Overview
In Part 1 we learned some basic functionality of stock trading simulator sites. We covered how you can register, view list of accounts and place a trading order. We will dedicate this particle to the subject of stock picking, and we will introduce some tools, which can be used to make this process easier. This time you can use your existing account at vivatrader.com to try out all the things we will be talking about.
What is stock scanner?
The idea is really simple. Usually to pick the stock you want to trade, you need to employ certain techniques, and we will cover some of them in later articles. To just give you an idea, you can simply pick out your favorite toy supplier or software maker. But usually this does not work too well, and people have come up with more sophisticated techniques, such as technical analysis and charting. These tools are also available on vivatrader.com site, but today we want to cover the stock scanner, which is essentially a tool that suggests stocks based on some criteria, so you do not have to do searching going trough thousands stocks one by one.
How does it work?
There is something called technical indicators, which are widely used for stock picking. For example, Relative Strength Indicator or RSI, Stochastic, Moving Averages, Ichimoku Clouds, to name a few. These are lines plotted on a stock price chart which you can analyze in order to predict price movements or market trends. Sometimes these indicators produce buy or sell signals, which are recommendations to buy or sell stocks. The stock scanner at vivatrader.com does just that and does it automatically. It goes through all 5000+ stocks, applies various indicators to every stock and produces alerts, which you can use to decide which stock you want to trade.
This is a great tool; it helps a lot in stock picking. To do the same manually you would spend literally hundreds of hours of work.
Which technical indicators are used?
The stock scanner is using the following technical indicators, each indicator producing one or more buy and sell signals (or other signals):
- Average Directional Index
- Ichimoku Clouds
- Parabolic SAR
- TRIX
- Average True Range
- Keltner Channels
- Price Channels
- Bollinger Bands
- MA Envelopes
- Rate of Change
- Ultimate Oscillator
- Aroon
- Choppiness Index
- Moving Averages
- Relative Strength Index
- Williams%R
- Aroon Oscillator
- Commodity Channel Index
- MACD
- Fast and Slow Stochastics
- Average Directional
- Index Force Index
- Money Flow Index
- Stochastic RSI (StochRsi)
Let's practice
Now we know what stock scanner is for. Let's pick and trade some stocks! One of my favorite indicators is Ichimoku Clouds. I'll be using this indicator, so head over to the stock scanner page and scroll down to the Ichimoku Clouds section. You will see something similar to the following:
Tenkan Sen cross above Kijun Sen (Buy signal) 600
Tenkan Sen cross below Kijun Sen (Sell Signal) 700
What does it mean?
You might be wondering now, what these cryptic letters mean. Nothing to be scared of, it simply tells us that the stock scanner produces two alerts using the Ichimoku Clouds indicator: buy and sell. The numbers show how many stocks have produced this signal in the last 3 days. In this particular case we can see that we have 600 stocks we could buy (or cover) and 700 stocks we could sell (or short sell) based on these recommendations. Again, those are just recommendations, and these alerts do not guarantee that the stock will perform well, but that's a good start for your analyses.
Picking and buying stock.
Just click on the number 600 (or whatever it is when you access the page). It will produce a list of stocks, all of them having the Tenkan Sen cross above Kijun Sen (Buy signal) in the last 3 days. Here are a few stocks which I could see:
Ticker Exchange Alert Date Change
ABA NYSE 2010-12-02 0.08%
ABC NYSE 2010-12-02 0.82%
ABV NYSE 2010-11-30 2.75%
ABM NYSE 2010-12-02 -5.06%
AAN NYSE 2010-12-02 0.83%
AI NYSE 2010-12-01 -0.51%
For the purposes of this example I will go with AAN. Click on the ticker and it brings up another interesting page, which is called Ticker Research. Using this page you can do technical analysis, look at historical prices or options, view the news, but we will cover it later, for now let's click the Trade Ticker button. You will need to login to your account (see Part1 for more information, if you do not have an account yet you will have to create one), and simply follow the instructions for Part1 to complete your trading order.
Combining indicators
You can combine a few indicators together; it is a useful trick if you want to narrow down your stock selection. Just go to VivaTrader's stock scanner and check off those indicators you want to combine. Then click "Find Stocks with All Selected Indicators" and it will bring up a list of stocks that produced all of the selected indicators.
Conclusion
In this chapter we learned how to use tools such as stock scanner for stock picking. In next chapters we will look more closely into various charting and technical analysis techniques.
Article Source: http://www.articlesbase.com/day-trading-articles/learning-paper-trading-with-trading-simulators-part-2-stock-scanner-3837946.html
About the AuthorTony is interested in everything related to investment and day trading, and sometime publishes materials pertaining to that area.
