What Investors Need to Know to Beat the Market

During trading sessions, investors—and especially traders—want to be where the action is. The problem is scanning a list of stocks and mutual funds won't point them in the right direction...unless they look for the biggest stock market gainers. This list of hot stocks is a prime watchlist of the best individual stocks of the day, any of which deserve the undivided attention of an ambitious broker, trader, or retail investor.

What Are Biggest Stock Gainers?
Why Are Percentage Gainers Important?
How to Find Stock Gainers
Risks of Stock Gainers
How to Profit from Percentage Gainers

This Is Why The Biggest Stock Gainers Matter

The biggest stock in terms of price is not necessarily the best investment—especially for traders who can leverage market data to make their moves.

Instead, those who are trading securities will want to look at data like a percent change and trading volume because percentage movement is what counts. The percent change in terms of a stock price from one period to another is a great financial tool for seeing which stocks are hot—and which ones are losers.

Percentage gainers are the stocks that are seeing upward movement in terms of their percent change. Keep in mind that percentage gainers lists do not take into account other data such as a market cap or trading volume.

Percentage gainers can be tagged to a specific stock index such as the Dow Jones or NASDAQ or to the market at large. Investors can also customize a platform or stock screener to give them a list of stocks that are seeing the biggest percent change, which is particularly useful if they are factoring in current events to make a decision.

Percentage Gainers Are Important Stocks To Watch

Percentage gainers are a great indicator of a stock's trajectory, whether it's one of the many stocks under $1 or a longstanding blue chip behemoth. A good understanding of percentage gainers is one of a handful of financial instruments that can also be applied to commodities and futures as well. Investors can track the percentage gainers for virtually any asset class including currencies.

When it comes to stocks, a percentage gain is an easy way to gauge market sentiment around a security, and its direction and value in terms of trading. The bigger the move, the more conviction in the market.

Either way, identifying percentage gainers is a form of technical analysis that traders—and particularly day traders—use for finding stocks that have significant price movement.

How to Find Stock Gainers For Profits

The formula for identifying the percentage gain on a stock is very simple. All you need to do is take the stock's daily high, subtract the stock's daily low, and divide it by the closing price. The stock that has a positive percentage is considered a percentage gainer. A stock with a negative percentage is a percentage loser.

You do not have to limit your research to one day only. The same formula can be applied to any period of time, whether that's a month, a year, or five years (or more). You would simply take the high point of pricing during that period, subtract the low, and divide it by the price at the end of that time period. For example, if you want to see which one of the most active stocks is really gaining the most over the last six months, you could modify the formula to fit that time period.

When an investor goes to a stock screening tool such as the one found on MarketBeat.com they can search the percentage gainers and even set up custom stock screens.

As it relates to traders identifying percentage gainers, some traders will pay close attention to pre-market and after-hours trading. Others will pay attention to one group over another. Either way, traders are concerned about looking for stocks that meet their criteria for both percentage gain and trading volume during a very defined window when they are looking to execute their trade.

Percentage gainers make good trade targets because when a stock is advancing, there are more investors interested in buying than selling.

Investors can use a stock screener to sort percentage gainers by the exchange they are listed on, by market capitalization, by price, and by trading volume. When selecting securities to trade using percentage gainer as a key indicator, it's important to compare the volume of that particular security over a week or maybe even several months. A popular metric for investors is to look for a security that is trading at twice its daily volume over the last 50 days.

There Are Risks For Trading Stock Gainers

There are no guarantees in investing, and every prospectus reminds retail investors that past performance is not a guarantee of future results. A humorously enlightening comment about the performance of securities comes from Mark Twain who famously said: "History doesn't repeat itself, but it often rhymes."

At times, stocks and futures will see significant movement after the close of a trading day. Pre-market trading is defined as trading that occurs between 4 a.m. to 9:30 a.m. Eastern Standard Time (EST). After hours trading takes place between 4:00 p.m. and 8:00 p.m. EST.

Many economic reports (also known as economic indicators) are released before the market opens. The reaction to these reports can cause significant price movement in stocks and futures. The same is true of a company's earnings reports which are typically issued before the market opens or immediately after it closes. And of course, there are always news events including natural disasters that can significantly affect the price movement of certain stocks. One of the biggest risks that investors can take in terms of analyzing percentage gain is zoning in on a time period that is too narrow while ignoring after-market activity.

Another limitation of percentage gainers is that, while providing a clear data point, the data requires context. Simply understanding how much a stock is moving does not tell an investor why that stock is moving. This is why investors should continue to use different forms of fundamental analysis and technical analysis when looking at percentage gainers.

How to Profit from Percentage Gainers

Despite the obvious limitations, it is possible to profit from indications of percentage gain. While the word "volatility" can sometimes be seen as negative, investors understand that volatility is necessary for profitable trading. Percentage gainers are one measure of volatility. In fact, many active traders butter their proverbial bread by playing the most volatile stocks, and one indicator they rely on is percentage, which tells them the winners or losers (which may turn out to be winners in terms of profit).

Stocks that are high percentage gainers or losers are only truly significant for traders if those stocks are accompanied by volume that allows trades to be entered and exited easily and at a price that facilitates profit. Many stocks, some of which are penny stocks, can show massive percentage gains, but they are trading on very small volume—which means that even a big percentage gain is not helpful.

A common standard for volume is to look for stocks that trade at 2x their average daily volume over the last 50 trading days. This is a good indicator that the percentage gain really does present a lucrative possibility beyond the price movement that has already been realized.

For securities that tend to have higher liquidity, investors may choose to look for a trading volume of 3x or 4x their moving average. It's important that whatever formula is used, it is used consistently. Volume, even within a sector, can vary greatly between two stocks.

The Top Stock Market Gainers Have Volume, Too

Traders want to know where the action is occurring because the biggest price movement happens where the market is most focused.

A percentage gainer is a stock that has increased the most in relation to its opening price (or the price at the beginning of your selected timeframe). Percentage gainers (otherwise known as advancers) offer important data for traders who are looking to profit from the price action of volatile stocks and futures.

Any stock that has a positive percentage is considered a percentage gainer. On any trading day, stock trackers will post real-time updates of percentage gainers or losers, which may also be called advancers or decliners.

Because the market is not static, percentage gainers continue to change even in after-hours or pre-market trading.

Like many forms of technical analysis, performance gainers need to be evaluated along with other market data such as trading volume in order to determine the securities that have the best trading possibilities. A stock that has a share price of $20 will be able to make a large percentage move on less volume than a stock trading at $100. However, a trader looking to enter and exit a trade quickly may find it difficult to trade at the price they want if the stock is trading at low volume, which in turn implies a low demand for the stock.

While commonly thought of in terms of stocks, investors can find performance gainers for virtually any asset class including commodities and futures. Many stock screening tools allow investors to get very precise—even allowing them to look at gainers by sectors or by volume. In this way, traders can customize the data to fit the criteria that they find most beneficial.

What Investors Need to Know to Beat the Market During trading sessions, investors—and especially traders—want to be where the action is. But scanning a list of stocks and mutual funds won't necessarily point them in the right direction...unless they...