The Stock Hacker tool in the thinkorswim® platform can help you match potential trade candidates to a set of fundamental criteria
Once you’ve identified a subset of stocks matching your criteria, you can use technical analysis to complement your fundamental outlook
Too many indicators can often lead to indecision and antacids. But there’s a simpler and more logical approach to find stocks for further stock analysis, to identify potential trades, and plot clear charts with minimal indicators to help anticipate what a stock might do next.
Step 1: Scan the Universe
Take a look at Stock Hacker on the Scan tab of the TD Ameritrade thinkorswim trading platform (see figure 1). Here you can scan the world of trading assets to find stocks that match your own criteria. And with a wide variety of stock analysis filters at your disposal, you can immediately pull up a list of stocks that fit your preferred parameters. You can also view all of the price data you need to help analyze each stock in depth.
Here’s how to do it.
FIGURE 1: LEGAL HACKING. Scanning for trades with Stock Hacker is as simple as choosing the list, setting your parameters, and sorting how you want the results displayed. Image source: the thinkorswim platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.
1—To get started with your thinkorswim scan, choose the subset of stocks you’d like to scan from the drop-down list next to the words Scan in. Here, you can see predefined categories as well as all your personal watchlists and Global Industry Classification Standard (GICS) lists.
2—If you only want to find stocks with listed options, select Category, which is the first item on the menu, and select All Optionable (see figure 2).
FIGURE 2: SELECTING ALL OPTIONABLE. Under the Scan tab, click Category > All Optionable to narrow your choice set to stocks with listed options. Image source: the thinkorswim platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.
3—Select Add Condition Group (to the right of the Setup Scan row). Select All of the following, None of the following, or Any of the following.
4—From the +Add filters button, select the filter type from the drop-down list for the above three categories. As an example, let’s add three filters for the All of the following category.
5—For the first filter, select Stock from the +Add filter drop-down list. Then select Last from the stock drop-down list and enter a minimum and maximum price. Add another stock filter, select Volume from the menu, and specify the minimum and max volume. For the third filter, select Study and from the corresponding drop-down list, select ADXCrossover and your parameters. The default inputs for this filter are ADX crosses above 20 with an input length of 14, which we’ll keep.
6—In the Sorted by menu, there are several choices for how you want to sort your scan results. You can stick to the default and sort by symbol. If you don’t find what you need in the prebuilt drop-down list, you can even create a custom quote formula.
7—In the next menu, to the right, select Ascending, then Scan.
The results will appear at the bottom of the screen like orderly soldiers. If you’re not happy with them, you can always edit the filters.
Step 2: Master the Universe
Okay, maybe not the actual universe, but you can attempt to determine where the stocks in your world might be going by charting them in thinkorswim Charts. Just select any symbol in the scan results, select More info on […], then TOS Charts.
If you’ve never charted, you should try to answer three basic questions:
- What’s the trend?How strong is the trend? Where do I want to get in?
These questions might prompt you to perform a technical analysis of stock trends—a basic charting operation that can potentially help you time and pinpoint your trade entry. To help us with these questions, we’ll add three studies and make a couple of minor adjustments to the parameters:
- Simple moving averageVolumeRelative Strength Index (RSI)
Your chart’s default time frame should be set to a one-year daily chart (1Y:1D). If you need to make adjustments, select Style on the upper-right corner of your chart, select Time frame setup, and then input your preferred time frame.
Then, from the Studies menu (also in the upper-right corner), add SimpleMovingAvg by following this sequence:
- Select Studies > Add Study > Moving Averages > SimpleMovingAvg.Next, change the parameters to 50 by selecting the SimpleMovingAvg line itself.Select Edit study SimpleMovingAvg.In the parameters window, change the length to 50.
Volume is a default indicator, so there’s no need to add it. However, if your volume isn’t displayed, you can add it within the Settings menu.
To add the RSI, select Studies > Add Study > Momentum Studies > M-S > RSI (see figure 3).
FIGURE 3: CHART THE TRADE. Once you find a stock in Stock Hacker, select it, then select TOS Chart. Then answer the three questions below. Image source: the thinkorswim platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.
Once you’ve got thinkorswim Charts set up, you can answer these three questions:
One: Is the stock clearly trading above the simple moving average (blue line in chart) or has it recently crossed above the line?
Two: Has the indicator line in the RSI crossed from below the 30 line to above the 70 line recently?
Three: Is the volume increasing or higher than normal (bars are higher than prior bars, indicating more traders committing to the trade)?
Remember that technical analysis of stocks can provide visual data to complement your fundamental stock outlook. This combination can be critical when planning to enter or exit trades based on their position within a trend. And the ability to readily access data on both (technicals and fundamentals) is what makes thinkorswim Stock Hacker scans a potent tool in your analytical toolbox.
Please keep in mind that past performance is no guarantee of future performance, and there’s no guarantee that any trend will continue in the future.
Although these principles are the foundation of technical analysis, other approaches, including fundamental analysis, may assert very different views.