Have you discovered the power of the scanning feature which is included in your FoxTrader? We’re pleased to report that many clients have been running the software through its paces and can’t stop praising this easy to use and effective feature.
If time has meant you haven’t yet discovered just how easy it is to set up a scan, take a moment now to sit back and read how you too can soon be writing scans with the best of them!
The idea is very simple…
Due to the flexible nature of the program you have the ability to create a scanning criteria to suit your trading needs.
Before you start, take a moment to decide what you would like the scan to look for. In the early days we suggest you take the time to write your criteria down before you begin so you can make sure that at the end of the day the scan you have designed is in fact meeting your requirements. |
The following example will walk you step by step through the process of setting up a scan. Keep in mind the following example has been written to show you how to use this powerful feature of FoxTrader and should not be construed as trading advice. Always remember, before making any trading decisions based on the results of this or any other scan, you need to decide, with or without the assistance of a securities advisor, whether this decision is appropriate in light of your own investment needs, objectives and financial circumstances. Let's begin...
We want to create a scan that will identify stocks that have good liquidity and that have been trending upwards over the last 2 months or so. So how do we do this?
Having determined we want our scan to do, click on Scans and select New. We need to name our scan, so let’s call ours liquid scan. Then click OK. Now we are able to start to add the criteria.
Our first criteria is to find securities that have good liquidity, but before we do, what do we mean by liquidity?
Liquidity is being able to convert assets into cash easily, quickly and with little or no loss of capital. A liquid market is a market with enough participants to make buying and selling easy.
One indicator that is closely related to finding liquid stocks is volume. Volume is not a simple science and can be used in many different ways. Basically, it is the total number of units traded in that particular instrument in a day. If a stock’s volume is high and increasing, this also indicates that the stock is liquid and can be quite powerful when selecting stocks.
To set the criteria, we click on Add. Select Indicators from the Scanner Type column, then scroll down and select Volume. Then select Add>> .
From the Search Criteria Parameters screen, check that the First Value has selected “Volume”. Then in the Operator box, select “greater than”. In the Second Value box, select “numeric value” (this should be the default) and then type in 2000000 in the value box. The Expression Box should now read: “Volume of the current day is Greater Than 2000000”. If so, select OK.
As an extra criteria, we could also ask FoxTrader to find the stocks where volume has been increasing for a set period of time, but for the purpose of this exercise we’ll leave this out.
For our second criteria, we want to identify stocks that are “safe” to invest in. One way to weed out companies that may be considered high risk is to include Market Capitalisation in your scan. Market Capitalisation is the number of shares on issue times the share price of the day. A company with a high market capitalisation suggests that it is a large company that is likely to be easy to trade and is therefore “safe”. So, from the main Scan screen, select Add, then select Fundamental from the Scanner Type and scroll down to select Market Cap. Then click Add>>. You’ll see that a different style of parameter screen appears. These parameter screens are all linked to the individual scan criteria.
According to our criteria, we think that a company with a Market Capitalisation above $10 million represents a stable company, so we select “greater than or equal to” from the Value box and then type in 10000000. Then click OK.
Our third requirement is for stocks that have been trending upwards for the last 2 months. There isn’t any criteria that is specifically called “uptrend” but there is the ability to scan for moving averages that are going up. So once again, from the main scan screen we click on Add. Then from the Scanner Type column, we select Indicators, then scroll through to select Simple MA. Then select Add>>.
If you scroll through the Operator list, you’ll notice a number of choices. We want to find stocks that have been trending upwards, so we select “is increasing”. Because we want to identify stocks that have been trending up for at least 2 months, we change the period to 40, representing 2 months of trading days. To do this, type “40” where it says “for the last…days”
For this exercise we have also used a 50 day period for the Moving Average which you can set by clicking on Settings and changing the period to 50.
Now we just need to change our criteria to only scan for Stocks, because fundamental data is not applicable for other exchanges. Then select “Meets all Criteria” on the Search Results page and we should find all the stocks that have high liquidity and are in a long-term uptrend. Click on Start and see which stocks meet this criteria. You may find that only a small number of stocks, or even no stocks appear. This does not necessarily mean that there is something wrong with the scan. We have created a scan with very precise parameters and it may be that on this day, there actually aren’t any stocks that meet this criteria. Try again tomorrow and see if any stocks have met your criteria. Alternatively, you can select “Meets Some Criteria” and then, once the scan has completed, click on any of the column headings to sort the scan results by that criteria.
This is a fairly simple scan, but should give you an understanding of the thought process behind setting your own scans. It is also important to note that you can adjust the scan by changing the settings and parameters until you’re happy with the result shown. Basically experiment until you feel you have come up with the right settings for each criteria.