Learning the tools of the trade

Over the last week, I have learned some important lessons: I’ve realized that I had not been using the tools at my disposal to efficiently in order to unleash their full potential and improve my trading process.

This realization came upon me as I received a delayed breakout alert on $SMSI as an earnings winner this week by Timothy Sykes. He had just mentioned that he saw it on his earnings up 5% scanner, a feature also available to me which I hadn’t really paid attention to up until I was pushed to think about it.

This post is intended as a quick overview of the different tools I use and how I have decided to improve my performance by using them the right way.

The tools

These are the tools that I currently use:

  • Trader Workstation + L2 datafeeds US equities – Base platform is free as an IB client, data feeds go up to about $75 per month
  • StocksToTrade + subscription – proprietary real time scanner rebranded┬áby Timothy Sykes’ team and developed by EquityFeed, $120/month (about $200 for non-challenge students) + about $3000 for the base software ($1000 for Challenge students) – Were I not a Challenge student, I would have opted for EquityFeed, which offers all of the same features except for the preset “Sykes” filters.
  • Multicharts.Net – free with IB, not something I would buy at this point if it wasn’t available to me for free, but quite possibly something I would consider as soon as I become profitable, as I am very accustomed to development interfaces.

Using the tools the right way in the realm of pennystocking

StocksToTrade or EquityFeed

Let me start by going over how I should have been using STT/EF this whole time as opposed to how I have been using it so far; but before that let’s go over what STT/EF is exactly.

StocksToTrade and EquityFeed are for all intents and purposes the same software, except StocksToTrade has had some aesthetic customizations as well as pre-programmed filters; also STT only offers a single subscription plan including all of the features of the premium EF plan (L2+Filter/Alert Builder).

STT/EF is simply a real time market scanner allowing to display real time data for a vast amount of equities across a variety of parameters. Especially interesting is the Filter Builder feature which offers a great way to customize the scanner to display only relevant stocks based on pre-set criteria.

This is especially important, since it is the feature that is the most relevant to pennystocking in terms of finding picks intraday or pre-market.

What I have been using on a daily basis since I signed up for STT is the market view, this has helped me spot some potential plays intraday, and the window filter settings (available pretty much on every scanner windows) allows to weed out according to specific parameters (ranges for price, volume, # of trades, SMA, ADR, ADV), mine is set to look for stocks with a price between $0.1 and $7.00, a volume higher than 100k and at least 200 trades on the day.

2015-01-17-STT-marketview
Market View displays all stocks sorted according to the user’s need

In STT one of the important scanner features that I had completely overlooked and neglected using at all is the filter called “Earnings in the past 24h up 5% intraday”. What it does is scan for stocks that have had earnings in the past 24h and if the % change is above 5%, it will be displayed in this window – this usually means that the earnings news could lead to a potential breakout (such as $SMSI which I missed specifically for not having this scanner up). It is also to keep an eye at this scanner throughout the day in order to catch potential breakouts early – This is a pre-set STT filter, which can also be set in EF by using the Filter Builder.

2015-01-17-STT-24hearnings5pcid
Earnings in the last 24h up 5%

Additionally to the above-mentioned filter, I have also created my own filter to select stocks having news, filings or earnings in the last 24h that are up 4%; same principle applies, and it helps catch fundamental moves early.

Earnings, News and Filings in the last 24h Up 4%
Earnings, News and Filings in the last 24h Up 4%

This leads me to mention the amazingly useful EF Filter Builder, also available in STT, which serves as the base for all filters created in the latter for which they are charging about $3000 to non-challenge folks. The filter builder essentially allows the user to create custom filters to obtain only the information that is relevant to the user, whatever this may be. While I like the concept a lot, I feel, as a long-time developer, that the absence of the OR operator is quite limiting in some cases (for example if you want to filter prices over 4% OR under -4%, you won’t be able to have this on a single filter). The screenshot below shows the filter settings for the screenshot above.

2015-01-17-STT-fbuilder

 

Last, but not least, is the underused Alert builder, which provides very useful popups when a certain parameter is triggered by the market for a specific stock. It does require the user to perform the proper research to establish key/intraday support and resistance as well as volume levels on a purely technical level in order to create a meaningful alert for a potential buy or short.

Here are some of the alerts that I’ve been experimenting with over my last trading day (on Thursday the 16th):

Multiple price and volume alerts for stocks in my watchlist
Multiple price and volume alerts for stocks in my watchlist

As much as STT/EF shine in real time scanning, they are particularly bad (and I mean really bad) in terms of charting. Their charting software is simply garbage, although it has been mentioned that StocksToTrade 2, supposed to come out in the coming weeks/months, will solve this. I am eager to give that a try.

Also worth noting that Equity Feed does offer a 14 day free trial for their premium service, which I have used and liked, I invite anyone to try that before committing to an expense like STT.

In terms of scanning they are quite possibly the best there is out there that is “affordable” to small players such as myself.

Trader Workstation

This fine piece of software is provided for free to Interactive Brokers account holders, it can be used without a subscription for trading activities, but it is also pretty useless without. For all L1+L2 it costs about $75 per month, depending on the feeds, news subscribed to.

IB is also the only broker platform I have used other than Questrade (which I found aesthetically graphically nicer, but lacking in features, such as a scanner or being able to short anything below $2.00 – NOT IDEAL FOR PENNYSTOCKING).

I have a multiple screen set-up (3 or 4 monitors depending on my location) so I am able to use all that real estate to show a fair amount of information. My TWS setup is composed of the main screen using the newer mosaic setup and the second screen holding the classic view.

The mosaic view allows me to dispose my TWS windows in a readable manner, while the classic view allows me to prepare all my orders prior to market open, something that I discovered I could do about a week and a half ago.

2015-01-17-TWS-Classic 2015-01-17-TWS-Main

 Multicharts.Net

This software included with IB for free to account holders and appeals to my developer side. While I have been trying to work an algorithmic approach, which I put on hold to better focus on learning and establishing a proper strategy, my main use of this program is currently focused on charting and establishing multiday and intraday resistance and support.

MC offers more advanced charting features than TWS, in the simple fact that, unlike TWS, it can pull 60 days worth of minute candles for any given stock. This makes it very practical in understanding movements and going back to study how and why a stock has moved at any given point. It also provides a very nice export feature that allows me to export the current chart into a text file containing all the price date (o, c, h, l, v) as well as the values of any given study added to the chart.

Based on Michael Goode’s approach of saving the intraday chart of every trade made, I am more of numbers guy and so I export this file, which would allow me for a better view of the status of the market when I traded it. Below is a screenshot of $SMSI 1min-intraday and 1 day-1year.

2015-01-17-MC-1 day 1 year 2015-01-17-MC-1 min multiday

As it can be seen on the screenshots, the information provided by the software is very useful in determining all necessary technical parameters required for a trade; moreover, for programmers, it is very practical for backtesting theories and strategies. The only drawback is that the program ticks every minute, which, in the real of pennystocks, can be an extremely long time before a decision is made (although this can be bypassed programmatically for the real-time mode).

Conclusion

This post covered a lot of everything but not much of everything; my point was not to do an exhaustive presentation of these tools, nor an in-depth review of these (which I may or may not do in the future). My point was actually a personal reminder to always learn how to properly use the tools at hand and not limit their wide capabilities with ignorance as this can be the difference between catching a good opportunity and letting it go away.

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