How to Scan for Stocks to Day Trade - Beginners Lesson 7 of 8

Introduction

In this video, the speaker introduces Lesson 7 of 8 in the Beginner's Trading Guide. The importance of scanning is discussed and how it can help traders to be more prepared.

Scanning: What is it?

• Scanning is a process that helps traders to break down thousands of setups into only a handful.

• Different traders have different types of scans and results depending on their trading style.

• Scanning allows traders to be prepared for certain actions so they can react with conviction or confidence when needed.

Why is Scanning Important?

• Preparing gives traders the confidence to take trades when they see them.

• Scanning allows traders to view charts at least once prior to jumping into a trade, giving them a general idea of what the chart looks like before entering.

• Having familiar patterns and setups that you're familiar with is important for successful trading.

Conclusion

Scanning is an essential part of trading as it helps traders prepare for potential trades and gives them the confidence to act when necessary. It also allows them to view charts beforehand, making them more familiar with potential trades.

Different Accounts for Different Strategies

In this section, Nate explains the importance of having different accounts for different trading strategies. He suggests that traders should ask themselves certain questions before jumping into a trade to determine which account is best suited for their strategy.

Importance of Separate Accounts

• If you're looking at a bigger picture idea, it may be good for a separate account.

• If you're looking at an even bigger picture idea that may not be a day trade or a couple of day trades, but something that you feel is a week or two weeks or maybe even a month out, it might be good to store it away in your 401k.

• Having different accounts for different strategies helps to avoid staring at every single tick and making impulsive decisions based on short-term movements.

Account Selection Based on Trading Strategy

• For day trades, Nate typically uses Wedbush or et Cie in his Centerpoint accounts and cashes out overnight.

• For potential gap plays or trades he wants to hold overnight or longer than just a typical day trade, he puts them into E*TRADE where they are on a separate monitor from his main one.

• For potential breakouts that he thinks will take several weeks to move, he puts them in his 401k account and manages them there without watching every single tick.

Managing Risk with Different Account Sizes

• The longer Nate plans on holding a stock, the less size he uses on that trade. For example, if he wants to trade 1000 shares intraday with defined risk, no problem. But if he wants to swing something of the same ticker then it might be two to three hundred shares because the risk is less defined and he will be holding it for a lot longer. In his 401k account, it might be 100 shares or something like that.

What Makes a Chart Interesting

In this section, Nate discusses what creates the biggest audience on a stock chart and the importance of lining up multiple timeframes.

Creating Interest in a Stock Chart

• The biggest audience on a stock chart is created by news events, earnings reports, and technical breakouts.

• Lining up multiple timeframes is important because it helps to mitigate some of the unknown risks associated with holding stocks for a longer amount of time.

Trading Strategies for Breakouts and Momentum

In this section, the speaker discusses his preferred trading strategies for breakouts and momentum. He emphasizes the importance of liquidity and volume in selecting stocks to trade.

Multiple Time Frame Breakout Strategy

• A daily chart setting up for a major breakout coupled with an intraday ABCD breakout creates a bigger audience.

• Liquidity is important when looking for stocks that are trading a lot of volume on their own.

• Scanning the night before can help identify charts nearing either a breakout or breakdown, allowing traders to react faster when they see them intraday.

Shorting Overextended Names

• Look for overextended stocks that have broken out of some type of consolidation and continue to head higher without correcting.

• When these stocks start to speed up to the upside in a parabolic move, there is usually a pullback that traders can take advantage of.

Breakout or Breakdown off Consolidation

• When a stock is flatlining for some period of time, it could be considered consolidation or stuck in some type of range.

• When it breaks out of that range, there's a good chance that whatever candle it makes will be bigger than the previous range.

• These setups are often preceded by increasing volume that slowly builds up into a major volume day.

Finding Trades Using Finviz

• Finviz is a free website that provides technical tools for scanning potential trades.

• It allows traders to run real-time quotes throughout the day without any delay.

Introduction to Finviz

In this section, the speaker introduces Finviz and its features.

Features of Finviz

• The speaker suggests paying for Finviz as it produces great results.

• You can see all the charts on one page or 10 charts per page.

• The homepage has useful information for checking out stuff intraday, such as abnormal volume and range.

• The screener has presets saved that filter for charts that are interesting.

• Nate goes through all of these charts daily and narrows them down into eight to twelve that he thinks are interesting.

• There is a dumper scan preset that shows stocks getting beat up that might be on watch for a bit of a bounce.

New Scanners and Trading News

In this section, the speaker talks about new scanners and trading news.

New Scanners

• There are many new scanners available with different terminals and plugins for brokers.

• Be cautious when using news to trade since it isn't always black and white.

• Positive news may not meet expectations, causing the stock price to go down.

• Stocks with catalyst coming up may have already priced in positive press releases.

Conclusion

The speaker encourages viewers to give him a thumbs up if they enjoyed the video. He also invites viewers to email him if they have any questions or want to join the Investors Underground community.

The Importance of Chat Rooms and Scanners

In this section, the speaker discusses the importance of chat rooms and scanners in trading.

Chat Rooms

• The speaker relies on chat rooms to identify important news.

• Different people in the chat room bring different expertise, which is helpful for identifying potential trades.

• Investors Underground is a high-quality chat room that provides useful information without off-topic chatter.

Scanners

• The speaker uses live scanners such as Hiya Day List, Equity Feed, and the chat room to identify potential trades.

• Hiya Day List shows stocks hitting all-time highs or lows, while Equity Feed is customizable to show whatever you want to see.

• The speaker mainly trades off top percentage gainers list from scans at night.

• Too many scanners can lead to missing trades or trying to trade everything seen.

Overall, the speaker emphasizes the importance of having a reliable source for news and expertise in trading. Chat rooms provide valuable insights from different perspectives while scanners help identify potential trades. It's important not to rely too heavily on scanners and instead focus on a few key sources.

Trading Tools and Resources

In this section, the speaker discusses the tools and resources he uses for trading, including scanning at night and monitoring chatter on Twitter.

Scanning at Night

• The speaker scans for potential trades at night.

• He uses a tool called "the chatter" to monitor stock discussions in chat rooms.

Using Twitter

• Twitter is a useful resource for finding out why stocks are moving.

• The speaker recommends following people who are worth watching on Twitter.

• However, he warns against listening to or asking for advice on Twitter.

Former Runners

• The speaker notes that many of the stocks he trades are former runners.

• These stocks often cycle through periods of growth and decline.

• Knowing a stock's history can help traders avoid underestimating it on the short side or take advantage of momentum on the long side.

List of Former Runners

• The speaker notes that there is no comprehensive list of former runners available.

• He advises traders to stay aware of changing trends in the market rather than relying on outdated lists.

Scanning Strategies

In this section, the speaker discusses different scanning strategies and how to choose the best one based on your personality type.

Choosing a Scanning Strategy

• Determine where you fit in the market to guide which scanning strategy is best for you.

• If you're proactive, focus on preparation the night before so that you know what you'll be trading the next day.

• If you're reactive, use a live scanner and chatroom to follow action and see if anyone's talking about stocks that you might want to trade.

Patience and Diligence

• Have diligence to do your homework, go through all charts, make sure you know what you want to trade.

• Have patience to ensure that it sets up intraday and the chart represents a very solid reward-to-risk before entering the trade.

Choosing a Trading Subscription Service

In this section, the speaker talks about choosing a trading subscription service.

Key Points

• The next video will discuss choosing a trading subscription service.

• For questions or help with trading, reach out via email.