Filters I Use to Create My Universe of Tradable Stocks

I was recently asked about how I determine my “universe” of stocks. That is the stocks that I consider fair game to be traded. I use different filters for swing trading and day trading but they do have similar criteria. In both cases I’m trying to find liquid, volatile stocks. Once the filter’s applied I then look for certain patterns / setups to trade.

For swing trade candidates I use the following criteria in TeleChart:

  • Price Per Share: about $5 to Max
  • 5 Day Average Volume: 75th percentile & higher (right now that works out to about 466,000 shares per day)
  • Price Volatility: 25th percentile & higher
  • Volume (Dollars) 5-Day: 75th percentile & higher

Here’s a shot of the filter. The count column shows how many stocks are left after applying each row in the filter.

That typically narrows the market down to about 1,000 stocks. Then I look for setups among that set of stocks. I gave a lot of details about the setups I scan for back in the day.

For day trading I’m trying to find liquid stocks which are abnormally active and volatile. To do that I use the following two scans in Trade-Ideas:

Bearish Scanner’s Filter:

  • Min Price: $10
  • Max Spread: 10 cents
  • Min Current Volume: 3 (stock is on pace to trade 3 times its normal volume today)
  • Min Volume Today: 300,000
  • Max Up from the Close: -0.5% (negative means down at least 0.5%)

Bullish Scanner’s Filter:

  • Min Price: $5
  • Max Spread: 10 cents
  • Min Current Volume: 3 (stock is on pace to trade 3 times its normal volume today)
  • Min Volume Today: 300,000
  • Max Up from the Close: 1%

Sometimes I’ll tweak these settings to give more or fewer alerts. I usually do that by adjusting the “Min Current Volume”. Details about the actual alerts & setups I track for daytrading are on my “how I work” page. If you use Trade-Ideas you can paste the following link into the “Collaborate” feature and load that filter and all the alerts I track:

Bearish — grab the URL of this link

Bullish — grab the URL of this link

Comments

  1. Posted by Nick on September 24, 2008 at 10:52 pm

    Thanks Mike.

  2. Posted by pythagoruz on September 25, 2008 at 12:00 am

    Ty Mike

  3. Posted by Scott on September 25, 2008 at 7:55 am

    Mike – Thanks for a great blog and your insights. One minor point – the volume scan for TC2007 is in hundreds, not thousands – so the scan is really for 466 thousand shares, not 4.6 mil for the 5 day average volume.

  4. Posted by Steve C on September 25, 2008 at 8:07 am

    Mike rocks! I love Trade Ideas, and they can thank you for my loyalty.

  5. Posted by Steve C on September 25, 2008 at 8:11 am

    Mike, I have a question for ya! It seems I’ve been getting stopped out a little too much lately. Do you use a multiple of the ATR for your stops, or are you buying/selling at resistance levels and placing stops under/over those levels?

  6. Posted by Michael on September 25, 2008 at 8:18 am

    Good catch Scott. I don’t know how I typed 4.6 mill instead of 466,000. It’s been fixed.

    Steve,

    No, I’m not surprised given how choppy & volatile this market’s been. I just use support/resistance to place my stops. My win rate hasn’t changed lately but I also cut my trading way back at the beginning of last week.

  7. Posted by Scott on September 25, 2008 at 8:03 pm

    Mike,

    I appreciate your ongoing willingness to share information. For quick moving trades, Trade Ideas rocks. Thanks for the scans!

    This market has been extremely choppy and it has kept many from many winning trades. I look forward to when things come back closer to normal. This stuff sucks!