You make a very good point about maintaining a list of favourite stocks and being distracted by all the choices that are available each day.
I do find that my list of favourites does change over time as the hot sectors change, the individual share has run its course and others with more movement potential appear and so on. Some additional general strategies I utilise are:
1. Trade shares at price points where the potential returns vs. the risks are optimal for day trading. See chart at the end of this post where I have graphically illustrated the % change in a one price point move. I tend to prefer shares in the 20c to 50c range. I also never buy shares at 10.5c and always at 10c if the buyer depth is sufficient. The reason for this is that at 10.5c, a one price point drop immediately leads to a 5% loss, whereas buying shares at 10c, a one point price drop leads to a 1% loss, and a one point price increase provides a gain of 5%. Many traders know this, and that is why you will often find a shares price hovering around the 10c mark for hours, sometimes even days, before finally continuing on its journey upwards, or alternatively, retracing.
2. I have a screen set up on Webiress with the market depth of all the favourite shares I know and have traded regularly, and want to keep a closer eye on. There are about 15 of these at any one time open on my screen. What I do during the day is to regularly skim over the market depths. This enables me to visually detect any noticeable change in trading patterns. This more often than not allows me to identify trading opportunities, which a quick look at a chart will then confirm. During this last week I picked up a change in pattern on one of my old favourites, CTO, bought some shares at 16.5c, and they ended up going up to 21.5c at one stage. Also recently with MOF, I noticed what appeared to be some accumulation going on, and took a punt at 15c odd. They then proceeded to rise quite nicely for a tidy profit. This does not always pay off, as is the case with any strategy, and appropriate stop losses are called for.
3. Another very lucrative strategy has been to trade shares on market moving news. This may comprise an ASX price sensitive announcement, or may be actual reports about a sector, economic news or other snippets gathered from a scan of many possible sources.
My routine in preparation for trading each day involves starting the day at 5 am, reading the news on various web sites, reading the financial review, and scanning and skimming through the Company Announcements on the ASX from where I left off the previous day. I also keep a list of companies where I know the company has huge potential for a price move but where the price has been sold down because of various factors, and a simple price sensitive announcement will set the SP surging. Examples of this are LYC- where their share price was heavily sold down because the financial crises and lack of funding forced them to delay plans to proceed to develop their rare earths deposit, which happens to be one of the largest in the world. Upon announcement that they had secured a Chinese investor to finance the project, the share price surged. In this case, I also feel that there is further potential in the SP, because the market has not yet fully priced in the financing, pending approvals by the regulatory authorities, and satisfactory completion of other conditions. OZL is another example where the SP moved prior to approvals at the AGM this. Other examples are RXM- who announced a significant gold find in Feb or so, HFA, whose share price leapt upon news of refinancing their near term debt etc etc.
4. The Day Trade diaries thread is also extremely useful in helping identify additional shares which may not have popped onto my radar at all. It is definitely a case of many hands making light work.
5. Lastly, I cannot stress enough the importance of risk management in my strategy. Preservation of capital is all important, and I am often surprised at how some people talk about having purchased a share for day trading purposes at x price and that they still hold in the hope that the current paper loss of 50% will be reduced because the share ""will bounce back, won't it??". Stop losses are extremely important to set and stick to. I generally use a 2% or $2 000, whichever is the greater, rule for stop losses. This allows me to trade shares in that 0.001c to 25c range, where one point price changes lead to larger than 2% losses. What this means is that I reduce the amount of capital invested in a trade so that a two or three point price drop (to allow for slippage) only leads to a $2 000 loss MAX.
Here is the chart I refer to in point 1 above. The horizontal red line represents the 2% stop loss level I use as to manage my risks. The Right Hand Axis represents the Risk less the reward equation, and it is used to graphically illustrate the fact that there is only one point on the entire chart where this ratio is greater than zero, that is 4% at the 10c price point, hence this being a traders favourite point, myself included
