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 look for the biggest stock market gainers. This list of hot stocks is a prime watchlist of the best individual stocks which deserve the undivided attention of an ambitious broker, trader, or retail investor.
Beyond knowing what stocks to buy, a stockbroker, investor, or trader investing will want to understand the import and financial meaning of these fast-moving securities in order to get the biggest gain from their money—and execute this type of trade again and again.
What are the Biggest Stock Gainers?
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, from the time the market opens to when the exchange closes (and during after hours).
Instead, those who are trading securities will want to look at data like a percent change and trading volume. This data will give traders a sense of the volatility and risk of individual stocks. The percent change in terms of stock price—not just the current price—is a great financial tool for seeing which stocks are hot—and which ones are losers.
Of course, the market is always in motion, and almost any component of technical analysis is just a moving average. But whether a stock is regularly on a list of growth stocks, or it’s a stable large cap denizen of the stock exchange, all stocks experience a fluctuation in price—especially in certain industries like crude oil.
Percentage gainers are the stocks that are seeing the biggest gain in terms of their percent change. These big gainers can allude to action around the stock, which in turn can mean it’s time to buy, sell or hold—though which one depends on technical analysis of other factors like market capitalization.
Keep in mind that percentage gainers do not take into account these other pieces of data, such as the market cap or trading volume. Percentage gainers can be tagged to a specific stock index such as the Dow Jones or NASDAQ. 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 current events or other information to determine which of the biggest stock market gainers are best to trade.
Why Are Percentage Gainers Important?
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. Understanding the ins and outs of percentage gainers can also help build equity beyond the stock exchange. A good understanding of percentage gainers is one of a handful of financial instruments that can also be applied to commodities and futures. Investors can track the percentage gainers for virtually any asset class including currencies.
But when it comes to stocks, a percentage gain is an easy way to gauge market sentiment around a particular security, and its direction and value in terms of trading. Though the worth of a stock’s price in terms of data is hotly debated by pundits and analysts, it certainly is the most frontline indicator of all the factors circulating around shares traded on the market. The percentage gain is an even better indicator of what’s been going on and what might happen in the near future.
Every day, the stock market provides investors with volumes of data, and some of these many data points are the market’s gainers and losers. Percentage gainers are also known as advancers.
When advancers outweigh 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.
While this might indicate some positive direction for the majority of securities that are actively trading that day, if the market has been openly declared a bear market, things are not good overall. However, day traders with short-term goals may not mind the bigger picture of a market’s overall downward direction since they attempt to capitalize on statistical movements—no matter where the market is headed.
Conversely, as 2018 showed, there can be many days when decliners lead advancers even during a bull market. In this regard, investors with long-term vision like a dividend investing strategy don’t care as much about percentage gain. They are more interested in fundamental analysis of a company and its value.
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. Stocks with the biggest increase in price movement, expressed as a percent, is one of the key metrics for ensuring profitable trades.
How to Find Stock Gainers
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 stocks’ 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.
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 to $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%
An investor could repeat the same process with any stock in the same exchange, and find the NASDAQ biggest losers for the day. If their expert intuition or technical analysis told them the price would then bounce back, they might even want to buy that particular stock.
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 are 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 (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 exactly that. Percentage gainers can be found for virtually any class of assets including currencies, commodities, and financial instruments.
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.
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. These constraints will help investors to narrow down their choices to a list of potential stocks. At this point, traders can continue to narrow the list based on their own preferences and trading history.
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.
Risks of 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.”
For active traders, “rhyming” can allude to using market data to find patterns in the stock market, and aligning their trading to fit those patterns. But from cheap stocks to buy to Fortune 500 companies that make up the bulk of retirement portfolios across America, there is no way to tell the totality of the future—which includes current events beyond the stock market.
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 the 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.
By putting together diverse statistics and building a pattern of decision making on a foundation of experience and knowledge, investors can make good choices about what stocks to buy. If they don’t have that, then trading is best outsourced to a competent money manager. Some retail investors with little experience can get tunnel-vision because of the excitement that builds around a particular statistic, such as percentage gain. They can then make a decision based on that one stat alone, without considering other factors—with disastrous results.
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.
Again, percentage gainers are not a standalone measurement of a good investment. Penny stocks are a good example of this principle. 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. This already low pricing point means that they could show significant growth, even without large trading volume. Many penny stocks are unproven companies that are inherently risky, even beyond stock analysis, in terms of their unproven potential or startup nature. Percentage gainers also tend to be growth stocks, which tend to carry more risk than other categories of stocks.
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).
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 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.
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 the moving average of a stock’s volume over a longer period to determine an average volume. Once they have that information, a common standard 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.
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. If investors notice a wide discrepancy between the trading volume of one stock and another in the same sector, it may require further fundamental analysis to determine why the discrepancy exists.
Top Stock Market Gainers
Traders want to know where the action is occurring because the biggest excitement tends to happen around price changes. Price changes properly played and analyzed in conjunction with other important statistical information is how traders make their money. To that end, traders will want to understand the ins and outs of stock market gainers.
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.
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. Trading percentage gainers does arguably carry increased risk because many stocks that show a high percentage gain are inherently growth stocks.
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.