One of the hardest aspects of trading can be coming up with ideas. Abandonment of an investment thesis in order to participate in the market can lead to very toxic transactions. In today’s market of low volatility and volume, this is especially true. This blog post looks at several ways traders can use stock screeners to help generate ideas.
The case of a price spike as an inefficient market movement may be triggered by algorithms acting up or a fat finger order. When this is the case, traders can capitalize by correcting the inefficiency themselves or by providing liquidity to others trying to correct the move.
Traders can react by either adding a position on speculation that news may be coming, or selling liquidity to investors speculating on the probability of a deal. When trading stock on this kind of data, out of the money options can act as a much needed hedge in case fundamental news is released against the position held.
There are several ways momentum can be measured. The simplest is to look for new highs over a certain period of time (ie. new 52 week high, intraday higher, etc). Another method is to screen for stocks trading at a certain percentage of a high (ie. a stock at 90 percent of its 52 week high). When a short term moving average crosses above a longer term moving average, or an exponential moving average crosses above a simple moving average, this is another indicator of momentum.
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