The Best Day Trading Stocks Are The Most Boring Stocks

Last Updated on April 18, 2023

My experience is that the most boring stocks are the best for day trading. Many day traders are thrill-seekers, which is too bad because I think the best stocks are the most boring.

This is a little bit like low volatility factor investing: over many decades the best stocks have proven to be the “boring” stocks that are the least volatile. The high flyers (the most volatile), have not performed well – contrary to financial theory you learn at school.

(This article is written by Oddmund Groette and was published in 2013.)

Low beta and low volatility are good for day trading

I haven’t thought much about my best day trading stocks until recently. But after reading a lot of academic papers, I have realized the following: I basically only day trade stocks that have low beta/low volatility. I trade boring stocks.

If I take the average beta for the whole stock market, I trade more or less only stocks that are in the lower half in terms of beta.

Also, I trade none of the “hot” stocks like FB, AAPL, GOOG, BIDU, etc.

After 10 years of day trading and 175 million shares traded, I still haven’t traded one single share in those stocks! And I have traded more than 3 000 different tickers so far. I did try LNKD but lost more in just a few trades than I did in dozens of others. Not my cup of tea.

This gravitation toward low-beta stocks is not intentional. It’s just a result of all my research and backtesting. My thinking and my take on the stock market fit better with those stocks. Risk-adjusted return improves a lot the less volatile the stock is.

One of my key parameters is looking at each stock’s max loss vs. max win. I prefer stocks in each strategy that have, on average, bigger average winners than average bigger losers, no matter the win rate. Bear in mind I never use a stop-loss (read here for why not use a stop loss). I only use time stops.

Looking at my trading records, I can say the following:

The more dull and boring the stock is, the better!

Southern Company (SO) has been one of the best stocks over this 10-year period. Can you imagine a more boring stock? My other favorites are KO, PG, and JNJ. Previously I also made good money in KFT, but that one is split into two companies. This is not the typical day trading stocks mentioned on message boards or social media.

Why high beta stocks are bad for trading

Why are high beta stocks bad for day trading?

In my opinion, high beta stocks are more difficult to trade because they occasionally produce bigger losses and the distribution curve is often negatively skewed. That shouldn’t be a problem as long as the profits are bigger, but human nature tends to ride losers and cut winners – we make behavioral mistakes.

I’m prone to trading biases, and I guess low volatility stocks minimize that (for me). Risk-adjusted return improves a lot the less volatile the stock is.

That’s why I stick to the boring stocks.

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  • […] Oddmund Grøtte skriver i dag hvordan hans favoritt daytradingaksjer er de kjedeligste på børsen. Jeg liker hvordan fokuset hans er på hva han kan tape, og ikke på mulighetene som ligger i store svingninger. Dette er et vanlig “rookie-mistake”; å trade aksjene som svinger mest  fordi man er ute etter store og raske gevinster. Jeg tipper det er svært få hobbyinvestorer som trader Statoil, mens det er favoritten hos alle profesjonelle som forvalter egne eller andres penger. Hvis man setter en grense for hva man tåler av tap, før man går inn i en trade, skal det i teorien være enklere å utføre stoplossen når den ryker (jeg skriver i teorien, for her syndes det mye) […]

  • Hi,

    I really your postings. I have a question. When you say stocks with low beta / volatility, what measure are you using? The average true range?? on a 14 day moving average basis? Or are you using the historical implied volatility?

    Thanks,
    Bob

  • hello! Love this posting! I have been daytrading for almost 10 years now, and I echo what you wrote in another posting that its been very difficult to make solid returns as of late. Im going to start trading boring stocks after reading your piece. The volatility in the ‘hot’ stocks has just made it impossible to make money and I feel daytrading boring stocks might just be an edge alot of folks overlooked. Also the stress of competing with high frequency computers is taking its toll on me. Im not a scalper, but rather I hold for several hours- never overnight.

    I do have a question if you get a free moment to share. How long do you hold your trades for?

    Thanks!

    • Hi,

      Thanks for the nice words. Usually I hold for at least two hours, but it all depends. I have several strategies and holdig periods vary. Most of them are around 2-3 hours. But in general I hold stocks longer now than I used to. I also spend a lot of EOD trading now.

  • […] No Comments Once in a while I receive e-mails from readers wondering how they can get ideas to test. In order to find profitable strategies you need to test a lot. Looking at my history I guess about 19 of 20 ideas are useless. Even worse, those 1 in 20 potential profitable ones, many turns out to be unprofitable in live trading! Knowing this I can say a lot of potential traders will lose patience/interest quite quickly. Trading is tedious work. However, I believe trading should be a little bit boring to make money. […]

  • I’ve heard the ATR mentioned before on trading foras, but where do I find the ATR of different stocks? Are there software for calculating or what?

    Nice blog theme by the way.

  • Oddmund,
    Excellent article.
    Do you have any other stocks to recommend for 2018?