Beginner’s Guide: Post 25
So, you’ve done the hard work! You’ve built your first trading plan, outlining exactly what kind of setup you’re hunting for – the specific market conditions, the chart patterns, the confirmation signals. That’s awesome!
But now comes a practical challenge: there are thousands upon thousands of stocks (and other assets) out there. How on earth do you find the handful that might actually be showing your specific setup at any given moment, without manually clicking through hundreds of charts? That sounds exhausting and super inefficient, right?
Well, thankfully, there are tools designed specifically for this job. Let’s talk about Stock Scanners – your potential shortcut to finding trades that actually fit your carefully crafted plan.
What the Heck is a Stock Scanner?
Think of a Stock Scanner (or market scanner) as a powerful search engine, but instead of searching the web, it searches the entire stock market (or whatever market you define) based on your specific criteria.
You tell the scanner, “Hey, show me only stocks that meet these conditions: [your condition 1], [your condition 2], [your condition 3]…” and bam! In seconds, it filters through thousands of possibilities and gives you a much smaller, manageable list of stocks that currently match what you’re looking for.
Why Bother Using One?
Scanners aren’t essential to trade, but they can be incredibly helpful, especially for day traders needing to find opportunities quickly:
- Massive Time Saver (Efficiency): Instead of manually flipping through endless charts hoping to stumble upon your setup, a scanner brings potential candidates directly to you, freeing up your time to focus on analyzing the best potential trades.
- Keeps You Focused: It helps ensure you’re looking at stocks that actually meet the rules defined in your trading plan, rather than getting distracted by random, shiny objects or stocks everyone’s hyping that don’t fit your strategy.
- Idea Generation Machine: A good scan can instantly give you a list of 5, 10, 20+ stocks that are potentially setting up according to your rules, providing a focused pool of charts to analyze further.
What Can You Scan For? (Simple Criteria for Beginners)
Scanners can have tons of complex options, but you should start simple! The criteria you scan for should directly match the conditions outlined in your trading plan ([Link to Post 24]). Here are some basic, common things beginners might scan for:
- Price Range: Maybe you only want to trade stocks between $10 and $50. You can filter out everything else.
- Volume / Liquidity: HUGE one! You only want to trade stocks with enough activity, right? ([Link to Post 14]) You can scan for stocks that have traded over a certain number of shares today (e.g., > 500,000 shares) or have a high average daily volume. This helps ensure you’re looking at liquid names.
- % Change: Want to find stocks making big moves today? You can scan for stocks that are up or down by a certain percentage (e.g., > 5% gain or loss since the open). These might offer momentum opportunities.
- Simple Technical Conditions: Some scanners let you add basic technical criteria, like:
- “Stocks trading near their high of the day”
- “Stocks approaching a key moving average”
- “Stocks breaking above yesterday’s high”
- Maybe even simple pattern recognition like “forming a potential flag pattern” (though pattern scanning can get complex quickly).
Start with just 2-3 simple criteria that directly match your plan’s setup definition.
Where Do You Find These Scanners?
Good news! You often don’t need to look far:
- Built Into Your Platform: Most good trading platforms have built-in scanning tools. Check the features of the platform you chose for paper trading – there’s likely a scanner hiding in there somewhere! These are often the easiest to start with.
- Standalone Software/Websites: There are also many dedicated scanning software programs and websites available, some free, some paid. These often offer more advanced features, but definitely start with your broker’s built-in tool first.
Using Scanners the Right Way (Important!)
Okay, here’s the critical part. A scanner is a filtering tool, not a “buy this now” signal generator!
- Ideas, NOT Signals: The list of stocks your scanner spits out are just potential candidates for your setup. They are NOT automatically trades you should take.
- Your Analysis is STILL Required: You MUST take the list from the scanner, pull up the chart for each stock, and do your own analysis based on your trading plan rules. Does it really meet all your criteria? Does the risk/reward make sense? Where would the stop go? The scanner just points you in the right direction; you still have to read the map!
- Start Simple: Don’t create scans with 20 different complex criteria right away. You’ll likely get zero results or get overwhelmed. Start with a few key filters based on your simple plan.
Think of it like using a metal detector on a beach. It might beep, telling you something might be there, but you still have to dig, see what it is, and decide if it’s actually treasure worth keeping.
Wrapping Up: Your Trade Hunting Assistant
So, Stock Scanners are handy tools that filter the huge market down to a manageable list of potential trading opportunities based on your specific criteria. They save time, help you focus on stocks that fit your plan, and generate ideas for analysis.
The key takeaway? Use scanners as idea generators, not magic buy/sell buttons. Always, always follow up with your own detailed chart analysis according to your trading plan before ever considering a trade.
Go ahead and explore the scanner functionality within your paper trading platform. Try setting up a simple scan based on the trading plan you started building. See what kind of stocks pop up! It’s another skill to practice.
What’s Next? The Biggest Hurdle…
Okay, you’re armed with knowledge about charts, risk management, you have a plan, and now you even know how to find stocks potentially fitting that plan. You’re executing trades in your paper account. Things should be straightforward now, right? Just follow the rules?
Sigh. If only it were that simple. As you start actually placing trades (even paper ones), you’ll quickly discover that the biggest challenge in trading often isn’t the charts or the rules – it’s the complex computer between your ears: your own mind.
It’s time to introduce the absolutely critical topic of trading psychology. Let’s start by looking at the two biggest emotional demons traders face in Fear and Greed: How Emotions Can Ruin Your Trading (And How to Manage Them
