Summary - Every day the stock market provides investors with volumes of data. One of these data points is the market’s gainers and losers. Percentage gainers are also known as advancers. When advancers lead decliners (percentage losers) it usually indicates a positive day for the stock market. However, percentage gainers are not a standalone indicator of the market’s overall direction. On any given day, even within a bear market, a stock exchange may show a significant amount of stocks that are big gainers. Conversely, as 2018 showed, there can be many days when decliners lead advancers even during a bull market.
Identifying percentage gainers is a form of technical analysis that traders, and particularly day traders, use for finding stocks that have significant price movement. Stocks with the biggest increase in price movement as a percent is one of the key metrics for ensuring profitable trades.
The formula for identifying the percentage gain on a stock is:
Stock daily high – stock daily low / stock closing price
For example, on February 13, 2019, Constellation Pharmaceuticals Inc. (NASDAQ: CNST) posted one of the larger percentage gains for the day. The stock was trading in a range of $10.13-11.65 and closed at $11.43. Its percentage gain was as follows:
11.65-10.13/11.43 or 1.52/11.43 = 13.2%
Percentage gainers make good trade targets because when a stock is advancing, there are more investors interested in buying than selling. But as mentioned above, percentage gainers are not a standalone indicator. When setting up trades, percentage gainers are used in combination with other technical indicators such as the most shares traded, or the stocks that are most active by index to narrow down a list of potential stocks. At this point, traders can continue to narrow the list based on their own preferences.
Investors can use a stock screener to sort percentage gainers by the exchange they are listed on, by market capitalization, by price and by volume traded. They can also go beyond equities and look for percentage gainers in commodities and futures including currencies and financial instruments. When selecting securities to trade using percentage gainers, it’s important to compare the securities volume over a week or maybe even several months. A popular metric for investors is to look for a security that is trading at 2x its daily volume over the last 50 days.
There are no guarantees in investing. Every prospectus reminds investors that past performance is not a guarantee of future results. A different way to look at the performance of securities can come from Mark Twain who famously said, “History doesn’t repeat itself, but it often rhymes”. For active traders, rhyming can mean using market data to find patterns in the stock market and aligning their trading to fit those patterns.
One of the most reliable patterns that traders, and particularly day traders, can look for is the stocks and securities that are the most active. These fall into four categories: those with the most shares traded (regardless of share price), the largest percentage gainers and losers, the stocks that are the most active by dollar volume, and the stocks that are most active by index. In this article, we’re going to focus on the percentage gainers. We’ll explain how to identify them, why they are important and where to find them so you can exercise profitable trades.
What are percentage gainers?
Percentage gainers are the stocks that are up the most in terms of their percent change. Percentage gainers do not take into account trading volume. Percentage gainers can be tagged to a specific stock index such as the Dow Jones or NASDAQ. And percentage gainers are not limited to equities. Investors can track the percentage gainers for virtually any asset class including commodities and currencies.
A percentage gain is found by calculating the difference between a stock’s daily high and daily low and dividing that number by the stock price. The stock that has a positive percentage is considered a percentage gainer. A stock with a negative percentage is a percentage loser.
For example, the percentage gain for a stock that trades within a range of $25-$30 and closes at $29 would be calculated as follows:
30-25/29 or 5/29 = 17.2 percent
Why are percentage gainers important?
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. The greater the percentage gain, the more volatile the security. For example, a $30 stock that moves $5 day, for a 16.7 percent gain, is more volatile than an $80 stock that moves $5 per day, a 6.2% gain. However, a large percentage gain only helps to identify stocks that show profit potential. In order to trade them successfully, other factors need to be taken into account. One factor is volume. 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 the price that is needed. Many stocks, some of which are penny stocks, can show massive percentage gains, but they are trading on very small volume.
When selecting an appropriate volume, some investors have a pre-set range and will only trade a stock if it falls within that range. Other investors will use a stock volume’s moving average to determine an average volume. Once they have that average volume, a common standard is to look for stocks that trade at 2x their average daily volume over the last 50 trading days. 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 on the same stock. Volume, even within a sector, can vary greatly between two stocks. If investors notice a wide discrepancy between the trading volume of one sector stock and another, it may require further fundamental analysis to determine why the discrepancy exists.
How to identify percentage gainers
When an investor goes to a stock screening tool (which can be found on most financial websites, including MarketBeat.com) they can use a series of drop-down menus to sort stocks by a specific group including the exchange they are traded on, their market capitalization (e.g. small-cap, mid cap, large cap), price, or volume. Most menus will even allow sorting to be done by sector. This means, for example, if an investor is only interested in viewing mid-cap technology stocks with a trading volume of over 500,000 they can do that. Percentage gainers can be found for virtually any class of assets including currencies, commodities, and financial instruments.
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.
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 only 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.
The limitations of percentage gainers
Percentage gainers are not a standalone measurement of a good investment. Penny stocks are a good example of this. Many penny stocks can show large percentage gains on any given trading day. These stocks, by definition, have prices below $5 and in some cases as low as $1. That means that they could show significant growth even without large trading volume. Percentage gainers also tend to be growth stocks, which carry more risk in general than other categories of stocks. Another limitation of percentage gainers is that, while providing a clear data point, that 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.
The final word on percentage gainers
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. A percentage gainer is a stock that has increased the most in relation to its opening price. The formula for percentage gain is the difference between a stock’s daily high and daily low divided by the stock price. Any stock that has a positive percentage is considered a percentage gainer. Any stock with a negative percentage is a percentage loser. 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. In fact, many traders use these periods to identify securities that are setting up for profitable trades.
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, for a trader that is looking to enter and exit a trade quickly, they may find it difficult to trade at the price they want if the stock is trading at low volume, which signals 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. Trading percentage gainers does carry increased risk because many stocks that show a high percentage gain are growth stocks.