How I scan - as of August 2011

timo4sho asked in the comments of the prior post:

I'm quite interested in how you find those candidates at the time of the setup .. as I am having difficulties finding them at the time.

I'd have to admit that I have no real easy and magical answer, like a scanner that only outputs stocks that are setting up perfectly (let me know if you find one!). I'm still trying to fine tune the process, and it's still quite a manual process. I'm just getting used to the fact that you have to keep flipping through the charts, and accepting the fact that you'll end up missing many great setups on certain days. Just need to catch a few good setups to make your day!

HERE'S WHAT I DO:

I gather my gap lists from TradeStation's scanner, combine them together, and then sort by volume. Nothing special or secret. Pretty much what Trader-X has described countless times regarding how he does it.  But I've made it into something I'm comfortable with doing.

I have other "special" scans, but in the end, they pretty much output the stocks similar to the regular gap scans. I ended up realizing that there's nothing special about those special scans, but at least I can say I've been there, done that.  However, I'm finding that they might be somewhat helpful for mid-day or late-day type scans.

After getting the scan results which run every 10 minutes, I'll go through each of the stocks starting with the highest volume first, taking a look at the charts to see if there are any interesting candidates. If so, I'll type the stock manually into a separate watch list window.  One review I've started to do is to take a closer look at the daily charts -- if it's forming a breakout on a bullish looking pattern, I'll keep a look.  Chances are, those are the ones they'll be talking about on Twitter/Stocktwits.

At key times during the opening, I'll start flipping through the charts. Right around 9:33 to start looking for the 5 min "quick hit" setups that might trigger at 9:40, and especially just prior to 10:00 to start looking for the 15 min quick hits as well as the classic pullback to the retracement zone setups.

AN EXERCISE TO CONSIDER:

Now the real trick, as you asked, is how to spot the entries.  Here's a tip, collect all the "textbook" setups you have, and start studying how they look 1, 2, maybe even 3 bars prior to the perfect setup.  Adjust your charts to see the stock prior to the setup, and do a screen capture.

Start reviewing what they look like a few bars (or even just a bar) prior to setup so that you can anticipate a potential setup. Then you'll have a better idea on what to put on your watch list.

BUT BEWARE...

Note that many times, a potential setup will turn out to be a failed setup, so beware of getting suckered into getting on board early -- wait for the actual trigger to take place before getting into the trade!  There have been many times when I've said, "Wow, this is going to be a great setup, I'm getting in now!" only to see it get stopped out without ever getting a proper signal to enter.

ANOTHER GOOD EXERCISE:

I collect all the charts with a perfect setup right at the time of setup, and will review them to help remind my brain what a good setup looks like.  I put them all into a folder, and then quickly scan through them.  I'm trying my best to brainwash my mind to only see and take the good setups, and pass on the bad.


Hope that helps, but realize that I'm still trying to find my way.  So it'll be interesting to see what I'm doing a year from now.  Maybe I'll have discovered the magic holy grail scanner by then that only gives me perfect setups, or else tells me to go away and play golf the rest of the day...but I'm not holding my breath!