SIMPLE SCAN FOR STOCKS: FINDING BUY AND SELL SIGNALS

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Cassandra Bridges
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2 The Simple Scan is The Wizard s easiest tool for investing in stocks. If you re new to investing or only have a little experience, the Simple Scan is ideal for you. This tutorial will cover how to find Buy and Sell Signals using the Simple Scan for Stocks. The Simple Scan also allows you to view current, open positions. This feature is covered in the tutorial, Simple Scan for Stocks: Viewing Open Positions. This tutorial contains the essential information for using any of our Stock Scans, so please read it before viewing any of our other Stocks tutorials. This guide is broken into 3 parts: Part : Investing Made Simple What is the Simple Scan for Stocks? Part 2: Looking for Buy and Sell Signals How to find Stocks to buy and sell. Part 3: Putting it All Together Selecting stocks, structuring your portfolio and placing orders with your broker.

3 Part : Investing Made Simple What is the Simple Scan for Stocks?

4 Simple but Sophisticated Don t let the name fool you: the scan may be simple, but behind the curtain is a very sophisticated process designed to bring you the stocks with the very best chances of making money. Each day, before you even press a button, The Wizard combs through close to 0,000 stocks. Using a proprietary algorithm and several powerful filters, The Wizard narrows this list to only a basket of the best ones. The Wizard follows a top-down approach that does the following:. Finds the best sectors: A sector is simply a category of stocks, grouped together by their general industry. Of the many sectors in the stock market, The Wizard identifies only the best ones. a. For Buys: The Wizard looks only for the strongest sectors. b. For Short-Sells: The Wizard looks only for the weakest sectors. 2. Finds the best Industries: Each sector contains a number of industries. Once The Wizard has identified the best sectors, it then looks for the very best industries within these sectors. 3. Looks for the big money: A stock can only move if there is a lot of money behind it. If a lot of investors are buying it, this will create upward pressure, and the stock will move up. If a lot of investors are selling it, however, this will create downward pressure, and the stock will drop in price. The telltale sign of this pressure is called Volume. Volume is simply the number of shares that are both bought and sold during a given day. High volume indicates that there is big money - a lot of investors - behind a stock. The Wizard only looks for stocks that exhibit high volume over a 50-day period. 4. Matches the Trend of the stock market: If the Market Trend = Buy, The Wizard only looks for stocks whose trend is also a Buy. If the Market Trend = Sell, The Wizard only looks for stocks whose trend is also a Sell. And the best part? You don t have to do any of this, because The Wizard does it all for you. All you do is choose a few simple options, run your scan and The Wizard will give you that day s list of the very best stocks. If that sounds easy, wait to you see how easy it is to actually run your own Simple Scan.

5 Part 2: Looking for Buy and Sell Signals How to find Stocks to buy and sell.

6 The 3 Steps to Finding Buy or Sell Signals Finding Buy or Sell signals for stocks requires only 3 easy steps. You ll find they re easy to learn and even easier to follow. Successful investing is about being consistent, so make sure you follow these 3 steps each and every time you run a Simple Scan. Step : CHECK THE MARKET TREND Step 2: SELECT YOUR OPTIONS Step 3: VIEW BUY OR SELL SIGNALS

7 Step : CHECK THE MARKET TREND We ve explained the Market Trend on this in other tutorials, so we ll simply touch on it here. (If you need a more detailed explanation of the Market Trend, please see our Investing with the Trend or Getting Started with Stocks tutorials.) The important thing to remember is that you buy when the Market Trend = Buy; you sell short or stand aside when the Market Trend = Sell; and you do nothing when the Market Trend = Sideways. Market Trend = Buy You will look for Buy Signals on stocks. The Wizard makes this easy by only showing Buy signals for Stocks when the Market Trend = Buy. Market Trend = Sell You will look for Sell Signals on stocks. If you do not want to sell short, your other option is to wait for a Buy Signal. The Wizard makes this easy by only showing Sell signals for Stocks when the Market Trend = Sell. Market Trend = Sideways The stock market is moving Sideways. When this happens, The Wizard will not show either Buy or Sell Signals.

8 Step 2: SELECT YOUR OPTIONS 2 To start a new Simple Scan, click on the Stocks button at the top of the page... Then click on the Simple Scan button 2

9 Step 2: SELECT YOUR OPTIONS The first screen you ll see is the Buy/Sell Options. You only have to choose 3 options. They are: 2 3 Your Time Horizon Your Market Index Your Investment Size Once you ve chosen your options, simply click the button to look for Buy or Sell Signals

10 Step 2: SELECT YOUR OPTIONS Your Time Horizon The Wizard gives you two options for choosing your Time Horizon.. Short-term (daily signals) If you prefer to invest for the shorter-term, choose this option. Choosing this option means that you ll be checking The Wizard at the end of every day for Buy or Sell Signals. It also means that you ll be monitoring your actual, live-money investment portfolio on a daily basis. Each investment for this Time Horizon typically lasts between a few weeks and a few months. 2. Long-term (weekly signals) If you prefer to invest for the longer-term, choose this option. Choosing this option means you ll be checking The Wizard once a week - at the end of every week or on the weekend - for Buy or Sell Signals. It also means that you ll be monitoring you actual investments on a weekly basis. Each investment for this Time Horizon typically lasts from a few months to well over a year.

Step 2: SELECT YOUR OPTIONS Your Market Index Next, choose your Market Index. A market index is simply a listing of stocks that are used as a gauge for the overall stock market.

11 Step 2: SELECT YOUR OPTIONS Your Market Index Next, choose your Market Index. A market index is simply a listing of stocks that are used as a gauge for the overall stock market.. Dow Jones 30: Also called the Dow Jones Industrial Average, it s an average of 30 significant stocks of some of the biggest corporations in the world. 2. S&P 500: The Standard & Poor s 500 Index is the most benchmark for the U.S. stock market. It contains a wide variety of companies, across all business sectors. 3. Nasdaq 00: An index 00 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market. 4. Russell 2000: An index of the 2,000 small cap - small capitalization - stocks. Small caps are simply smaller corporations with a cumulative stock value that is typically less than $ billion. 5. 8,900+ stocks: The Wizard scans a universe of over 8,900 stocks.

12 Step 2: SELECT YOUR OPTIONS Your Investment Size Next, choose your Investment Size. Choosing your Investment Size is a critical piece to managing your risk. We ll explain this in more detail on the next page.. The size of your investment portfolio: Enter the dollar amount of your investment or retirement portfolio. 2. Select an amount for each investment: This is the percentage of your overall portfolio that you ll dedicate to each investment. Select from % - 5%, and The Wizard will automatically show you the dollar amount you ll have for each investment.

13 Step 2: SELECT YOUR OPTIONS Why should I choose an Investment Size? One of the enduring truths of investing is that you can t win em all. In other words, not every investment you make will be profitable. Some will lose money. Because of this, it s critical that we manage our risk, so that if any of our investments do lose money, they don t significantly effect our portfolio and we can preserve our capital. One of the ways The Wizard can help you avoid significant losses is to put a limit on the amount of money you invest in any one stock. The way The Wizard sets this limit is to cap it as a percentage of your overall portfolio. (As you ll see in a bit, The Wizard will then show you how many shares of each stock you can buy based on your investment size.) It is ultimately up to you to decide how much money you want to invest in any one stock, but please bear in mind that taking an excessively large position will significantly increase your risks of losing a lot of your money. It is far more prudent to preserve your capital so that if your investments do lose money, you still have plenty of capital left to live on and play another day. You only have to choose your Investment Size once. Once you ve chosen your Investment Size, The Wizard will remember it, and you ll never have to choose it again - unless you want to change it.

14 Step 2: SELECT YOUR OPTIONS Look for Buy Signals One of the great features of The Wizard is that if the Market Trend = Buy, we will only give you the ability to look for Buy Signals on stocks. Conversely, if the Market Trend = Sell, you ll only be able to look for Sell Signals on stocks. We do this to insure that you re only investing with the current Trend of the market and not taking the unnecessary risk of trying to buck the tide. If the Market Trend = Buy, The Wizard will only allow you to scan for Buy Signals.

15 Step 2: SELECT YOUR OPTIONS Look for Sell Signals If the Market Trend = Sell, The Wizard will only allow you to scan for Sell Signals.

Step 2: SELECT YOUR OPTIONS What if the Market Trend = Sideways? If the Market Trend = Sideways, The Wizard will not allow you to scan for either Buy or Sell Signals.

16 Step 2: SELECT YOUR OPTIONS What if the Market Trend = Sideways? If the Market Trend = Sideways, The Wizard will not allow you to scan for either Buy or Sell Signals. Instead, you must wait for the Market Trend to change to Buy or Sell before you can look for new stock investments. It s our way of giving you the very best chance of investing with the Trend of the market.

17 Step 3: VIEW BUY OR SELL SIGNALS Once you ve run your scan, The Wizard shows you a list of stocks. Here s an overview of what you ll see Stock Symbol and Name Price to buy or sell short Price to get out Price to take your profits How many shares to buy (Based on your investment size) Trend of that stock Ranking, from strongest to weakest You can click on any of the column headers and the list of stocks will sort according to that column. Clicking on the same column header again, and the list will re-sort in the opposite direction

18 Step 3: VIEW BUY OR SELL SIGNALS Symbol / Company Name 2 The Wizard shows you the ticker symbol and the company name for each stock in the list. When you place your order to buy or sell short a stock, you will use its ticker symbol. When you roll you cursor over the box containing any symbol, a box will pop up, showing you the Sector and Industry for that stock, the Trend of that Sector and Industry. You can click on the name of the Sector or Industry, and you will be taken to the Sector Scan section. You can also view a detailed quote for that stock. 2

Step 3: VIEW BUY OR SELL SIGNALS Buy Price / Sell Price 2 Buy Price When you look for Buy Signals, The Wizard will show you the exact price - down to the penny - at which to buy each stock.

19 Step 3: VIEW BUY OR SELL SIGNALS Buy Price / Sell Price 2 Buy Price When you look for Buy Signals, The Wizard will show you the exact price - down to the penny - at which to buy each stock. Sell Price When you look for Sell Signals, The Wizard will show you the exact price at which to sell short each stock. The Wizard s Buy and Sell Prices are what you ll use when you place your orders with your broker. To learn how to place orders with your broker, please see our Placing Orders tutorial. 2

20 Step 3: VIEW BUY OR SELL SIGNALS Stop Price The Stop Price is the price at which you will get out - exit your investment. The Wizard s Stop Price acts like an insurance policy. In the event that your investment loses money, the Stop Price is where you will exit in order to avoid a large loss. Because some of your investments will inevitably lose money, it is critical that any losses you do have are kept to a minimum. The Wizard s Stop is known as a trailing stop. This means that if you buy a stock and its price goes up, the Stop Price will follow up behind it, locking in your profit along the way. This way, if the stock does reverse and go back down, you will not give back your profit. Exit your entire position at the Stop Price: Whether you have taken profits or not, you will exit your entire position at the Stop Price. For Buy Signals, if your stock s price drops to the Stop Price or below, you will exit immediately. For Short-Sell Signals, if your stock s price rises to the Stop Price or above, you will also exit immediately. Managing your Stop Price can be tricky, so for more information on how to place an order for the Stop Price, please see our Placing Orders tutorial.

21 Step 3: VIEW BUY OR SELL SIGNALS Buy Signal Profit Targets Buy Targets For each Buy Signal, the Wizard provides two prices at which to take profits. When your stock reaches one of The Wizard s profit targets, you will sell a certain number of shares. 50% Target: At this profit target, you will sell 50% of your shares. If you had bought 00 shares, you will sell 50% at this price. 75% Target: At this profit target, you will sell 25% of your original share size. Again, if you had bought 00 shares, you will sell 25 shares at this price. At this point, you will have on 25 shares remaining. You will have sold 75% of your position, which is why it s called the 75% target. At this point, you will exit the remainder of your position at the Stop Price. The Wizard s Profit Targets allow you to take profits as you go along. As the old saying goes, You can never go broke taking profits. To learn how to place orders with your broker to take profits, please see our Placing Orders tutorial.

22 Step 3: VIEW BUY OR SELL SIGNALS Short-Sell Signal Profit Targets Sell Targets For each Sell Signal, the Wizard also provides two prices at which to take profits. When your stock reaches one of The Wizard s profit targets, you will buy back a certain number of shares. (To learn what buy back means and for more information short-selling, see our Short-Selling tutorial.) 50% Target: At this profit target, you will buy back 50% of your shares. If you had sold short 00 shares, you will buy back 50 shares at this price. 75% Target: At this profit target, you will buy back 25% of your original share size. Again, if you had sold short 00 shares, you will buy back 25 shares at this price. At this point, you will have on 25 shares remaining. At this point, you will exit the remainder of your position at the Stop Price.

23 Step 3: VIEW BUY OR SELL SIGNALS Shares per Investment For each stock, The Wizard shows you exactly how many shares you can buy, based on the Investment Size you chose when selecting your Simple Scan options. The Wizard also shows you the dollar amount of those shares. This makes it very easy for you to place your orders to buy or sell short stocks. This feature is the same for both Buy and Short-Sell Signals.

24 Step 3: VIEW BUY OR SELL SIGNALS Trend / Ranking 2 The Trend for each stock. You ll notice that when you look for Buy Signals, the Trend for each stock is a Buy. When you look for Sell Signals, the Trend for each stock is a Sell. You can click on the Trend arrow for any stock to see a calendar, showing at least several years of how The Wizard has called the Trend for that stock. For more information on this particular feature, please see our Investing with the Trend tutorial. The Wizard also ranks each stock in the list. Why is the ranking important? Because if you are going to buy stocks for your portfolio and don t know which ones to choose, simply pick the highest ranked ones first. 2

25 Part 3: Putting it All Together Structuring your portfolio, selecting stocks and placing orders with your broker.

QUICK START GUIDE INVESTING WITH STOCKS Now that you ve learned how to perform a Simple Scan and how to view a list of Buy or Sell Signals, it s time to put it all together.

26 QUICK START GUIDE INVESTING WITH STOCKS Now that you ve learned how to perform a Simple Scan and how to view a list of Buy or Sell Signals, it s time to put it all together. How do I structure my portfolio? If you ve never invested before - or even if you have - the question of how to structure your portfolio can be daunting. So we re going to break it down for you and make it simple. Whether you re investing for retirement or for any other reason, there are two things to consider when structuring your portfolio:. How much capital (money) do I have to invest? 2. How many stocks do I want to hold in my portfolio at one time? How much capital do I have to invest? Only you can answer this question, of course, but we can help. Remember that when you looked for Buy or Sell signals, you entered the size of your investment portfolio, and you selected a percentage for each investment. This feature has been specifically designed for you to determine how much money you want to invest in each stock.

27 QUICK START GUIDE INVESTING WITH STOCKS How many stocks do I want to hold in my portfolio at one time? This is another question of personal preference. Some investors prefer to hold only a few investments at once, while others are comfortable holding 20 or more stocks at once. There are two things to consider when deciding how many stocks you want to hold at one time:. Your investment size: Your investment size will dictate the maximum number of stocks you can hold at one time. If you ve set your investment size to 5% of your portfolio, you will be mathematically limited to 20 stocks in your portfolio. However, if you decide that you re only comfortable with holding 0 stocks in your portfolio at one time, this does not mean you should increase your investment size to 0%. While this choice is ultimately yours, such a large investment size significantly increases your risk of losing a good chunk of your capital. It isn t necessary to dedicate all of your investment capital at one time. It s OK to simply keep some in cash or a cash-equivalent. 2. Your time commitment: A question you ll want to ask yourself is: How much time am I willing to spend investing? There s no right or wrong answer. If you decide you want to spend only 30 minutes per week, that s perfectly fine; The Wizard has been designed so that you can invest using the Long-Term (weekly) Signals and spend about half an hour per week checking for new Signals and managing your orders with your broker. We have some extraordinarily successful customers who do just that. The entire purpose of The Wizard is to take most of the work of investing out of your hands. Short-Term (daily) Signals: The Wizard updates these Signals every day, after 7pm EST, so you must check our site for new Signals and also monitor any existing investments you have on a daily basis. Long-Term (weekly) Signals: The Wizard updates these Signals once a week, after 7pm EST on Friday. Using the Long-Term Signals, you must check our site for new Signals and monitor any of your existing investments once a week. Long-term investors can spend as little as 5-20 minutes per week. Short-term investors will need to commit more time, but will also have more investment opportunities per month and per year. The one piece of advice we can offer is this: Do what feels right for you. Also remember that the more stocks you have in your portfolio at one time, the more time it will take you to monitor your investments.

28 QUICK START GUIDE INVESTING WITH STOCKS How do I know which stocks to choose? One of the most common question we ve gotten is, Out of this entire list of stocks, how do I know which ones to choose? Since most investors have a limited amount of space in their portfolios, this is a great question. Fortunately, we ve got a great answer. Let s use an example to illustrate:. You ve run a Simple Scan for Buy Signals. 2. The Wizard shows you a list of 30 stocks. 3. In your investment portfolio, you ve decided that you re willing to hold 0 stocks at one time. You are currently holding 7 stocks, which means you have 3 open slots. 4. Simply click on the Ranking column header to sort the list of stocks by their numerical rank. 5. Then, choose the top 3 ranked stocks from the list.

29 QUICK START GUIDE INVESTING WITH STOCKS Placing orders with your broker So now that you ve decided how much you have to invest, how much you re willing to invest in any one stock and how many stocks you re willing to hold at one time, it s time to place your orders to buy your stocks. To place your orders, you ll need to know a few things: The ticker symbol for the stock 4 Price to take your profits 2 Price to buy or sell short 5 How many shares to buy 3 Stop Price - the price to get out Fortunately, The Wizard gives you all of this information! You now have everything you need to place your order with your broker. This tutorial doesn t cover the details of how to place an order with your broker. To learn how to place orders for Buying and Selling Short, exiting at the Stop Price and Taking Profits, please see our Placing Orders tutorial. That tutorial will also tell you how to manage your positions once you ve placed your orders

QUICK START GUIDE INVESTING WITH STOCKS Adding Stocks to a Portfolio or Watchlist The Wizard also gives you two different ways to track stocks.

30 QUICK START GUIDE INVESTING WITH STOCKS Adding Stocks to a Portfolio or Watchlist The Wizard also gives you two different ways to track stocks. 2 Add stocks to My Portfolio My Portfolio is a feature that allows you to paper trade - to track investments without actually committing any money. To add stocks to a Portfolio, check the box next to their symbol names and click the Add Selected Stocks to My Portfolio button. Add stocks to My Watchlist A Watchlist is simpler than a Portfolio. In it, you can keep a custom of list of stocks that you want to follow. To add stocks to a Watchlist, check the box next to their symbol names and click the Add Selected Stocks to My Portfolio button. To learn more about Portfolios and Watchlists, see our tutorials for My Portfolio and My Watchlist. 2

31 QUICK START GUIDE INVESTING WITH STOCKS What s Next? Now that you know how to find Buy and Sell Signals for Stocks, you re next step is to learn how The Wizard shows how its current signals are doing. This is a great feature, because you ll see that we re completely honest about how we re doing. You ll gain the confidence that comes not only from knowing that we show both our winners and losers, but also from seeing how great The Wizard really is. (And don t worry, this next tutorial is much shorter...) The next tutorial for you to view is: View the tutorial: Simple Scan for Stocks: Viewing Open Positions

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