How to choose stocks for short-term trading? Master these three key factors for quick profits

Stock market fluctuations are endless, and many investors still struggle to see profits after holding stocks for years. Therefore, they start to consider whether “short-term trading is easier to make money.” Short-term trading involves buying and selling within days or weeks, profiting from price swings. Unlike long-term investors who focus on fundamentals, short-term traders rely more on technical analysis, market sentiment, and news events to judge trends. While stock selection in the short term directly impacts profit or loss, the market’s “more losers than winners” saying is not unfounded—risks do exist. To maintain steady profits amid high risks, the first step is mastering the correct stock selection methods.

Core Logic of Short-Term Stock Selection: Rapid Capital Turnover to Amplify Returns

The fundamental difference between short-term and long-term investing lies in trading frequency. Short-term investors seek not the intrinsic value of stocks but to leverage quick capital turnover to magnify each trade’s gains. This means that the criteria for short-term stock selection are entirely different from those for long-term investing—we need to find stocks that can fluctuate rapidly and are actively traded, rather than companies with strong fundamentals.

The stocks you choose must have the following characteristics: 1) attractive market themes, 2) sufficient trading volume to ensure easy entry and exit, 3) significant price volatility. Only when these three are met can short-term stock selection avoid turning into gambling.

Three Key Elements of Short-Term Stock Selection

Element 1: Has a Theme—Market Attention as the Source of Volume

Themes are the primary drivers of stock price movements. When a certain industry, company, or policy becomes a hot topic, investors’ buying and selling behaviors become more active, increasing trading volume and amplifying price swings.

Themes can come from multiple sources: industry trends (e.g., AI boom boosting chip stocks), policy incentives (e.g., new energy subsidies driving EV stocks higher), corporate developments (e.g., mergers, new product launches), or earnings reports (better or worse than expected quarterly results).

For example, NVIDIA (NVDA) has become a favorite among short-term traders because of multiple themes: the intensifying US-China chip competition, its core GPU products widely used in crypto mining and AI training, and the hot demand in these fields. These factors drive market trading demand for the stock. Themes generate buying and selling opportunities; more trading means more chances to profit from price differences.

However, it’s important to note that the effectiveness of themes diminishes over time. Outdated themes or repeated hype can trap investors in losses. When selecting stocks short-term, always monitor the freshness and sustainability of themes to avoid chasing after stocks that have lost market interest.

Element 2: Has Sufficient Volume—Liquidity Determines Ease of Entry and Exit

After choosing a theme, the next critical question is: can you actually sell the stock when needed?

Stocks with ample trading volume have clear advantages. First, the bid-ask spread is smaller, so your small trades won’t significantly impact the stock’s price movement. Second, the stock reacts quickly to market news, reflecting new information promptly in the price, allowing you to seize opportunities or cut losses in time. Third, high transparency of information means you can gauge market sentiment by observing other investors’ opinions and trades.

Conversely, if the stock you buy has low trading volume, you face risks such as: difficulty finding a buyer, being forced to sell at a much lower price than expected, large institutional influence skewing your judgment, or high transaction costs eroding profits.

In this regard, the US stock market is particularly suitable for short-term trading. Mainstream stocks like Tesla (TSLA), Amazon (AMZN), and TSMC (TSM) have daily trading volumes reaching hundreds of millions of shares, ensuring liquidity and smooth trading.

Element 3: Large Price Fluctuations—The Foundation of Profits

Even if a stock has a hot theme and high volume, if its price moves slowly and steadily like Walmart, short-term traders won’t profit. Short-term trading requires stocks to fluctuate up and down to create opportunities for long or short positions.

A key moment to observe price volatility is during earnings announcements. After quarterly reports, investors compare actual results with expectations. If earnings beat forecasts, the stock often gaps up; if below expectations, it gaps down. Netflix, for example, saw its stock jump sharply after beating earnings, while Meta experienced a significant drop after missing estimates. These moments are golden opportunities for short-term traders.

Besides earnings reports, any major news that can change market expectations may cause gap moves. That’s why short-term stock selection should pay close attention to company announcements—anticipate events that could trigger volatility to position yourself in advance.

Typical Cases: Why Are These Stocks Suitable for Short-Term Trading?

Based on the three key elements, the following stocks have long maintained characteristics suitable for short-term trading:

Tesla (TSLA): As a leader in electric vehicles and tech innovation, it’s always under market scrutiny. Elon Musk’s tweets, delivery events, and product launches often cause price swings. Cyclical earnings also create multiple short-term opportunities.

NVIDIA (NVDA): A GPU giant with products used in gaming, data centers, autonomous driving, and AI. The AI boom keeps trading volume and volatility high, making it a frequent target for short-term traders.

AMD: A CPU and GPU manufacturer competing with NVIDIA and Intel. Market share shifts, product launches, and customer movements often trigger price swings.

Netflix (NFLX): A streaming giant whose user growth and subscription data directly impact stock price. Every earnings report can cause significant volatility.

TSMC: The world’s largest foundry, benefiting from semiconductor industry cycles and geopolitical factors, with high trading activity.

Other notable short-term stocks include Amazon (AMZN), Snap (SNAP), Alibaba (BABA), Cisco (CSCO), Chevron (CVX), among others. These stocks cover hot industries like AI, semiconductors, EVs, payments, and energy, maintaining high market attention.

How to Select Stocks for Short-Term Trading: Practical Tips to Avoid Pitfalls

Knowing the theory of short-term stock selection is not enough; disciplined execution is crucial. Here are some key points:

1. Avoid chasing themes that are already mainstream
When a theme is widely discussed or front-page news, most participants are retail investors or latecomers. Short-term traders should enter early in the theme’s lifecycle, not follow the crowd after it matures.

2. Have clear entry and exit points
Short-term trading relies on technical analysis to identify support and resistance levels. Vague entry/exit points lead to losses. Use candlestick patterns, moving averages, RSI, and other tools to define precise trading zones.

3. Strictly enforce stop-losses
Risks in short-term trading are swift; misjudgments can lead to rapid losses. Set clear stop-loss levels before entering and exit immediately when hit—don’t wait for a rebound.

4. Don’t be intimidated by large swings
Volatility is inherent in short-term stocks; daily declines of 5% or even 10% are common. Focus on whether your judgment logic is correct, not short-term price fluctuations.

After Choosing the Right Stocks: Use Appropriate Trading Tools

Discipline and transaction costs are vital in short-term trading. The US market, with its high liquidity and no commission fees, is the most active for short-term traders globally. It also allows multiple trades within a single day, offering unprecedented flexibility.

To implement the above methods, consider using professional short-term trading platforms. For example, Mitrade offers over 300 US stock CFDs, as well as Hong Kong stocks, forex, indices, and cryptocurrencies. The platform supports both long and short positions, provides 24-hour trading, and is regulated by reputable authorities to ensure fund safety. Its user-friendly interface, various technical tools, and risk management features (limit orders, stop-losses) make short-term trading more efficient.

New traders can start with a demo account to practice, then move to real trading once familiar—reducing learning costs and risks.

Final Advice on Short-Term Stock Selection

Ultimately, short-term stock selection boils down to finding stocks that have a “theme, volume, and volatility.” But short-term trading is not an easy way to make quick money—it requires solid technical skills, quick decision-making, and strong mental resilience.

Not everyone is suited for short-term trading, but if you’re interested in rapid trading, mastering the methods outlined here, combined with strict discipline and risk management, will turn short-term stock selection from a mystery into an executable strategy. Remember: in short-term trading, choosing the right stocks is just the starting point; disciplined execution is the key to profitability.