I’d like to share with you a simple 3 Step Process of Finding Stocks to Trade that have a higher chance of going up in the next 2-3 weeks. This is a process for finding stocks using scanner software. The time frame for holding the stocks is swing trading i.e. anywhere between 2-3 days to 2-3 weeks. For Scanning you can can either use TradingView.com or FinViz.com.
Step 1: The Scanner
First, we run the scanner once or twice a week. You can even run it on a daily basis if you like but won’t make much difference. However, if the stock dips below zero lines for a day or two only (AIMS Wave red bars) and you don’t scan it might be gone before your scanner can pick it and you will miss it.
In this step, we want to quickly go through the list and visually inspect the stocks that have a clean wave 3 and 4 show. It will also pick some really bad-looking pictures. We will ignore those and chose the ones that look ready or ready(ish). In this step, we will use a broad view. We will select the charts we like and add it to the Main Watchlist. In the tradingview platform, you can use the keyboard shortcut ALT-W to add it to the watch list quickly.
Step 2: The Watchlist
After we have gone through the scanner we will now go and check our watchlist. The watchlist might have several stocks from previous scans. They might be not ready yet or perhaps their patterns have further deteriorated and not setting up correctly. We can either keep them on the list and give it more time. Or else we can delete them.
If you are keeping or building a universe of 300-500 stocks then you can keep the stocks instead of deleting them. But if you are going to keep a fresh bunch of stocks every week then you can delete the ones that don’t look good anymore.
In this step, we want to further analyze the stocks that look good on the eye. We will draw our target zones, we will draw our quick 10 seconds Elliott waves. We will investigate if the stock has a good ADR/ATR and a good history.
4 things we will look for in Stock before setting our orders
- Is the picture correct? Is this a good setup 1?
- Is the symmetry of the wave correct? Meaning do we have at least or roughly around 50/50 split (time wise) between wave 3 and wave 4? We don’t want a stock that spikes up say 100 points within 3 bars, creating a wave 3 followed by a 30 days sideways. No, we want to have a stock with e.g. 60 bars of wave 3 and wave 4 where 40 bars were spent in wave 3 and 20 were spent during wave 4. It’s a rough estimate. We rely more on visual inspection instead of the strict number counts.
- Is the target zone at least above the peak of wave 3? Do we have at least 2R space between entry and TZ1? Is the box small enough?
- Does the stock show good volatility? Is ADR value acceptable? Is it moving at least a few dollars a week?
If we like the stock we will go to step 3.
Step 3: Watchlist to Shortlist to Tradelist Process
If all of that is good, then we will consider trading this stock. This is the process of shortlisting a stock.
The Shortlist (Orange Label)
At this point we will attach the ORANGE label to the chart. This will shortlist this stock and we will consider trading it within the next 48 hrs.
The orange list is my shortlisted stocks. Shortlisted stocks are taken from the Watchlist. Once you attach a label to a chart it shows as labelled watchlist in tradingview.
The stocks can go in and out of the orange list. You can still be drop the stock back to watchlist if you don’t like it anymore. E.g. the next day the stock gaps up too much and now it’s not feasible to trade. Or the stock gaps down too much and now it is not a good setup.
Trade List: (Blue List)
Once we take an order and take a trade we then attach the blue label to it. These are stocks that we are currently trading.
The Purple List (Stocks I have missed or traded)
I also keep a purple list. ON this list I keep stocks that I have either taken, missed or still want to keep so that I can further analyse them and learn lesson from.
So, I hope you find this Simple 3 Step Process of Finding Stocks to Trade easy to understand and apply it to your trading. If you have any questions or comments please leave a comment below.