Scanning for Set Ups
There are many ways to approach trading. Over the years I have moved more and more towards managing a large number of positions rather than concentrating my money in just a few. I have purposefully done this to reduce risk as the size of a particular position is necessarily lower and the number of stocks I carry in a given sector tends to be more dispersed.
In order to do this though, you need a steady source of ideas. In today's world, the easiest way to generate these stock entry ideas is via stock scanning. There are many tools available to search for trade setups. I've chosen tools and data sets that are easily accessible and executable anywhere I might happen to be both domestically and around the world; thus the tools and data sets I keep need to be available remotely via the Internet. I do not care to have a heavy client but instead a thin client that is simply a browser which is enabled from the remote server. This has some limiting factors but it allows me the independence of not having to have a particular application on a particular hard drive of some computer that I have to have with me in order to work. With my setup (www.prophet.net) I can do my work where ever I may be as long as I can access the internet.
Independent of which tool set you might use, there are applications that allow you to scan for technical setups that may produce possible trades. The key is to find some set of criteria which yields potential trade setups. Since I believe that the market rewards some trades at a given time while punishing others, I have built scans (that I continue to refine) that attempt to identify the technical patterns that you see me trade with on this site like wedges, retraces, breakouts, etc. When the general market seems to be support a retrace pattern, like today and tomorrow, then I will concentrate on looking for bullish retrace patterns.
Here's a simple scan that I use anytime general market appears to be in an intermediate term bullish advance.
Criteria:
In order to do this though, you need a steady source of ideas. In today's world, the easiest way to generate these stock entry ideas is via stock scanning. There are many tools available to search for trade setups. I've chosen tools and data sets that are easily accessible and executable anywhere I might happen to be both domestically and around the world; thus the tools and data sets I keep need to be available remotely via the Internet. I do not care to have a heavy client but instead a thin client that is simply a browser which is enabled from the remote server. This has some limiting factors but it allows me the independence of not having to have a particular application on a particular hard drive of some computer that I have to have with me in order to work. With my setup (www.prophet.net) I can do my work where ever I may be as long as I can access the internet.
Independent of which tool set you might use, there are applications that allow you to scan for technical setups that may produce possible trades. The key is to find some set of criteria which yields potential trade setups. Since I believe that the market rewards some trades at a given time while punishing others, I have built scans (that I continue to refine) that attempt to identify the technical patterns that you see me trade with on this site like wedges, retraces, breakouts, etc. When the general market seems to be support a retrace pattern, like today and tomorrow, then I will concentrate on looking for bullish retrace patterns.
Here's a simple scan that I use anytime general market appears to be in an intermediate term bullish advance.
Criteria:
- Exchanges: NYSE AMEX NASDAQ(NM)
- Average Volume is at least 50,000 shares
- Last Price is above 50-Day MA
- Virtual Volume is at least 200% greater than Average Volume
- Last Price is at least $2
In this scan, I'm just looking at any stock that traded on above average volume today, is liquid and not a penny stock and is likely bullish (trading above the 50 day moving average).
In the next post, I'll review some other scans that I use as I continually look for trading ideas.
posted by Tat | 2:13:00 PM
3 Comments:
Thanks, Tat.
Please define average volume. I generally use the 21 or 34 period moving average. That about where you come in?
Good question. With this new format I feel that we are getting some great posts, good feedback and questions.
I use a 30 day MA for average volume.
Following are some possible scan criteria. I hope they will serve as a basis for further discussion. I've written them for Metastock but added comments where the syntax may not be clear to users of other software.
C >= 2
AND
C > O
AND
C >= Fml( "50% of Range")
{Today’s close falls above 50% of the range. Doesn’t have to be included, but I’m not keen on failure bars.}
AND
C >= HHV(H,260) - HHV(H,260)*0.05
{today’s close is greater than 95% of the highest high of the last 260 bars. No particular reason for the 95% -- 99% or 90% would do just fine, as would a greater number of periods.}
AND
C > Ref(H,-1)
{today’s close is greater than yesterday’s high -- necessary??}
AND
Mov(V,30,S) > 1500
{the 30-bar simple moving average of volume > 100,000 shares}
AND
V >= Mov(V,30,S)*2
{today’s volume is greater than twice the value of the 30-period simple moving average of volume}
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