Today's Quote: “You only win if you aren't afraid to lose.” - Rocky Aok.

Let’s continue our discussion of using watchlists. So we have our ‘universe’ of stocks (yesterday’s discussion.) What now? Now it is time for an effective way to scan to find the setups on the charts that display the strategies we want to play. For the bigger timeframes, swing and core, there are two ways to go about scanning. First you can manually scan your entire watchlist every day on the daily charts, and every week on the weekly charts, looking for the patterns you recognize. Second you can do the ‘lazy scan’ which involves an hour every week and fifteen minutes every day. We will look at each one of these methods, and then discuss scanning for day trades and scalps.

The first way is to review your entire universe every week for core trading (every day for swing trading) and run through each and every chart and look for chart patterns of strategies your trading plan says you may trade. When you do this, there are a few things to keep in mind. One of the most useful distinctions is something that is a small point, but often takes traders a long time to learn. It took me a long time. When we scan, we are not trying to ‘make something’ out of ever chart we see. Sure, we could come up with lots of intelligent comments. But if you don’t see a play, it is a waste of time. The key is to just keep scanning until you see a chart that has the exact pattern you are looking for. One that has a pattern that you recognize.

Next, train your brain to look for those patterns you want. Many people don’t realize it, but your brain can only think in pictures. So don’t stop and examine each chart for the criteria; at least not initially. Train your brain to only stop at the pictures of charts that look familiar. How do you get your brain to see these? Simply really study perfect examples of the patterns you want. If you play the pattern and make money, save the chart and keep reviewing it. Your brain will eventually learn the ‘picture of money’ just as if you were looking through a stack of animal pictures looking for an elephant.

Also consider the order you view the charts. There is no value in viewing the symbols alphabetically or by total volume. However, if you sort by a column that compares price to a moving average, it will sort the stocks by strength. This can be helpful scanning. Tomorrow we will look at the ‘lazy scan’ method’.