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How to Scan Stocks for Swing Trading

A stock scanner is an automatic tool that searches the market for stocks that meet a specific set of predetermined technical and fundamental criteria. Fundamental scanners include financial indicators related to a particular business operation. This may be the market capitalization, P/E ratio, revenue, dynamics of income, etc. Technical scanners may contain specific candlestick patterns, price notifications, the percentage of the price change, and other parameters that take into account exclusively the behavior of the stock price.

Given modern high-speed technologies, one can use scanners to find good market conditions and trading signals. Scanners can help to find good opportunities for making money, but for inexperienced traders, this can turn into excessive trading of irrelevant stocks. Although the scanning algorithms are now quite developed, you need to remember that their results give only a list of shares that are potential candidates for trading. You still need to analyze these shares and then make a trading decision yourself.

The scanner’s purpose is to find several stocks that are ready for the transaction with a high probability of success. A combination of carefully selected criteria and the scanner will help filter out noise to find stocks that are worth consideration. To achieve this, you need to have several basic and several special criteria. Most scanner programs already have predefined settings, but they require adjustment to the trading style of a particular trader; otherwise, it is impossible to achieve maximum efficiency.

Using Scanners in Your Swing Trading Strategy

All swing traders have their own trading style, strategy, preferred type of stocks, and selection criteria. A good scanner should be considered a continuation of a trading strategy. It is necessary to adapt it in accordance with your rhythm of trade, market industries, style, and other factors. 

Traders need to specify at least a trading volume, price range, and country. The main rule: inexperienced traders should go for a larger average daily volume, which will ensure good liquidity. Taking this parameter into account helps to prevent slippage. The size of your trading account will be the main determiner of the price range. As for the special criteria, they depend on how well the trader understands what he or she is looking for.

When integrating stock scanners into your trading, it is important to remember that any scanner is only a supplementary tool for a trader. As with any other tool, its effectiveness largely depends on the user. You should not expect the scanner to somehow magically provide you with great deals. The scanner, however, will allow you to find opportunities for trading more effectively.

Swing Trading Strategies for Stocks

Swing trading is based on a technical methodology for determining the duration of a previous market swing in relation to the technical structure of the market and predicting the next swing. The main advantage of swing trading is that you can make a profit no matter what direction the market is moving. When you scan stocks to find those that offer great swing trading opportunities, you need to enter criteria that follow the rules of the particular strategy you are using. The following trading strategies are popular among traders who swing trade stocks.

  1. Pullbacks

A pullback is a stock’s short-term move in the opposite direction of the longer-term trend. This gives an opportunity to join an uptrend at a relatively advantageous price. The idea of this strategy is to always trade short-term pullbacks that occur during the long-term trend.

2. Short-selling

A short position is a bearish or negative asset transaction. Instead of buying at a low price and selling at a high, you sell at a high price and buy at a low – and profit from the price difference. The goal of this strategy is to later buy these shares at a lower price and receive a profit equal to the difference between the initial selling price of the stock and its “buyback” price.

3. Moving average crossover

A moving average crossover occurs when two or more moving averages intersect, confirming a change in the market trend. This happens when significant price changes occur, pushing the lines up or down and thus causing them to intersect. The most popular signals of moving averages are their intersection with the price or their intersection with each other. The crossing of the price by the moving average up gives a buy signal, down – a sell signal. The intersection of the slow-moving average by a fast from the bottom up gives a buy signal, from top to bottom – a sell signal.

4. Hammer candlestick pattern

The most common and easiest to interpret candlestick pattern is the Hammer pattern. The model consists of only one candle, but at the same time, it gives fairly accurate signals. It shows that a stock is nearing a bottom in a downtrend. The Inverted Hammer also forms in a downtrend and represents a likely trend reversal or support.

5. Breakout strategy

A breakout strategy is where you take a position on the early side of the uptrend. Breakout traders are looking for strong stocks. They buy when the stock has just made a breakthrough, and follow it up because high volume breakouts are usually strong buy signals, especially in bull markets. These traders can sometimes find stocks that travel amazing distances in the shortest periods of time.