More questions from a newbie

Discussion in 'Trading' started by squirrel, Feb 18, 2001.

  1. squirrel


    Am I wrong in assuming that for a beginner, the basics to making the first daytrade and the ones thereafter succesfull,,,really depends on which stocks you choose to trade ???? I think that if you have a general knowledge of how everything works and knowing that you have the discipline to acheive your goals it all comes down to having a basket of stocks in front of you to work with....My main question here has to do with stock screening. I know that no one person will share his complete screening theory...but I have yet to find a site on the web that deals with the values that make an all around sound setup for the basic begining daytrader.... I guess what I am trying to say,,,, is that if you all were just starting out,,,all over again,,,, what would some of the values for screening your stock be set at??
    I seem to be having a lot of trouble understanding this... Somehow I feel that if I can get past this will open a new world to me. I have tried to refrain from asking too many little questions,,,as I am basicly on my own here,,,,but I really need help with this,,, thanks
  2. squirrel - Baron's advanced day trading course gets into screening parameters. It's an excellent class and definetely worth the $ 199 price. For a daily list of potential trading candidates - try Trade Prospector at Good luck !!
  3. Squirrel,

    I think it's difficult to nail down one particular method of screening, because each trader has his/her own type of trading that they're comfortable with, and therefore different types of stocks to trade. For instance, I prefer to trade smaller share lots of volatile stocks that have very large daily point swings. Accordingly, there is automatically a certain list of stocks that I look at (i.e. screen for stocks with a daily range greater than 10 and average daily volume of 2 million shares or greater). From that list I narrow it down to 4 or 5 stocks that I follow regularly and learn how they move. Others prefer to trade large share blocks on tighter trading stocks (i.e. CSCO) and scalp the spread. Yet others trade stocks moving on news, in which case you'd be screening news wires, and are constantly trading different stocks every day. Again, it all depends upon what type of trading you're comfortable with, and each method works for different traders.
  4. WarEagle

    WarEagle Moderator


    In his books, Tony Oz gives many of the screens he uses for finding stocks. On his website there is a page ( ) that goes over how he uses BigEasyInvestor, a free end of day scanning program. The page is intended to be used along side his book "The Stock Trader" which covers other scans. Many of the scans in his books can be used in this program. Plus, as you become more confident in your trading, you can turn your own ideas into scans.

    Privateer has posted several times here about his use of this program and has given some very good information about it. Perhaps you can find some of those threads.

    Good luck

  5. BAsically the best opportunities for daytraders are situations where there is abnormally high volume being transacted.... CAuse the mm's are more concerned with moving the size order, and they don't care about your 2k shares. So I generally scan intraday for what's trading about 300% of volume by 11... 500% by 1 etc. that will give you a good idea of what's moving... Remember, volume preceeds movement... and also ends the move leading to a reveral of that move.
  6. Dustin


    Everyone has their own strategy, so we all trade a different set of stocks. For my style geared towards scalping I like stocks with the following:

    8M+ Volume
    Highly correlated to futures/market
    Excellent ECN liquidity
    Large intraday ranges
  7. squirrel,

    as you can see from all the posts here, there are as many strategies / stock screening ideas for daytrading as there are traders out there.

    So it depends very much on what you feel comfortable with.

    But there are a few general rules in trading, which you should adhere, unless you want start to become a speculator :

    1. you need sufficient amount of supply and demand = liquidity / volume.
    Many "wannabe" traders , most of them with small trading accounts, go for the low-priced issues, pink-sheet and pennystocks, because they read about spectacular moves of 50%, 100% and more within a day.
    These moves are often enough based on heavy manipulation on thinly traded stocks.
    As a trader, stay away from those. If you want to gamble - play them.
    As a trader, you also want to stay away from IPO's.
    ( are there any left ? )

    2. You'll need a fair amount of movement in the stock = a certain level of intraday volatility which gives you enough chances to participate in moves.

    3. Decide, what kind of daytrading you want to do - intraday swings of several points can only be traded on a relatively small number of stocks, most of them can be found in the tech & biotech sectors.
    I'd say ( others may correct me ) there are only about 100 stocks, most of them NASDAQ, which make intraday-moves of several points on a regular basis and have enough liquidity to trade them day in day out.Still too much to follow on a daily bases, So I weed them out by some restrictions on daialy trading range and volume. My list contains only about 30 stocks, enough to follow on regular basis IMO.

    These are the preferred targets of many daytraders. Playing these stocks with lotsizes of 1000 shares or more involves high risk and requires strict stop-loss discipline. I trade these stocks in lots of 100 - 300 shares, but have no more than 3 or 4 positions open at the same time, but sometimes carry positions overnight as well.
    ( I guess, it's pretty much the Tony Oz style, which I prefer )

    4. If you want to scalp the teenies with large lotsizes, you might look for less volatile but still liquid stocks, so getting in and out should not turn out to be a problem.
    If you like to scalp the spread, look for reasonably volatile stocks which trade in volumes less than 1 Mio shares a day. Here you'll find often enough opportunites because of bid / ask of spreads more than 1/2 point.

    5.Momentum-trading ( in Play )
    here you trade stocks which appear in the headlines of newspapers, magazines like Barrons or IBD or on CNBC. Also the up & downgrades of powerhouses like Goldman Sachs are always good for a few points on any given day.

    Other popular sources for momentum stocks are well known investing-websites and the typical hotlists of mover's and shaker's, new 52 week highs and lows, unusual volume etc.

    Unless it's a stock which trades already with high volatility and volume, you'll find, that many of these event-driven moves don't last very long; maybe only a few days, before the stocks fall back into the daily agony of low volatility.
    Make sure you checked the support & resistance landscape before jumping on any of those momentum trades. I have paid for some expensive lessons when I started daytrading these stocks about 2 years ago. Don't let your daytrade turn
    into a longterm investment ;-)

    6. Bread & Butter Stocks :
    These are stocks which tend to work well with many popular technical indicators, support & resistance and have a strong correlation to follow the S&P futures. Many of them can be found among the DJ 30 Industrials, the Nasdaq 100 and S&P 100 stocks and are the preferred objects traded by many professionals.
    However, be aware that moves in these stocks are also affected heavily by program-trading, which kicks in at certain key price-levels and / or fair-value ratio's between futures and the stocks.

    7. Trading stocks on certain price / volume patterns - this is the area, which requires,IMHO, the most knowledge about TA and is subject to a high degree of subjectivity.
    What you might interpret as a certain promising pattern, might just mean - well nothing at all to other traders.

    Since you cannot follow thousands of stocks on a daily basis, even with the best screening tools, you need to describe the desired pattern very accurately with your screening tool's programming language, to enable it to find exactly what you're looking for. Most probably, you'll want to restrict your pattern screening on a watchlist of a few hundred stocks which fit some basic criteria for trading.

    With intraday-screening, there's little time to prepare your trade, because you don't know in advance when the desired pattern / signal will pop up.

    Once a it does, you have to evaluate the situation very quickly and make your decision, or you'll miss the better part of the move.

    Breakout's or reversals at key-pivot points tend to happen fast and on high volume.
    Very often, there are only a few moments left to enter the trade after the signal appeared.

    This is true especially for so called "high probability patterns" as published on many charting websites.
    The only high probability with these patterms is, that so many trades watch for them that they become a kind of self-fulfilling prophecy - at least for a few moments though.
    ( Buy the party, sell the hangover in that case ).

    Good screening eod screening-tools, webbased :

    Get an overview at my website under :

    or here :

    Software :

    Realtime-screeners / software & websites

    Finally, here a simple screen, which I use with Bigeasyinvestor to find daytrading candidates for swingtrading :

    1. Average daily range >= 4 USD
    2. 1 Month average volume >= 800.000
    3. 1 Month average volume <= 15.000.000
    4. Closing price >= 20 USD
    5. beta >= 1

    This screen brings up about 25 - 35 Stocks - from a database of about 8500 issues.
    I guess, that's a number one can handle on daily bases.
    I execute this screen every weekend.
    But most of the time, there are not much changes to make to my list.

    The ususal suspects are :
    Most net stocks have failed to make to my screens since a couple of months.
    Signs of bottoming out on lower volatility ? ( Just a remark )

    Please be aware, that this screen is not for finding any significant entry or exit patterns - it's just for determining stocks which provide enough liquidity and volatility for being good swing-trading candidates.
    Further evaluation and check of the TA landscape is always required !!!

    Hope this helped a bit
    Good Luck

  8. squirrel


    Privateer,,,, and all others,,,, thanks for the replies.... Privateer,,,,in bread and butter section you mentioned that the move in these stocks are sometimes affected by "program trading",,,what did you mean by that? And also,,,how far do you think one needs to delve into the study of TA in order to be able to set up a typical screening program for true daytrading... I guess I'm just overwhelmed by the choices of parameters one has at his fingertips.... I am slowly studying these one at a time.....But even after that,,,there is still a matter of putting them all together for the big picture....Thanks
  9. Privateer nice post

    Program trading are computer generate signals usually done by hedge funds. These are usually executed near the end of the day.

    Squirrel I would study a lot of charts. Human psychology is in those charts, patterns repeat. Learn the patterns. Learn everything you can about money management. A book that you might find useful is Trade Your Way to Financial Freedom (check out reviews here for more info) The next thing to really work on is yourself, human psychology plays a big part in trading.

    Privateer and others there is another style which is finding stocks that don't have a big point range instead a rather tight range such as INTC or MSFT. These stocks don't go 20 points in a day. Usually near the middle of the day they have clearly defined their support/resistance levels. Trading these levels is another strategy

  10. squirrel,

    rtharp has already answered the question concerning program trading.

    For what concerns TA : Well it depends on what you want to achieve.
    For daytrading purposes, I'd say, you need to have a good understanding of the meaning of Support & Resistance, ( Fibonacci retracements & projections in this context )
    the meaning of of important moving averages like the 20,50, and 200 day MA's. Also you may need to learn, how to interpret Times & Sales and Level 2 Orderbook quotes.

    Evtl. you'll like to work with Stochastics and MACD , but I think, that's it basically.
    Chart-reading and working with TA is not a science, it's rather an art which may take years to learn and to fully understand ( if ever ;-) )

    Some traders swear on trading certain chart patterns ( IMHO a highly subjective art of trading )

    A good sources for learning about TA :

    and the new Equis ( MetaStock ) site :

    look here for to start in TA

    You'll find additional educational links under th "Education" section on my website and, of course, here :

    check out also the other 2 education links on this website.

    regards &

    #10     Feb 20, 2001