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How To Scan & Find Explosive Stocks To Day Trade (TradingView Stock Screener Strategy) - YouTube
Channel: The Secret Mindset
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There are thousands of stocks to choose from,
and day traders or swing traders can pick
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any stocks they want.
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However, the first step for a trader is to
figure out WHAT to trade.
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In todayâs video I will share several tips
on how to select stocks for intraday and swing
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trading, in order to identify the best trading
opportunities.
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Your role as a trader or investor is to filter
through the noise of the markets and select
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the best setups.
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This may sound complicated, but the process
is painless once you know how to start.
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Every good scan starts with the proper scanning
criteria.
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First, let me start by saying that there is
no âperfectâ scan, as all traders have
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different styles and strategies.
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This is my own way to pick stocks to trade,
for swing trading.
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That said, once you understand how these filters
work, you can begin creating your own scan,
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one that will work for you.
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So here are the filters I use.
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1.
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The average daily volume (over the past 50
days) must be at least 1 million shares traded.
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There are several reasons why the daily average
volume is the primary factor in my stock-selection
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process.
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The first is liquidity.
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Your stock must have sufficient intra-day
trading volume.
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Any stock that is trading under 1 million
shares per day can be easily manipulated by
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market makers (MMs), and they usually trade
very slowly.
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Think about it this way: do you really want
to be trading a stock that Wall Street obviously
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wants nothing to do with?
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Remember low volume means low interest in
the company.
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A low-volume-traded stock simply means itâs
not worth trading.
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Low volume stocks tend to be extremely speculative
and unpredictable.
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Because there is such a limited number of
shares, a large purchase by a mutual fund
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or another big investor can cause a huge spike
in the price.
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Or, if the investor decides to sell, the share
price will likely tank.
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Neither scenario is ideal for us, small players.
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That's why I avoid stocks that trade fewer
than 1 million shares per day, based on a
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50-day average.
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2.
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The stock price must be minimum $50
Both volume and price are key factors that
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help fuel big moves in stocks.
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I personally tend avoid penny stocks and prefer
to stick with stocks that are priced over
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$50.
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The triple-digit stocks are even more suitable
for day trading and swing trading.
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Why?
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Because the stocks in this price range are
the most highly traded stocks, but also have
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the largest volatility.
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One of the most consistent mistakes a significant
number of beginner and inexperienced traders
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make is to be drawn to penny stocks.
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Consider penny stocks as any instrument that
trades for less than $5.00 per share.
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At first glance, penny stocks may seem appealing
because they tend to fluctuate tremendously
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in price, in very short periods of time.
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In theory, you could generate a very high
return quickly.
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Unlike stocks over $50, which enjoy deep liquidity,
some of these companies might not have any
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buyers or sellers for days at a time.
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If you were to build a position at $1, then
go to sell it at $2 when, there might not
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be any buyers.
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You could put in a sell order, and it would
just sit there, day after day, doing nothing.
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Thatâs why I recommend avoid penny stocks,
especially if you are a beginner, and stick
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with stocks that are priced over 50$.
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They will have consistent volumes, consistent
liquidity, and most importantly, are consistently
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traded by Wall Street.
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3.
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Use the ATR to assess volatility
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Another important factor you should analyze
before entering the market is the daily trading
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range.
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Some stocks exhibit a relatively small trading
range which makes them not suitable for day
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trading.
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A stock goes through different cycles and
every period of low trading ranges at one
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point will be followed by an expansion period.
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So if today your favorite day trading stock
has a low ATR, maybe itâs best to simply
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wait for another day to enter the market when
the trading conditions are more favorable.
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As a day trader, the ideal periods to enter
the market is when the ATR shows expansion
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periods in the daily range.
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Let me show you a simple way to determine
if a significant range expansion is taking
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place.
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Based on my backtesting result, the ATR reading
will signal a significant increase in the
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range once it breaks above the 100-day EMA.
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Simply attach the 100-day moving average on
the ATR indicator.
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In this way, youâll easily see if the average
intraday price swings are sufficient to trade.
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For better and faster results, you want a
chart pattern that is consistently fluctuating
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intra-day.
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Your stock should be moving, for you to book
some profits.
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4.
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The average daily range is another great metric
for measuring volatility.
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Traders want to find stocks that have a high
price range, making for more trading opportunities.
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The idea behind the average daily range is
that each market has its own âpersonalityâ
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when it comes to how far it travels in a single
day.
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The daily range is calculated by taking the
difference between the stockâs daily high
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and daily low.
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You want that number to be high.
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For example, if a stock is stuck in a $0.50
range every day, it would be difficult to
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place profitable trades (without large sums
of money).
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On the other hand, a stock trading in a $5
daily range would provide plenty of opportunities.
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So, a correct analysis of volatility is an
extremely important element when choosing
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which stocks to trade.
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5.
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Narrow Spreads Stocks
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Like any marketplace, there are two sides
to every trade: a buyer and a seller.
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A buyer submits a bid, which is the highest
price they're willing to pay for a stock,
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while a seller submits an ask, which is the
lowest price they're willing to accept.
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The difference between the bid and the ask
is called the spread.
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Beginner traders usually donât pay too much
attention to how the difference between the
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bid and the ask of a stock affects their profit.
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Large stock spreads can damage your profit
potential, thatâs why you need to choose
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stocks that have narrow spreads.
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The spread is a byproduct of the daily trading
volume.
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Naturally, stocks with large volume will positively
influence the spread.
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More liquid stocks â those that trade more
often in higher volumes â will have a narrower
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spread.
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Low volume stocks can exhibit very wide spreads
that have the capacity to wipe out the profit
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potential.
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So, before going long on a stock, always make
sure the difference between the bid price
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and the ask price is narrow.
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With the volatility in the stock market, the
last thing you want is high fees cutting into
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your gains.
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6.
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There must be no current news headlines that
affect the stock.
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If your stock is constantly in the news headlines
due to a major economic issue taking place,
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then donât trade it.
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Wait it out.
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Stocks that are constantly affected by the
news tend to be highly volatile, and they
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tend to have very unpredictable charting patterns.
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If you are a beginner, donât try to anticipate
the market reaction to big events, I can tell
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you from personal experience that the market
often does exactly the opposite of what youâd
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think it SHOULD do.
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As a beginner, youâre supposed to be avoiding
the noise.
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You can very easily get sidetracked and stumped
by the news that are currently affecting your
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stock intra-day.
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Of course, you cannot completely avoid the
news as a trader, but you just have to learn
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how to ânavigate aroundâ the news which
is usually much easier than trying to directly
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get involved into news trading.
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7.
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EARNINGS PER SHARE GROWTH
To asses your chances of picking a good stock
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to trade, I like to take a close look at its
fundamentals, especially its earnings-per-share
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growth.
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If you day trade, you could skip this, but
if you are a swing trader like me, and prefer
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to go long on stocks, earnings-per-share growth
represents an important number.
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So, to find good stocks to go long, seek outstanding
profit performance.
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You can easily calculate earnings per share.
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Simply divide a company's net income by its
number of shares outstanding.
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Specifically, stocks with earnings-per-share
growth rates of at least 20% compared with
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the previous year suggest a company has products
or services in strong demand.
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It's even better if the earnings-per-share
growth rate has been accelerating in recent
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quarters and years.
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Strong earnings growth is essential to a stock's
success and has the greatest impact on its
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future price performance.
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8.
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Day Highs and Lows
When a stock makes a major move up or down
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following a period of consolidation, itâs
called a breakout.
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Breakouts are prime opportunities for traders
because a stock has the potential not only
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to make a big move in a short period, but
also to continue that directional move by
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gaining momentum.
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Incorporating day highs and day lows into
your scanning process can help you find stocks
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that are breaking out.
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For example, if you want to find shorter-term
breakouts, you may look for stocks that are
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trading above their 30-day highs.
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For a medium-term breakout, you may analyze
stocks that are trading above their 90-day
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highs.
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Or you can look for stocks that have reached
their 52-week highs.
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9.
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200 moving average on the daily chart
The 200 moving average is widely used by traders
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because it is seen as a good indicator of
the long term trend in the market.
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If price is consistently trading above the
200 moving average, this can be viewed as
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an upward trending market.
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Markets trading below the 200 moving average
are seen to be in a downtrend.
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One of the easiest scans to incorporate with
the 200 moving average is to view the market
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in relation to this line.
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Traders commonly do this to analyze the general
market trend and then look to only place trades
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in the direction of the long-term trend.
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10.
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There must be no stocks affected by frequent
government regulations.
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If the stock is affected by government regulations
or approvalsâI do not trade it.
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Great examples of stocks that usually are
very risky to trade are biotech stocks and
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military defense stocks.
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These stocks tend to move even 50 percent
in one single day when the news hits the wire
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(good or bad news), whether it be the FDA
approving or declining a new product, for
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example.
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You never want to deal with this kind of volatility
and uncertainty, especially if youâre just
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getting started.
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If you learned something new and found value,
leave us a like to show your support, subscribe
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to our channel and click the bell icon to
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Until next time.
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