Let’s break this down simply, step by step, to make sure you understand how and why we use Trade-Ideas scanners as a new stock trader.
What is a Stock Scanner?
A stock scanner is like a radar. It continuously looks for stocks that meet certain conditions or behaviors (like price movement or high volume) and alerts you in real-time. Think of it as having thousands of eyes on the market, helping you spot opportunities faster than doing it manually.
What Do the Columns in a Scanner Mean?
Here are the key columns in a typical stock scanner and what they tell you:
Price: The current trading price of the stock.
Volume: How many shares have been traded so far today. High volume means lots of interest in the stock.
Relative Volume (RVOL): Compares today’s volume to its normal volume. An RVOL of 2 means the stock is trading twice its usual volume, which signals unusual activity.
Short Float: The percentage of shares that have been sold short (traders betting the stock will go down). A higher short float can lead to a short squeeze.
% Change: How much the stock’s price has gone up or down, shown as a percentage.
Gap %: How much the stock’s price changed between yesterday’s close and today’s open (this is key for gap scanners).
Why Use a Scanner?
In day trading, time is money. You need to know quickly when a stock is making a big move. Stock scanners, like the ones in Trade-Ideas, can tell you when a stock might be ready for a trade—such as when it's starting to break out or when a lot of traders are showing interest. Without a scanner, you’d be digging through thousands of stocks blindly.
When Should I Pay Attention to a Stock on the Scanner?
You want to look at stocks that meet certain criteria, like:
Big Price Movement: If the % Change or Gap % is high (e.g., over 3% up or down), it could be a sign the stock is moving significantly.
High Relative Volume: If RVOL is higher than 1, the stock is trading more than usual. For example, if RVOL = 3, that means 3x its normal activity, which is a red flag for potential action.
Breaking through Levels: If a stock is making a new high, hitting resistance, or showing a breakout, it could be a good time to trade.
What is a Gap Scanner?
A gap scanner looks for stocks whose price jumped up or down between yesterday’s closing price and today’s opening price (this is called a "gap"). For example:
Gap Up: If the stock closed at $10 yesterday but opened at $12 today, that’s a 20% gap up.
Gap Down: If the stock opened lower than yesterday's close, it’s a gap down.
Gap scanners help you find stocks that might be reacting to overnight news, earnings reports, or big changes in sentiment.
What is Short Float?
Short float tells you the percentage of shares that are being shorted (borrowed and sold with the expectation that the price will fall). If a stock has a high short float (e.g., over 20%), it means a lot of people are betting against it. This is key for potential short squeezes, because if the stock starts to go up, those traders may have to buy shares back, pushing the price even higher.
What is a Short Squeeze?
A short squeeze happens when traders who were betting against the stock (shorting it) are forced to buy the stock to cover their positions because the price is going up instead of down. When this happens, it can push the stock price even higher, creating a big upward movement. Stocks with a high short float are at risk for a short squeeze.
What is Relative Volume?
Relative Volume (RVOL) shows you how much trading activity a stock has compared to its usual volume. If the RVOL is 2, the stock is trading at double its usual volume, which often signals something important is happening (like news, a breakout, or unusual interest from traders).
How Do I Identify What Stock to Trade?
To identify a stock to trade using Trade-Ideas scanners, follow these steps:
Set your criteria: Look for stocks with strong volume (high RVOL), significant price movement (high % Change or Gap %), and potential breakout patterns.
Watch for breakouts: Use your breakout scanner to find stocks breaking key resistance levels on high volume. Combine this with momentum alerts to catch fast-moving stocks.
Check short float: If a stock has a high short float and starts going up, it could lead to a short squeeze, which means even more upward momentum.
Confirm with Relative Volume: Stocks with an RVOL over 2 or 3 are usually worth investigating. The higher the RVOL, the more unusual the activity, which often leads to sharp price moves.
Example:
Let’s say you see a stock in your scanner with:
Price: $15
% Change: +122%
Volume: 10 million (high for this stock)
RVOL: 25 (this stock is trading at 25x its normal volume)
Short Float: 25% (a lot of people are shorting it)
This stock could be a great candidate for a breakout or short squeeze, especially if it’s trading near a resistance level.
The key is using these scanners to filter out noise and focus on stocks with the right mix of price movement, volume, and potential for quick profits!