The best stock market scans for short-term swing and day traders
If you’re looking for new stock scans and trade setups, then you’re in the right place!
We’ve been creating scans and screeners for ourselves and for other traders since 2012 and one of the most popular questions we receive is, ‘which scan is the best?’ In this blog post, we’re going to answer that question for you, explain why it might not be the same for everyone, and give you some context on how to figure out the best stock market scans for you.
Let’s get started with the basics.
What is a stock scan?
A stock scan, often also called a stock screener, is a script, piece of code, or filter that traders use to narrow down a large universe of stocks to a smaller list. Stock scans are synonymous with trade setups, which is a critical component of a trader’s trading strategy.
A stock scan (screener) will give you a list of stocks that meet pre-defined criteria based on price action, technical indicators, moving averages, etc. Here’s an example taken from our guide on scanning for breakout setups of 7 conditions all combined together in one scan with the purpose of finding bullish stocks hitting 52-week highs:
The goal of using stock scans is to find the types of stocks you specifically care about, and, often for technical traders, the purpose is to refine their timing so that they are entering a stock before it moves in their desired direction.
Beginner example: want to buy a stock at $30 per share and sell it an hour later for $31? I’m sure you do — we all do!
One approach you can take is to review as many previous chart examples of that scenario happening, writing out the technical picture of what the stocks look like at the start of those moves, and then put that criteria into a stock scan so you can find those starting points going forward as they are happening in real-time.
Getting familiar with different types of stock scans is a great skill for traders to develop as it makes for extremely efficient use of time. Instead of manually looking through 3,000 charts, you can click one button and instantly get back the handful of patterns you actually care about, leaving you with more time to prepare and plan your trades.
There are a handful of different platforms on which you scan for stocks, but our favorite is Worden TC2000 due to its comprehensive scanning capabilities. We have a large library of pre-built stock scans that are available for you to download right now and we’ll highlight a handful of them as examples throughout this article.
Categorizing the best stock scans
As we mentioned above, a stock scan is simply a set of criteria used to narrow a large universe of stocks. Because there are infinite combinations of technical and fundamental criteria traders can screen on, we find it helpful to group stock scans into categories based on the types of stocks (or patterns) they’re programmed to find.
The great part about categorizing scans like this is that they translate across time frames. Do you like to trade stocks at new highs? Day traders and swing traders alike can enjoy those trade setups on their respective time frames.
The best breakout stock scans (momentum)
The first category of stocks we’re going to look at is breakout trade setups. These tend to be the most common setups we see traders scanning for and there are a lot of ways to define these scans. Some of the more popular approaches include:
- Fresh 52-week highs
- Breakouts of horizontal resistance
- Chart pattern breakouts
- Moving average cross overs
- New highs in RSI or MACD
- High volume breakouts
- Price gap ups
Here are some actionable breakout scans you can learn more about and download from our TC2000 store:
Why are breakout scans great? They identify stocks that are in the process of moving in the direction you want them to go. In other words, a trader is getting immediate price confirmation that the stock is moving in the direction they’re looking for. For this reason, breakout scans are classified as momentum trades (or setups) since the stock is moving in a continuous direction.
The best reversal stock scans (reversion to the mean)
Next up are reversal stock scans and in a lot of ways they are the exact opposite of breakout scans. These are stocks that have been trending in one direction but are now showing signs of reversing. Instead of traders looking for price confirmation and momentum, they are looking for exhaustion, mean-reversion, and a change in trend direction. Common reversal stock scans include:
- Breakout failures
- Engulfing candlestick patterns
- Pin bars and hammer candlesticks
- Moving average crossovers
- Momentum divergence setups
- High volume reversals
Here are some actionable reversal scans you can learn more about and download from our TC2000 store:
Why are reversal stock scans great? They won’t give you the same level of confirmation as breakout scans but they do generally offer price improvements (aka better entries) in a new emerging trend. Instead of chasing momentum and being a little bit late to the party, traders are essentially betting on being first in line to a change in market character that others may have not realized is happening yet.
The best consolidation stock scans
This next category of scans is a popular starting point for a lot of traders because it provides versatility and planning for a handful of different trade opportunities. Consolidation screeners look for stocks that are slowing down, moving sideways, and contracting in price. Some examples include:
- Sideways range
- Lower volume consecutive days
- Smaller range of consecutive days
- Bollinger band squeezes
Here are some actionable breakout scans you can learn more about and download from our TC2000 store:
Why are consolidation scans great? They give you time to plan the type of move you’re expecting the stock to make once it comes out of consolidation. For instance, if you’re a breakout trader, and you want to be prepared ahead of time for the move, making a watchlist of stocks consolidating is a great idea. On the flip side, reversal traders can look to trade reversals at the extreme ends of the consolidation until the stock shows signs of breaking out, or maybe you’re an option seller that likes to sell OTM calls/puts beyond recent highs and lows.
The best fundamental stock scans
Last but not least, we’ll put all flavors of fundamental screening criteria together in one category. Fundamentals can yield very different types of stocks, from dividend payers to value companies, all the way to growth stocks. Here are some examples:
- Strong sales growth
- Low PE stocks
- Strong free cash flow
- Founder led companies
- High dividend payouts
- Low debt ratios
Why are fundamental stock scans great? They tell you a lot about the type of stock you’re looking at. Longer-term investors and position traders tend to appreciate this set of criteria a lot more as they might be interested in establishing a position in companies that meet their criteria for a long time horizon hold. Oftentimes, fundamental criteria isn’t so actionable for short-term traders, however, including a base set of fundamental criteria combined with your technical conditions often yields powerful results, in fact, this is exactly what we do with our weekly curated TR150 Watchlist.
The best stock market scans for swing traders and day traders
Hopefully, by now you have a greater appreciation of all the different stock screeners available to you. Choosing the best stock scans will come down to these two important concepts:
- You need to know yourself (sounds cheesy but keep reading)
- You need to know the type of environment you’re in
Select the best stock scans by knowing yourself
The reality is, every strategy, stock scan, pattern, etc. will go through periods of generating strong performance and then underperformance.
One of the biggest challenges for traders is getting through the drawdowns and not throwing in the towel during the bad times. This has always been the central risk for traders — can you avoid blowing up your account and sticking with your process during unfavorable times? — whether that’s a bear market, a choppy market, or an extremely volatile market.
The only way you’ll be able to sit through uncomfortable periods of trading performance is if you have confidence in the strategy (trade setup) you’re trading.
If you’re not someone who is comfortable buying breakouts at all-time highs, but your favorite stock market guru on Twitter is telling you that’s the sure-fire way to profitability, then as soon as that setup starts to let you down and results in some losing trades, you’re going to want to give up on it immediately.
Finding a trade setup that resonates with you, where you understand the psychological drivers of that setup – and it’s underlying edge – is what you need to be on the hunt for.
If you’re someone who likes to be early to moves or if you’re someone who likes being contrarian and wants to get ahead at turning points for the new developing trend, then chances are reversals, pullbacks, and value stocks are probably going to be a good fit for you.
Select the best stock scans based on the market environment
It’s not just knowing yourself and having confidence in the trade setup you’re using.
Each of the categories of stock scans we described above are very different from one another, and in many cases, will produce very different results depending on the market environment you have in front of you. For instance, when you get a strongly bullish market environment where nearly every stock is moving up, momentum and breakout setups are going to be some of the strongest-performing trades during these periods.
Why? Because there are going to be more setups presenting themselves and they’re highly likely to follow through and continue their momentum, aka make money.
On the flip side, picture in your mind, a sideways range-bound market that doesn’t have any strongly trending tendencies behind it.
During these environments, breakout trade setups are much more likely to fail and mean revert back to the average of a stock’s recent prices. In these situations, reversals are going to be a lot more actionable and “in line” with the overall structure and mood of the market environment.
Figuring out the best stock scans to use is a two-fold exercise of knowing yourself and knowing the type of environment you’re in. When you can optimize on both, then you’ll be in a great position to make some money.
More about Trade Risk’s stock scans
Now that you have a lot more context about why stock scans are useful, the different categories (choices) of scans, and how to choose the best stock scans for you, we invite you to browse through our store of 30+ pre-built scans and solutions. Every scan you see in our store will have more information about how it works and/or an accompanying video demonstration when you click on its individual page.
Please keep in mind, you will need to have a subscription to Worden TC2000 software gold level or higher to use anything you see in our store since all of our screeners act as a plug-in to TC2000’s software. We recommend new traders start by downloading some of our free products to get started that way.
We hope you enjoyed this walk-through on the best screeners available, and if you have any questions or comments leave them below or contact us.
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Posted in Article, Stock Selection, Trading Education, Trading Strategy
Tagged with 52-Week Highs, Breakouts, Chart Patterns, Day Trading, Discretionary Trading, Entries and Exits, Leading Stocks, Mean Reversion, Momentum Trading, Price Action, Pullbacks, Stock Scans, Swing Trading, Technical Analysis, Technical Indicators, Trade Setups