With more than 5,000 stocks and twice as many ETFs and mutual funds to choose from, finding the 5-10 Stock picks with good potential to make you outsized gains can be a daunting task. The average day trader is tasked with the job of identifying stocks with potential to make more than 4% intraday moves in a huge market that runs on sentiment and herd mentality.
For instance, if a company’s earnings report comes in worse than the consensus on Wall Street, the corresponding stock is supposed to fall, while the converse is true for companies which exceed earnings estimates. Yet it’s not uncommon to find stocks of companies rallying after a bad earnings report, based on buying momentum and mysterious catalysts that the market sees as having good potential for future growth.
By the same token, traders are surprised when the stock of a company that beats top- and bottom-line expectations tanks wildly after the earnings report sometimes due to things like unexpected GAAP adjustments (Hint: a high-end Stock Scanner should be able to detect such odds based on historical data).
But these are just some of the idiosyncrasies that the average day trader has to contend with all in a day’s work. And goes to show how capable the market is of defying logic.
Timothy Sykes : Millionaire Stock Trader and Entrepreneur
This is precisely why most day traders use stock scanners to zero in on potential winners. Even the most seasoned day traders will tell you that they make majority of their profits not by using gut instinct but by employing a stock screener of choice.
A good stock screener removes the guesswork from trading by employing complex algorithms to identify potential gainers/losers with an accuracy of 65-75%. Gone are the days when traders traded off a master list of about 50 stocks and endless hours of researching companies, poring through mountains of data, and looking over financial news for random companies. A stock scanner helps you work much smarter.
Free vs. proprietary stock scanners
A stock scanner helps you search for companies that meet certain financial criteria. In its purest incarnation, a basic stock scanner is made up of three main components:
- Database of companies
- A set of variables
- A screening engine that searches for companies that satisfy the trader’s preferred list of variables and generates a list of matches.
In the not-too-distant past, only hedge fund managers and well-established traders had access to even basic stock scanners. But not anymore; today, there are plenty of free stock scanners such as Finviz, StockFetcher, Zacks Stock Screener, MSN Money and others. Many of these free tools are good enough for basic stock screening. But as you might imagine, even the best free stock scanners have their limitations, hence the need for more comprehensive tools for serious traders.
Here we shall compare three popular stock scanners: Finviz, StockFetcher, and StocksToTrade (STT).
Source: Warrior Trading
Finviz is a relatively powerful and easy-to-use stock scanner. The screener gives the user dropdowns for metric values with a good number of categories that allow for fairly specific filters. Finviz has three major sections where the user can add their criteria including Descriptive, Fundamental, and Technical. The screener has 14 views to choose from including Overview, Financial, Valuation, Technical, Performance, Charts, and News. The user can change the view and sort the information type to see the top and bottom ranked stocks on their list.
Finviz is generally easy to use and does not require the user to possess in-depth knowledge of Wall Street insider language. For instance, if you are only interested in stocks that are hitting their 52-week highs, have an ATR greater than 1, and a prescribed volume, just six clicks are enough to filter through a database of more than 7k stocks and produce a workable list of less than 20 stocks.
Perhaps the best part about Finviz is that it’s free. This can be important to a new trader who’s just getting started and needs to keep his or her monthly expenses low. There’s a paid version known as Finviz Elite, which costs $39.50 per month.
But just like any free stock scanner, Finviz comes with its fair share of challenges. Whereas the scanner provides many of the parameters that traders use every day to screen stocks, Finviz’s major drawback is that it does not allow the trader to customize the screen. For instance, the trader is limited to screening for stocks that are up +5%, +10%, +15%, but cannot enter custom values such as 3% or 7%.
Another big drawback of Finviz is that it lacks a historical scanning feature which traders can use to back-test by inputting buy/sell conditions and checking what would have been the outcome in the past. And Finviz also suffers from slow data speeds for some data sets. For instance, it provides great information for nightly scanning but is very limited when performing intraday scans. This slow data feed can keep you out of quicker moving intraday setups and cause you to miss out on potentially profitable trades.
Sample StockFetcher Chart
StockFetcher is another popular free stock scanner. Unlike Finviz, which cannot be customized, StockFetcher allows you to create your own stocks screens by typing in the specific information you would like to screen. StockFetcher also features a web-based back-testing tool.
The free version of StockFetcher allows you to see only five stocks in the results. To view all the stocks in the search results, you need to upgrade to the $8.95/month and $16.95/month versions. Quarterly packages are also available at a small discount.
But just like Finviz, StockFetcher has some major drawbacks. For starters, it can only be used with stocks but not forex. It also does not provide intraday (minutes, hours) charts, which might not be a big deal for swing traders but obviously limits its usefulness to day traders. The screen only operates on daily and weekly time-frames. Further, the scanner lacks real-time screening capability. Intraday measures are based on delayed updates made during market hours. Results are delayed for 15 minutes for NASDAQ stocks and 20 minutes for NYSE, AMEX, and stocks on other exchanges. The company says on its Help page that it has no plans to introduce intraday measures and charts. Obviously this is bad news for day traders.
Although StockFetcher allows for back-testing, the ability is quite limited. The most expensive plans allows you to back-test for 2-year periods.
StocksToTrade, or simply STT, is a leading proprietary stock scanner. It ranks as one of the latest and most sophisticated stock scanners on the market today, and works equally well for both new and experienced traders. The scanner was designed by millionaire penny stock trader and stock guru, Timothy Sykes, a highly specialized trader who mastered the intricacies of penny stock trading.
STT is essentially a stock scanner created by a real trader based on years of first-hand knowledge and experience. The software excels in three main areas that are a major concern for day traders: data research, stock charting, and trade execution.
The platform comes with virtually everything a trader needs to trade successfully including a suite of charting tools, a host of dynamic technical indicators, stock chart overlays, real-time displays of top gainers/losers, headline news, stocks hitting new highs/lows, and recent SEC filings. The scanner features a very comprehensive database of more than 16,000 stocks that Mr. Sykes has personally filtered to match his proven money-making trade strategies. The scanner allows you to use the pre-programmed scans or create your own custom stock screens.
It’s most outstanding feature, however, is the Oracle. This is a unique feature that automatically detects and alerts you to stocks with profitable setups. The Oracle uses the scanner’s proprietary algorithms to find such stocks. This tool not only tells you the right stocks to trade, but also calculates the likely size of gain/loss thus allowing you to buy long or sell short.
Another useful feature is the in-built paper trading tool that allows you to simulate real trades without using real cash. This is an important feature for new traders who need to practice first without risking wiping out their accounts.
STT comes with a 7-day trial period for only $1, after which you can upgrade to a $149.95 monthly plan or $1,499.50 annual plan. The annual plan is actually very cost effective because it means you are getting two months for free.
Some traders worry that STT is not a broker platform. But you need not worry because it seamlessly connects to several brokerage accounts and allows you to trade directly from the platform.
In summary, STT stands out from anything available in the market due to the sheer completeness of the scanner. It is the only scanner that features research, charting, and trade execution under a single platform. Its unique Oracle is a highly valuable tool that you simply cannot find in any another scanner. For just a buck for a test drive, you can be on the way to joining the elite top 1% of day traders who make millions trading stocks, options, and forex.
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