Scanning for Stocks: The Basics
Last updated
Last updated
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Have you ever found a stock that has gone through the roof and wondered “if only I'd found out about that stock before it took off!” to yourself? We've all been there, some of us more often than we'd like!
No matter what the overall market is doing, there are always stocks out there doing interesting things, such as making new highs, having pivotal crossovers or breaking out of old trading ranges. With thousands of stocks to choose from and hundreds of indicators and patterns available, trying to find the interesting ones is virtually impossible. There is just too much data to process without help.
This is the exact problem that the StockCharts Scan Engine solves. The Scan Engine will allow you to sift through thousands of stocks to spot these golden opportunities that you've been missing, which makes it one of the most powerful tools available to you on StockCharts. Taking the time to learn how to use the Scan Engine effectively may be one of the most profitable decisions you will ever make.
The Scan Engine takes a vast amount of price data and applies your filtering criteria to select only those stocks that you are interested in. Those results can then be displayed in a number of different formats for further analysis. The following illustration presents an overview of the various components of the scanning process:
As you can see at the top of the diagram, data for thousands of stocks is contained in the Scan Engine. Users create search criteria using one of the two workbenches provided; that criteria is then used to filter these millions of data points down into a result set. The result set is the list of all the stocks that satisfy your search criteria. Once you have a result set, you can move that data into a number of additional formats for further analysis.
Our Scan Engine contains 3000 daily data points (roughly 12 years) for each of the 50,000+ different stocks, indices and mutual funds that we track. This price data can be used to calculate values for several different technical indicators. (Note that scans using indicators that require more than 12 years of data will lose accuracy.)
The Scan Engine allows users to create scans based on Daily, Weekly and Monthly bars. It does not support scans based on intraday (1-minute, 5-minute, etc.) bars.
The first update for the Scan Engine usually begins at 9:31 AM Eastern Time. Because of the vast amounts of data involved, all scanning systems work with datasets that are slightly older than “real-time.” When the market is open, our Scan Engine is continually updating the final data point for all of the stocks and indexes that it tracks on a rotating basis. When a member runs a scan based on the “Last Intraday Update,“ the Scan Engine will use a final daily data point that may be up to three minutes old, depending on when the scan is run.
AS a StockCharts member you can create and run custom technical scans with whatever technical criteria you want. StockCharts offers two workbenches for creating custom technical scans—Standard Scan Workbench and Advanced Scan Workbench. Both workbenches are designed to help you quickly and easily construct custom scans by selecting pre-created scan clauses and adding them to your scan.
If you're using the Advanced Scan Workbench, you'll insert pre-created scan criteria into your scan from dropdown menus, then customize the criteria to suit your specific requirements. This provides a great deal of power and flexibility to create specially tailored scans for you but it does require time and effort to master. For more information on using the Advanced Scan Workbench to create custom scans, please see our Advanced Scan Workbench article in the Support Center.
The Standard Scan Workbench is easier to learn than the Advanced Scan Workbench but is limited to simple scans. However, it's a good educational resource for learning to write scans. For more info on the Standard Scan Workbench and how to convert standard scans to advanced ones, please see our Standard Scan Workbench page in the Support Center.
StockCharts also provides a large collection of Predefined Scans that run throughout the day. The results from these predefined scans are available for anyone to review. In addition, StockCharts members can open the scans in the Advanced Scan Workbench to learn how they are constructed. A link to the predefined scan results is located on the Charts & Tools page. For more information on predefined scans, please see our Predefined Scan Results article in the Support Center.
In the Advanced Scan Workbench, you can add various criteria—simple or complex—to your scan. Below are a few scanning strategies that are especially handy to have in your toolkit.
A trend change is often signaled by one line crossing over another. This can be a bullish signal or a bearish signal. Common crossovers consist of indicators such as moving averages, MACD signals, or Stochastics. A crossover occurs when indicator A is greater than indicator B today but was less than indicator B yesterday.
Cool Tip. The cross operator allows you to add crossover signal criteria to your scan.
You may want to know an indicator's highest or lowest value over a certain period, i.e., a 52-week high or low. You may also wish to know what the highest volume level was over the previous week or the lowest RSI value in the last month.
Cool Tip. Use the Min/Max function to identify high/low values.
Another common strategy is to determine if a price or indicator value is within a specific range of values or is a multiple of another value. For example, we may want to know when a stock's price is within 5% of its 52-week high or when volume is 25% higher its average volume. These percentages can be found with simple arithmetic operators. Multiplying a value by 1.05 will identify values 5% greater than said value while multiplying it by 0.85 will find values 15% less (1.0 - 0.15).
Divergences occur when price is going in one direction and an indicator is moving in the opposite direction. This indicates that a trend change may be about to occur. For example, if the price is going up while the RSI is going down, it's a negative divergence, suggesting the price may soon drop. A positive divergence is the opposite: price is falling while other indicators are rising.
There are many ways to scan for stocks or ETFs. However, before starting to write any scan clauses, it is important to decide at a high level what you want to find with your scan. For more information on choosing the right criteria for your scan, please see our Planning Scans article in the Support Center.
The Scan Engine is one of the most powerful tools available at StockCharts. Learning the nuances of scanning as it relates to your investment objectives takes time. However, the time you will save in the long run by finding more winners quickly will vastly outweigh the time spent learning. The key to becoming an expert scanner is to experiment with different ways of finding your best leads.
