Key Takeaways

The Stock Hacker tool in the thinkorswim platform can help you match potential trade candidates to a set of fundamental criteria

Once you’ve identified a subset of stocks matching your criteria, you can use technical analysis to help complement your fundamental outlook

Too many indicators can often lead to indecision and antacids. But there’s a simpler and more logical approach to performing part of your stock analysis, finding a potential trade, and plotting a clear chart with minimal indicators to help you anticipate what a stock might do next.

Step 1: Scan the Universe

Take a look at Stock Hacker in the Scan tab of the TD Ameritrade thinkorswim® trading platform (figure 1). There you can scan the world of stocks to find the ones that match your own criteria. And with a wide variety of stock analysis filters at your disposal, you can immediately pull up a list of stocks that fit your preferred parameters. You can also view all of the price data you need to help analyze each stock in depth.

Here’s how to do it.

FIGURE 1: LEGAL HACKING. Scanning for trades with Stock Hacker is as simple as choosing the list, then your parameters, and sorting how you want the results to show. Image source: The thinkorswim platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

1—To get started with your thinkorswim scan, choose the subset of stocks you would like to scan from the dropdown menu next to the words “Scan in.” There, you can see predefined categories as well as all your personal watchlists and Global Industry Classification Standard (GICS) lists.

2—If you only want to see stocks with listed options, select Category, which is the first item on the menu, and choose All Optionable (figure 2).

FIGURE 2: SELECTING ALL OPTIONABLE.  Under the Scan tab, click Category > All Optionable to narrow your choice set to stocks with listed options. Image source: The thinkorswim platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

3—Select Add Stock Filter below the Scan in dropdown to add a stock filter to the existing set of criteria.

4—At the top row of your stock filter, choose Last from the menu and enter a minimum and maximum price of the stock.

5—Now click the Add Study Filter button. Use the dropdown to select the Price Performance group and choose Price Direction. The default inputs for this filter are CLOSE and increased, which we’ll keep. But you might want to increase the number of bars of data to more than 3.

6—In the Sorted by menu, select Basic Price & Quote and then Volume to sort your stock selection by the most heavily traded shares.

7—And in the next menu, to the right, choose Ascending. Then press Scan.

The results will appear at the bottom of the screen like orderly soldiers. If you’re not happy with them, you can always edit the filters.

Step 2: Master the Universe

Okay, maybe not the actual universe, but you can attempt to determine where the stocks in your world might be going by charting them in thinkorswim Charts. Just right-click on any symbol in the scan results, click on More info on [your stock of choice], and choose TOS Charts.

If you’ve never charted, you should try to answer three basic questions:

What’s the trend?How strong is the trend? Where do I want to get in?  

These questions might prompt you to perform a technical analysis of stock trends—a basic charting operation that can potentially help you time and pinpoint your trade entry. To help us with these questions, we’ll add three studies and make a couple of minor adjustments to the parameters:

Simple moving averageVolumeRelative Strength Index (RSI)

Your chart’s default time frame should be set to a one-year daily chart (1Y:1D). If you need to make adjustments, click on Style at the upper right-hand corner of your chart, select Time frame setup, and then select your preferred time frame.

Then, from the Studies menu, also in the upper right corner, add SimpleMovingAvg by following this sequence:

Click on Studies > Add Study > Moving Averages > SimpleMovingAvg.Next, change the parameters to 50 by right-clicking on the SimpleMovingAvg line itself.Select Edit study SimpleMovingAvg.In the parameters window, change the length to 50.

Volume is a default indicator, so there’s no need to add it. However, if your volume isn’t displayed, you can add it within the Settings menu.

To add the RSI, click on Studies > Add Study > Momentum Studies > M-S > RSI.

FIGURE 3: CHART THE TRADE. Once you find a stock in Stock Hacker, right-click and choose “TOS Chart.” Then answer the three questions below. Image source: Thethinkorswim platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

Once you’ve got thinkorswim Charts set up, you can answer these three questions:

One: Is the stock clearly trading above the simple moving average (blue line in chart) or has it recently crossed above the line?

Two: Does the indicator line in the RSI cross from below the 30 line to above the 70 line recently?

Three: Is the volume increasing or higher than normal (bars are higher than prior bars, indicating more traders committing to the trade)?

Remember that a technical analysis of stocks can provide visual data o complement your fundamental stock outlook. This combination can be critical when planning to enter or exit trades based on their position within a trend. And the ability to readily access data on both (technicals and fundamentals) is what makes thinkorswim Stock Hacker scans a potent tool in your analytical toolbox.

Please keep in mind that past performance is no guarantee of future performance and there’s no guarantee that any trend will continue in the future.

While these principals are the foundation of technical analysis, other approaches, including fundamental analysis, may assert very different views.