Today's Quote: “There is no success without hardship.” - Sophocles.

Yesterday we discussed how to take our personal ‘universe’ of stocks and scan them for ideas to go on our watchlist. Core traders would to this weekly (and look at monthly charts every month) and swing and day traders would do this every night. Going through a long list of stocks can take some time, especially when you are new to scanning. For those ‘part-time’ traders, there is a practical compromise we call the ‘lazy scan’. Swing traders can spend as little as an hour on the weekend and 5 minutes a day. Core traders could spend a couple hours at then end of the month and 10 minutes a week.

Actually this method can produce the best results for many people because of the focus it creates. The downside is that it is primarily for finding one type of play. Here is how it works. At the end of the month (or on the weekend if swing trading) you go through your entire universe on weekly charts (or daily charts if swing trading) and you pull out all of the uptrends and downtrends. You simply scan through each stock and look for all the requirements of uptrends and downtrends. Make sure you are looking for the best quality trends, the ones that meet all of the requirements of being a power trend. When you are done, you can temporarily discard your universe and just save your ‘uptrend’ and ‘downtrend’ lists.

That is the hardest part. Now, at the end of every week (end of every day if swing trading) you quickly cruise through your uptrend list and look for three red bars (or lower highs) and look through your downtrend list for three green bars (or three higher lows). When you find those, the stock goes on your watchlist and you wait for the entry signal. It is that easy. Every month (week) you scan again for the trends; add the new trends, discard the trends that have failed.

One of the big advantages of this system is that you are ONLY playing stocks that are in power trends, because those trend lists become your universe. The trend of the stock is the most important characteristic, and leads to the very best plays.