while others like Annaly Capital and Berkshire Hathaway are not.
The most active stocks refer to those that have the biggest volume in an exchange in a certain timeframe. In most cases, the most active stocks are those that are in the headline during a given day.
For example, if a company publishes strong earnings, there is a high chance that more traders and investors will want to buy it.
Similarly, if a company makes some headlines, such as a merger and acquisition (M&A), management change, or a new product, there is a high possibility that it will be substantially active during the day.
Importance of volume and volatility
Volume refers to the total number of shares being traded in a given session. It is worth noting that the volume should be taken in context. In most cases, the volume is always considered in terms of historical context.
For example, assume that a company like Apple has a daily trading volume of 10 million. Also, if the company has an average trading volume of 1 million, it means that there is an issue that caused the discrepancy.
Volatility is another important aspect for traders. In most cases, traders usually do well when stocks and other assets are showing some volatility.
Why most active stocks are ideal
There are several reasons why most active stocks are ideal for day traders. First, as mentioned, these stocks tend to have some volatility, which is an ideal thing for most traders.
Second, these stocks tend to have some news behind them. As such, these news events are usually catalysts for both investors and traders. For investors, this activeness can be a catalyst to buy and hold a stock for a long time.
Third, active stocks have more entry and exit points, which are ideal for most traders. Further, checking these active stocks can help you find trading ideas of companies and also see companies you have never heard about.
Related » How to Find the best entry Points
How to find the most active stocks
It is relatively easy to find the most active trades of the day. For example, you can use platforms like WeBull, Investing.com, Yahoo Finance, and Market Chameleon to find them. These platforms have a dedicated web page where they show the most active stocks.
Similarly, the most popular trading platforms like Robinhood, Schwab, and TD Ameritrade have the page for active stocks.
The screenshot shows some of the most active stocks during August 2022. As you can see, Embark Technology, a small company valued at $492 million was the most active stock in the US. It was followed by Invitae Corp, T2 Biotech, a company valued at $33 million, and Unity Biotech, a firm valued at over $90.6 million.
Another way to look at the most active stocks is to focus on those that are generating hype among investors and traders.
A good way to go about this is to use social media platforms for traders. One of the most popular ones is known as StockTwits. In the chart below, we see that companies like AMC, S&P 500, DWAC, and PSHG were the most active in the market.
In addition to checking the most actives, it is always recommended that you check out the top performing stocks in the pre-market. In most cases, you will find that the top movers in the pre-market are also the most active stocks during the session.
The chart below shows that some of the top active stocks are the same in the pre-market movers.
Watchlist and related
There are other things that can help you determine the most active stocks in the market. First, you can look at stocks that are hitting their 52-week highs and 52-week lows. In most cases, there will always be a reason for this.
Second, you should have a watchlist that will simplify the reasons why these stocks are showing significant volume. At DTTW™, our team of analysts compiles and sends a free comprehensive watchlist on the most active stocks every day.
Strategies to trade most active stocks
There are several strategies to use when trading most active stocks. Fairly popular strategies that are also easy to apply! If you plan to focus on the most active stocks, you probably won’t have any problems.
First, you should consider doing a multi-timeframe analysis. This is a type of analysis that looks at a number of timeframes in a chart. By so-doing, you will be at a good position to identify areas of potential support and resistance.
Second, scalping is another top strategy you should consider using when trading these stocks. Scalping is a trading strategy where you buy and sell an asset’s price within a few minutes.
The goal is to make small profits several times a day and accumulate some profits for a long period.
Fibonacci Retracement and more
Third, you could use tools like Fibonacci Retracement to identify the key targets in the chart. Finally, you should also focus on buying the dip and fading the rally. In most cases, stocks that go parabolic today are the same ones that will pull back in the following day.
In this article, we have looked at what the most active stocks are in the market. Further, we assessed why stocks become active and how to find these active stocks. Most importantly, we looked at some strategies to use when trading these stocks.