Today's Quote: “A minute’s success pays the failure of years.” Robert Browning.

Finally we begin discussion of the fifth weapon. Last, but not least, the fifth watchlist we use to find the best plays throughout the trading day is the use of computer scans. We are talking about third-party software products that scan the market for a set of criteria we want to find and return the results to us.

Now be careful here. We are not talking about scanning products that deliver the Holy Grail. We are talking about scanners that very quickly scan a huge list of stocks and in just a second or two and return to you the results that you are looking for. Some simple scans you most likely are aware of include stocks that are trading on the highest increase in volume, stocks that are up on the day the greatest percentage, and stocks trading near the high of the day. There are many other scans that can be very useful for the active traitor as well. These include things as simple as the morning gap list, to finding stocks in the middle of the day that are the greatest distance away from their standard deviation.

Depending on the way you trade these scans can be very useful to you. If you encompass a wide variety of strategies and are looking for unique plays all the time, you need to have a lot of eyes on the market and use a very wide universe throughout the day. The problem with a large list of stocks is that it is impossible to watch all of them on a continuous basis. Through the use the scanner we have extra sets of eyes that can go out in the market and probe for the results we want. It would take a long time to scan through 1500 stocks to find the ones that are currently basing at the high of the day. A scanner can go through 1500 stocks and produce for you a list of five or ten that are basing near the high of the day in one or two seconds.

It is not to say that any one of those in the final search results will meet your criteria for a trade. The scanner simply returns to you what you have asked of it. The scans can become fairly complex and include the ability to filter out stocks that are trading under certain price or under certain volume or with two wide of a spread (the difference between the bid and the ask). There is almost no limit to the search qualifications or the filters that can be applied to narrow your search parameters.

So you may be wondering if there are any specific recommendations for what scanning product to use. As you may have guessed we have one. Monday we will discuss the product that is the choice for VCM traders.