So welcome to The Stock Market Millionaire podcast. This is episode number 31, and it’s about Using Technical Analysis of the Financial Markets to Build a Great Candidate List. Now, when you’re building a candidate list, which I call the “big list,” it’s some something that I look to do one time, and then I modify along the way. So what does that mean? Well, I’ll go ahead and I will create a filter and I’ll build a list out and find my big list of candidates that I look at. And, that list is things that I would have no problem trading, but not necessarily what I’m trading now. So I create that list, and then every couple of days, week, two weeks, whatever fits your schedule, for me it’s about once a week, I go through that big list and I identify companies that would work right now or over the next couple of days that have an opportunity, that the pattern is kind of setting up.
Now in the process, I will use multiple technical indicators, things such as volume Wilder’s Average True Range and so forth. Now, again, these are indicators to add a candidate to my big list. It’s not an indicator that I look at every day. In other words, if I want a minimum of 1 million shares of volume traded every day on my stock, once I find that I don’t have to check, “ooo, did it trade a million today?” I’m not normally in that situation. When I look for Wilder’ Average True Range and I want it to move a minimum of $4 a day, and I find that well, that’s for the last 13 days on average, we’ve moved $4 a day. So, I don’t need to check it again tomorrow. Right? These are things to help add it to my big list if you would.
Now, charting and technical analysis, play a key role in identifying that big list, right? You’ve gotta be able to look at the chart and say, “does this one actually fit or not?” Because if it doesn’t fit, if it doesn’t work, then you’re going to have a problem, potentially. Right? So I wanna sure that from a technical standpoint, that everything is working the way I want it to. In other words, if I wanna buy a stock and it’s in what I call a death spiral, where it’s just spinning down the drain, right, and going to oblivion, right, aero, right, I don’t wanna buy something like that. So from a technical analysis standpoint, it’s working for what I want, right? The way that I do this personally, is I start off with the S & P 500 stock list when I’m filtering down that large list. So I start with 500 stocks. And from there, I create a filter, as I mentioned earlier, that will bring down the candidates, and I’ll talk about it in a minute, but it’ll bring down the amount of candidates that I have, but my starting point is the S & P 500.
So you don’t have to say, where do I go to look for these candidates as a, a place to start off at, just use the S and P 500,.if you feel it’s not enough, or if you’re very much a tech person, you can go to the NASDAQ, right? Which is a hundred stocks. You can go to the Dow, you can add all three of them into one list and start with 630, if you choose to. But each list has a very separate purpose to it. The Dow is very blue chip, stodgy type companies where not all but many, uh, whereas the NASDAQ is very high tech, very high flyers rocking, rolling, and right, the Amazons and, and such of the world, uh, as you have some of those companies on the do as well. And then the S & P 500 is the top 500 companies, uh, out there, right? So there’s a good mix in just that S & P 500 without having to go to other lists, although you are welcome to do so.
Now, when implementing technical analysis of the financial markets to build a list, you wanna make sure that, uh, you build that list out to fit your personal risk profile and risk tolerance. So when I started back in 1997, I knew that I needed to learn technical analysis if I wanted to be successful at trading. And that’s exactly it. There’s nothing else that I would credit my success to besides mindset, other than technicals. You’ve gotta be able to read the technicals. In other words, you’ve gotta be able to look at that chart and say, what does it look like? It’s doing next? What does it seem to be doing now? What can I plan on happening next? You’ve gotta be able to do that, and the only way in my opinion to do so is to go ahead and look at an actual chart with the technical analysis.
Now I use a charting program called Omega Chartz, and I put my filtering on autopilot. So let’s go to the charts and take a look at a filter, where I I’m gonna break it down for you and show you the various things that I’m going to add into that filter and what it actually does to our list. All right. So let’s go and start there.
So, as we’re looking at the charts, now, I’m gonna go into Omega Chartz and I’m going to open up my filters first. Now, if you’re listening to, this is a podcast, you’ll still be able to follow along with everything that I’m doing. If you’re watching this as a video, you’ll be able to see all of the components as I click through them. So we’re going to click on filters, because that’s what I want create, and I want to create a new filter. And I get pop up here. And it tells me to click here to add, so I’m going to do that. Now I get some choices. I’m gonna start off with symbol group. Why? Because I wanna start with the S & P 500, right? That’s the, the group we wanna work with as a control group. So let’s go there first. Now I have a lot of watch lists that I’ve created on my own, but let’s just go to the plain-Jane, every day, S & P 500.
And it shows me that the S and P 500 has 503 candidates go figure, how the heck does that happen? Right? Well, now we’re gonna go ahead, click here to add. We’re going to go down to price and volume, and I’m going to choose volume. Just straight volume, nothing special. I don’t want close the last five days, I don’t an average– volume, period. And when I click on volume, I wanna make sure that it says value, not percentile. I don’t have a top number of volume, meaning I’m not capping it at 5 million shares a day traded. That’s not what I wanna see. But for the below, I’m going to start off with 500,000 shares. Actually for above 500,000 shares. When I click on the screen, it now shows me I have 409 candidates. So I took the 503 down to 409 just by saying, I need at least a half a million shares traded a day. All right. But that’s not enough. I want to go ahead and add in price, right?
So we go back to price and volume. And the way we add price on Omega Chartz is close. Now, it’s not closed up the last five days versus the 200– None of that, it’s just close. What’s my closing price. So also I wanna make sure it’s a value, not a percentile, and I have an above and a below number. So my above number is going to be arbitrary to what you want in yours. Let’s say that we wanna start off with stocks that are above $40 per share, but they are below $200 a share. So I put 40 above, 200 below. And when I click on the screen, that tells me now there are 350 stocks. If I stop with just these two components here, I have way too many candidates on my list, right? So I may have to go in and filter even further down to be able to do so.
Now I’ve done things in here that I’ve built criteria, that, and- the criteria are custom that I wrote. And it’s very simple to write here that I wrote for things like Wilder average true range. So if we come in and go into, let’s see miscellaneous, I think is where it is. And then I save everything that I create with my initials RR, and I am looking for WATR, which Wilder’s average true range. If you’re watching this on the screen on video, you’re seeing there is a tremendous amount of RR’s in here that I have created. And you see RR Wilders average true range greater than, and you see here, it says greater than $4. I’m going to click on that. Well, that now takes my, my watch list from 269, it takes it down to 50. See, I now have a much more manageable list that I can work with at 50 candidates. That doesn’t mean I’m trading all of these today. That just means that this list is a starting point for me, a place that I can go every week and say, “all right, what is setting up?” And I have multiple lists that I have ones that do not change. I have a list of 20 stocks that I use every single week.
It’s called Power Option Plays. We trade them day in and day out. It’s just what I do, right? That’s my favorite list of all two trade, but I look for other potential trade setups. Well, so this would be directional, but what if I was looking for, I don’t know, covered calls and naked puts, this would not be a list I would go to. I would create a list that fit that strategy, but creating this filter to bring down 500 candidates to 50 candidates, that’s great. And if you modify it a little bit, increase the volume, decrease the pricing in there, lower or raise the Wilder’s average true range, you will change the size of that list, but you can easily do that to make adjustments to it. And any good charting program will allow you to do that. Now, I use TradeStation. This is a very complex process on TradeStation.
I use TradeStation 9.5, and we had to actually go in and figure out how to cheat the system to make it think we were using an optionable stock that we really weren’t the way we said… And this was not me. This was not TradeStation tech support. This was their ADVANCED tech support that came up with that, as far as how we get it around this glitch. TOS, you can, I use TOS, you can do these types of things on TOS, but you need to be a little bit more of a programmer to be able to do so. Right. Same thing with when you look at other brokers firms out there, softwares. I like Omega Chartz because of the ease of how simple it is to create these.
Now, I use Omega Chartz and put my filtering on autopilot, all the time. We went and looked at the charts here and the list, if I go ahead now and save this, I’m going to put it down as “RR test 123.” And I’m gonna click, OK. And I want to display that list. It now shows me the 50 stocks that are in there. I’ve got companies in there like Apple, Applied Materials, AMD, Capital One, Etsy, Expedia, Fang, Keys, MRNA, Marriot…You see where I’m going with this right? Big companies, Nucore, PayPal, Qualcom, so on and so forth. There are 50 companies in there, of the 50 right off the bat, I know 30 of ’em exactly who they are, Exactly what they do and such. The other ones, maybe not much, but now is the fun part of, I get to look at them and say, Ooh, what’s next? Right?
So remember the goal is to boil down. Remember the goal is to boil down a big list into a few hundred stocks, into a handful of candidates. So we take that 500 and drop it down to 50, and that’s really what we’re trying to accomplish there. So there you have it, ladies and gentlemen. With that, make it a profitable day. Stay focused on the quest to becoming a great trader, keep crushing it. And remember, you’re just one trade away, take care, and I’ll see you at our next update. Bye for now.