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The Best Day Trading Stocks Are The Most Boring Stocks – Low Volatility Strategy

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.


– Why are low-beta and low-volatility stocks considered better for day trading?

Low-beta and low-volatility stocks are favored for day trading because they are less likely to experience significant price fluctuations, making them more suitable for short-term trading strategies.

– What connection exists between the preference for low-beta stocks and academic findings in investing?

The inclination toward low-beta stocks in day trading aligns with academic research indicating that low-volatility stocks tend to outperform high-volatility stocks over the long term, contrary to traditional financial theories.

– How does low volatility impact the risk-adjusted return for day trading stocks?

Lower volatility stocks tend to have improved risk-adjusted returns. The author looks for stocks that, on average, produce larger gains compared to losses, irrespective of the win rate.