How To Start Investing: Scanning For Stocks

How To Start Investing: Scanning For Stocks

The Beginner Trader

How to find stocks

Regardless of the trading or investing strategy you decide to follow, both will need one key, and that is finding the stocks that meet your criteria. To find stocks you are looking for, you will need to use a stock scanner, or maybe more than one scanner to narrow your focus. 

Why do I need a scanner?

There are roughly 2800 companies listes on the New York Stock Exchange (NYSE). Plus the 30 Dow Jones companies, and the hundreds of companies listed on the American Stock Exchange (AMEX) – It would be impossible for you to sift through all those companies in any sort of timely manner to find good trading opportunities. 

Every trading stategy will have its own set of criteria to help you define what it is you’re looking for. For example, you may be looking for stocks that have gapped up, or gapped down. You may be looking for stocks that have just closed above their 200ma, or whose 50ma just crossed the 200ma in one direction or another. You may be looking for value stocks, and you need to find out which are trading below book value. There are almost countless ways you can filter stocks to match your criteria, you just need a filter. That’s where scanners come in. 

Below are some free scanners that you can use anytime. Most have paid version which give you access to additional filters. In some cases you may be able to combine the filters of one scanner with another to fill in the gaps the other is missing (or charging for). I use the free versions of these services as I also have access to my brokerages own scanning tools, and charts which offer just as many, if not more features. I just like the ease of these websites, so I also use them for my research.

Screen Shot Of Barchart.com

BarChart.com

Barchart.com offers a free screening tool that I use mostly for quick pre-market scans. However, it is much more than just a scanner.  You can use it for free with no account. You can use it free, with an account, which gives you access to watchlists and saving screens among other things. Or you can pay for their premiere version which give you additional filters, and features. 

  1. Stock Market News
  2. Market Performance (overall and by sector)
  3. Screener
  4. Watchlists
  5. Charting Software
  6. ETF, Options, Futures, and Currencies
  7. As of the writing of this post ($29.99/mo) – Discounts if you pay yearly. 
Screenshot of Finviz.com

Finviz.com

Finviz.com offers a lot of the same features as Barchart.com. I do like their screener better and feel it’s easier to navigate and use. Like barchart.com you can use the website for free, without an account. You can create an account to save your screens. Although you can’t create charts without upgrading to the paid version. I like to use Finviz to scan for swing trade opportunities, rocket stocks, and dividend stocks. A cool feature that Finviz has that other websites do not is their heat map (see pic above), which offers a cool visual way to take in how the market is doing on that particular day, broken up by sector.

  1. Stock Market News
  2. Market Performance (overall and by sector)
  3. Screener
  4. Watchlists
  5. Charting Software (paid version)
  6. Futures, FOREX, Crypto
  7. As of the writing of this post ($24.96/mo) – why not $24.95? I don’t know. 

Do you have a favorite scanner?

Do you have a favorite screening tool that I haven’t mentioned? Write in the comment section below and I’ll check it out. It could be a stand alone website, or even your own brokerages scanners, if you have one you like. 

    Investing Q&A of the Day: Float

    Investing Q&A of the Day: Float

    The Beginner Trader

    What is a stock’s “float”?

    A stock’s float refers to the amount of outstanding shares that are available for trade (buy/sell). To determine the amount of outstanding shares a company has, you can do a quick search on Yahoo Finance. THIS LINK will take you the Yahoo Finance “Statistics” page for the Coca Cola Company, stock symbol $KO. If you scroll down to the “Share Statistics” you will find the float. I have highlighted for you in the image below. 

     

    Highlighting where to find a stock's float.

    The “floating” stock is calculated by subtracting closely-held shares (insiders, major shareholders, employees) and restricted stock that may arise from an IPO.

    Why does float matter?

    Depending on your trading strategy, you will want to narrow your searching by float. In my day trading strategy I look for companies with less than 30-50 million shares. While that sounds like a lot of shares, that would be considered a low float stock. You can see in the example above that $KO has almost 4 billion shares of float, which is very high.

    In my day trading strategy I am looking for stocks that are moving quickly in one direction or another. A stock with less shares will be more volatile than a stock with lots of shares. This is simply due to the dynamic of supply and demand. If a low share, low cost stock has good news in the morning, lots of traders will pour into that stock, and since there isn’t as many outstanding shares, the price of the stock will fluctuate wildy in the first hour of the morning. Riding that volatility is where you can make (or lose) money in a short amount of time. 

    If you’re looking at a stock as more of a long term investment, float may not matter as much in your calculations. You would be looking at other fundamentals like ROIC, PE Ratios, ROA, etc. 

    To learn more about stocks and investing be sure to follow me on twitter @cchapeton.

     

    How To Read Candlestick Charts

    How To Read Candlestick Charts

    The Beginner Trader

    How to read a candlestick chart

    Before you can read a full candlestick chart with all those confusing lines and indicators, you need to know what a candlestick is made up of and what each individual candlestick tell us. So let’s start with the basics.

    What is a candlestick chart?

    A candlestick chart as it relates to a stock, gives us information on the price of a stock on a given month, week, day, hour, minute, or even second. It’s also a quick reference to the past price of a stock, and the chart will allow you to see trends. The time frame you choose to view the chart in (1min, 5min, 1D, 1Mo, etc.) depends on what your trading strategy requires. We will not get into in this post. A chart is made up of multiple candlesticks. The candlesticks can vary in size, shape, and color. Learning how to read a single candlestick is the first step in learning how to read the charts and look for patterns that will fit your future trading strategies. 

    Bar Chart Sample

    I labeled three areas in the image above:

    1. Stock Name & Symbol
    2. Time Frame
    3. Price

    Depending on the software of brokerage you use, your chart may look a little different. However, the information is always the same. Each individual red or green bar is a period of time. In the example above each of the bars represents one full day of trading. On green days the stock went up, on red days the stock went down. Easy enough, right? Let’s look at the bars.

    Making Sense of the Candlesticks

    A single bar will give you 4 main points of information. A candlestick is made up of a body and (usually) one or two wicks. Although it is possible to have candle with no wicks. The color of the body tells you if the price went up or down during the time period that bar lasted. A red candles signifies the bar closed lower then it opened, or went down. A green candle tells you the opposite.

    The 4 points of information a candlestick gives you:

    • The price the stock opened
    • The price the stock closed
    • The high of the stock reached on that candle
    • The low of the stock reached on that candle

    Check out the images below and see if you can spot the one difference that would make a candle red or green. Do you see it?

    Red Candle - Stocks Charts
    Green Candle - Stocks Charts

    The Shape Of The Candlestick

    Each individual bar will also have it’s own “shape”. By that I mean that some may be really long, some may be really short, others may have long top wicks, and other long short wicks, etc.

    Note: A single candle by itself does not tell us the direction a stock is going, but when combined with other candlesticks or indicators, they can be a good predictor. In the next section I will show you a few patterns you should know about. These patterns alone won’t do you much good, but when combined with other indicators not mentioned here, they can be good predictors of things to come. 

    Green Hammer Candle

    GREEN HAMMER

    A green hammer candle at the end of a long downtrend may be the first signs of a reversal. Selling pressure (bears) is starting to get beat by buying pressure (bulls). The long bottom wick indicates that the stock dropped far lower during that day, but the bulls started to push back, ultimately driving the candle green.

    If you want confirmation of the reversal, you may want to watch the following day’s close. If it closes higher, then you may be looking at confirmation of the reversal. 

    NOTE: A green hammer candle works best as an indicator after a long downtrend. Seeing a green hammer when a stock is trading sideways or already on the way up, carries less weight as an indicator.

    Red Hammer Candle

    RED HAMMER

    A red hammer candle at the end of a long uptrend may be the first signs of a reversal. Buying pressure (bulls) is starting to get beat by selling pressure (bears). The long bottom wick indicates that the stock dropped far lower during that day, but the bulls started to push back, ultimately driving the candle green.

    If you want confirmation of the reversal, you may want to watch the following day’s close. If it closes higher, then you may be looking at confirmation of the reversal. 

    NOTE: A green hammer candle works best as an indicator after a long downtrend. Seeing a green hammer when a stock is trading sideways or already on the way up, carries less weight as an indicator.

    Inverse Hammer Candle

    INVERSE HAMMER

    Similar to a green hammer. a green inverse hammer candle at the end of a long downtrend may be the first signs of a reversal. In this scenario the stock price opened low, gained steamed at some point during the day and was beaten back by bears. However, the bulls held their ground and kept it green, gaining on the day. 

    If you want confirmation of the reversal, you may want to watch the following day’s close. If it closes higher, then you may be looking at confirmation of the reversal. 

    NOTE: A green inverse hammer candle works best as an indicator after a long downtrend. Seeing a green inverse hammer when a stock is trading sideways or already on the way up, carries less weight as an indicator.

    Shooting Star Candle

    SHOOTING STAR

    A shooting star candle that appears at the end of a long uptrend, may signal the start of a reversal. You may be able to guess why it’s called a shooting star. In this scenario the stock price opened high, shot up at some point during the day, and began selling off ending in a red shooting star.  The bears put an end to a bull run and that may continue.

    If you want confirmation of the reversal, you may want to watch the following day’s close. If it closes lower than the previous day, then you may be looking at confirmation of the reversal. This would be a situation to go short, or if you’re still holding a stock, it may be the time to sell. 

    NOTE: A shooting star candle works best as an indicator after a long uptrend. Seeing a shooting star when a stock is trading sideways or already going down, carries less weight as an indicator.

    October 2020: Investment Update

    October 2020: Investment Update

    My Investment Tracker – October 2020

    From time to time I will be posting updates on my trading accounts. My P&L, current holds, and what I am thinking about moving forward. I am still in the learning process and trying out different strategies hoping to really hone in on 2 to 3 strategies that I can master. I started my IRA with $2800 in December 2018, and my brokerage account with $3500 in early 2020. Not included in the numbers below are my BTC holdings and general savings.

    My IRA (US Dollars)

    Brokerage Account

    Below are the overall results from my past 60 days of trading. I had been cruising at around 90% P&L for a little while, but finally sold off some losing positions to start to bring my numbers back to a more normal range. I am still working on getting rid of losers faster, as you can tell.

    Biggest Gainers (%)
    $TSLA: +97%
    $PLUG: +20.6%
    $GRWG: +15.71%

    Biggest Losers (%)
    $PRVB: -30%
    $SLDB: -22%

    Long terms holds: $TSLA, $NOBL
    Short term holds: $GE, $PLUG
    Speculative play: $RLFTF – my first venture into penny stocks. We’ll see how this goes.

    Lessons learned: Both PRVB and SLDB were dumb holds on my part. They didn’t need to be such big losses in terms of percentage. I think because I am still not playing with huge sums of money, I tend to let the losers go a while thinking “it’s okay, it’s only $x dollars, not too bad” but I have to be more disciplined and remember that every little bit counts. Most of the losing trades came from my brokerage account, which brought me back nearly to where it had started. 

    Always do your own investment research. My website is not meant to be investment advice. It’s just a way for me to track and keep accountable as well as to share my knowledge and experience. 

    60 Day Results - All Accounts

    My History With Money and Investing

    My History With Money and Investing

    I haven’t been great with money…

    That could be the main theme of my 20’s and early 30’s. Money was never important to me in the sense of building wealth and saving for the future. Part of the reason was that I never had a mentor to guide me on how money worked. As you can see on my “about me” page, I grew up with a single mom who did her best to keep food on the table. While the succeeded in doing so, money, was never her specialty. Budgeting…yes. Saving…a little. But investing and using your money to make money was not on her radar, and rightfully so.

     

    My first money mistake

    Looking back, I think the first major mistake I made was not understanding how to save money. Making money was never a problem. Not saving money was the problem. I was always more of a “live for the moment” type of person. I would worry about the future when it got here. I would spend money on things I wanted. I would buy things for friends. I even bought sports car that I probably shouldn’t have, although, that was fun. I suppose that may be true of most kids in their late teens and early 20’s.

    If you are young and starting to get into the workforce, hopefully my life story will help you avoid the same pitfalls. If I had set aside a small percentage of my paychecks, say 5%, from when I started working full time until today — I would likely have bought a house by now…IN THE BAY AREA. No small feat, I can assure you. I’ll talk more about savings accounts and how to use them in future posts.

     

    Not understanding credit cards or credit scores.

    This one really came back to burn me in my first years of adulthood. I think the saving grace was that I screwed up when I was 19-20, so I had time to recover from my mistake. As soon as I turned 18, I started getting offers for credit cards. By the time I was about 19 I had two cards in my name. They didn’t have large credit lines, but it was enough to get me in trouble. One card had a max of $1000. I think the other had roughly the same, maybe $1500. I can’t remember anymore.

    I know what you’re thinking. Did I think I really had $1000 to spend? Typically that’s the problem young people run into with their first credit cards. They think they actually have that money. That wasn’t my issue. I think in theory I understood that I didn’t have that money and I needed to pay it back. In practice however…well, I failed. I maxed out one card on a weekend getaway with a girl I was trying to impress. I maxed out the second one on what was probably needless purchases. I was making minimum payments and I thought it was fine. Then…bam! A mistake at work cost me my job, and I fell behind on payments. Worse yet, I wasn’t very organized with my finances, so even keep track of what was happening was a mess. I fell behind on payments, the fees piled up, and I couldn’t afford to make the payments.

    Eventually, I settled with the card companies and paid them back a portion of what was due. My credit was ruined for years. It was about the time I settled with the card companies that I found out about credit scores, what they were, and how they worked. At one point my credit score was down in the 500’s. It took my 7 years to get my score above 700. Today my score is excellent and I have ZERO debt. I pay my cards off every month and collect the rewards. 

    If you are unfamiliar with how credit scores work,  you should read this

    In retrospect the most frustrating part was how I let myself get into so much financial trouble over such a small amount. You live, you learn. I’ll talk more about how to use credit card properly in future posts.

     

    Investing…or lack thereof

    This might be my biggest sin of all. Growing up I never heard about investing, stocks, bonds, markets, charts, etc. It wasn’t even a foreign language, it just didn’t exist in my house. I did like to watch the news, so by my teen years I was aware of the stock market, but outside of knowing it existed, I had no idea how it worked. I thought it was something rich people did. Knowing what I know now…HURTS…it just hurts. lol. But I can’t let that stop me from moving forward and doing the right thing.

    In my late 20’s I took a job as a professor at a local community college. It was the first job I had that offered a retirement plan where they matched my contribution. I signed up for it because it sounded like the right thing to do, and then I forgot about it. I spent a couple of years at that job, and in that short amount of time I had built up a little under $2000 in a Calstrs account. Calstrs is the retirement plan for teachers in the state of CA. I quit my job in 2011 to join my wife working full time on growing our business. That ended up being a great move, but with the business we didn’t have any investments or 401k options setup. We were just reinvesting everything into the business in those first years.

    After making that move I started to think more about investing, retirement, and how I would achieve it. We had two young boys, and a thriving business. With most of my focus on those two aspects of my life, I still didn’t take the time to focus on investing. Luckily I had that small nest egg from Calstrs just sitting there, growing, without me doing a thing.

    In late 2018 I finally took the time to research investments. Our CPA had been asking us why we hadn’t been putting away money for years. I finally listened. I went back to look at my Calstrs account. I figured I could just keep adding to it now that I was able to. When I called to set that up, I learned that I couldn’t contribute to it since I was no longer employed by the state. I looked at my options and decided to move my money to an IRA with Schwab. (I’ll get into different brokerage accounts and companies in future posts). It was a small account by most standards, but it was mine, and I could now do something with it. In December of 2018 I opened my IRA with about $2500.

    Now, 18 months later, I have my IRA, my day trading account, and some money in Bitcoin. All together my investments went from $2500 to just over $20,000 in just 18 months. I am KICKING MYSELF for not doing this sooner, but it’s time to focus on the future. My journey is just beginning. Don’t wait to start yours.

    Carlos Chapeton

    NOTE: My blog is not investment advice. I am not affiliated with or get paid from any business I mention in my posts. These are merely a record of my investment journey as told by me. Before investing you should do your own research and decide which investment options are right for you.