Page 12 - Trading #101 Course – PART II TWO: SUCCESSFUL TRADING PIE – www.traderscoach.com

TRADING #101 COURSE – PART II TWO: SUCCESSFUL TRADING PIE – WWW.TRADERSCOACH.COM

Chapter 10:

Second Slice - Scanning for Opportunities

The second slice of the “financial pie” is scanning for opportunities. The question “How
do I find opportunities?” is going to be answered differently for each person, depending
on what kind of trader you are and what markets you are trading. This chapter is
designed to give you a starting point on how to most efficiently identify high-probability
opportunities in the financial markets.
Your business plan and your trading rules will determine what you are going to scan or
screen for, and the types of scans or screens you decide to use will in the end be
implemented into your trading rules. These two areas are interconnected and work hand
in hand.

When scanning, your goal is to begin with a broad universe of possible opportunities.
You will then narrow down the universe to find the highest-probability opportunities. The
idea is to be like a prospector who is sorting and sifting, looking for nuggets of gold.
This is done by specifying conditions that need to be met. These conditions are based
on your trading rules and historical performance results. Your previous successful
trades and your trading rules will tell you what to look for and what are the best
conditions to use for the market you are trading.
For example, if you are a trend trader and you have found that after a market has been
in consolidation for a certain number of price bars it will most likely break out into a
significant trend, either bullish or bearish, then you can scan the universe of stocks for
this one condition and create a watch list of stocks that are in this type of consolidation.

With this watch list, you can then further narrow down your choices with other conditions
based on your trading rules. This is a simple illustration of the basic idea of scanning for
opportunities.

Technical Scanning Techniques

There are many scanning techniques that technical traders will use for finding
opportunities. These are standard scans that are available on a variety of front-end
charting platforms. Examples of some popular technical scans are:

• Indicator-based conditions such as the relative strength index
(RSI).
• Price-based conditions such as price crossing over the moving
average.
• Volume-based conditions.

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