How to find your best stock pick for the day

Scanning for short list of possible candidates for your best stock pick is a daily routine done by every trader every day or several times a week.

This job could be divided into two parts:

• First part can be automated and done by some stock pick or stock analysis software or web site screener. Result of this first step is list of possible stock picks which should be reviewed in second step.
  


• Second part should be done manually by personal and individual reviewing of  every stock chart in list. Do not worry, when you will practice basic rules and reviewing, you will be able to make individual selection very quickly.

First you need to define general rules which are independent on any stock trading strategy or system. I personally have these fixed rules:

1. stock price has to be over 5 USD
2. average daily volume has to exceed 450000 shares.

Next rule is relative to trade type - whether I plan long or short trade:

• Price has to be over 50EMA ( exponential moving average ) for long trade setup or below for short trade setup

Hey, great . This is first complete set of rules which can be used independently. I personally use them for trades based on my Sector trading strategy.

But now we will follow to define another rules to have complete scanner for potential profitable stock picks.

I like to use support and resistance . Breakout and also Pullback strategies are based on them. Therefore I want to have scanner which will find stock with price near significant level of support or resistance. I defined such level as last 3 month maximum or minimum of stock price. My scan rule is to find stock with last price in distance less then 5% then 3 month maximum or minimum.

Volume plays important role in simple stock trading and analysis so I recommend to include special volume rule into scanner. This rule is based on condition that we are looking for stock which is picking up. So the rule is to find stock which had above average volume sometime during last 20 days.

Well, the list of all rules is here:

1. stock price has to be over 5 USD
2. average daily volume has to exceed 450000 shares
3. price is over (for long trade) or below (for short trade) 50EMA
4. price is not far then 5% from 3 month maximum (for longs)or minimum (for shorts)
5. stock volume exceeded average volume sometime during last 20 days

Simple 5 rules which allow you to find your best stock pick for next trading day. Automatically.

You can define such rules in your technical analysis software. I like AmiBroker very much and I think it is best software for stock pick and for stock analysis.

If you like it too and want to receive these scanners for free with already written formulas for AmiBroker scanner in AFL language, just fill this form:

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