Scanning for Stocks with the Stock Hacker Tool

August 28, 2023 Beginner
The Stock Hacker scanning tool on the thinkorswim® platform can help traders find potential trade candidates that match their criteria.

When searching for potential trading and investment ideas, understanding how to use a scanning tool can help narrow down potential choices. With help from the thinkorswim® Stock Hacker tool, it's possible to scan for stocks that fit specific criteria.

How to scan for stocks

Starting on the Scan tab on the thinkorswim platform, a trader can use the Stock Hacker to scan for stocks that match specific criteria. This scanning tool features a wide variety of stock analysis filters that make it easy to create a list of stocks that fit a specific set of parameters.

The Option Hacker tool, which has a similar interface to the Stock Hacker tool, allows traders to perform single options scans.

Option Hacker tool on thinkorswim

Image illustrates the Option Hacker on the Scan tab on the thinkorswim platform. Image highlights where to add filters and set conditions as well as how to sort the results.

Source: thinkorswim platform

For illustrative purpose only.

Here are the steps to use the scanning tool: 

1—Select a subset of stocks from the drop-down list next to the words Scan in. This drop-down list shows predefined categories, personal watchlists, and Global Industry Classification Standard (GICS) lists.

2—To find stocks with listed options, select Category, which is the first item on the list, and then All Optionable.

Narrowing the selection

Image illustrates how to narrow the choice set to stocks with listed options by choosing the All Optionable category on the Scan tab.

Source: thinkorswim platform

3—Select Add Condition Group (to the right of the Setup Scan row). Select All of the following, None of the following, or Any of the following.

4—From the +Add filters button, select the filter type from the drop-down list for the above three categories. For example, consider adding three filters for the All of the following category. 

5—For the first filter, select Stock from the +Add filter drop-down list. Then select Last from the stock drop-down list and enter a minimum and maximum price. To add another stock filter, select Volume from the menu, and specify the minimum and maximum volume. Another filter available for traders is the Average Directional Index (ADX) Crossover study. The ADXCrossover finds where the ADX crosses a specified level. Values of ADX higher than this level are supposed to signify a strong trend (of either direction), while lower values indicate a weak trend. To add the ADXCrossover, select Study, and from the corresponding drop-down list, select ADXCrossover and enter parameters. The default inputs for this filter are ADX crosses above 20 with an input length of 14.

6—In the Sorted by menu above the search results, there are several choices for how to sort the scan results. The default is to sort by symbol. 

7—In the next list to the right, select Ascending, then Scan.

The results from the scan will appear at the bottom of the screen. Edit the filters as needed until a list is created that matches the stock criteria for the search.

How to chart scan results

After scanning for a list of stocks that meet the desired criteria, a trader can learn more about each stock by selecting any symbol in the scan results, right-clicking the stock, and selecting More info on […], then TOS Charts.

Beginning chartists should try to answer three basic questions:

1. What's the trend?

2. How strong is the trend?

3. Where do I want to get in?

These questions are designed to help traders perform a technical analysis of stock trends—a basic charting operation that can potentially help identify a trade entry point. By adding three studies and making some minor adjustments to the parameters, it's possible to analyze a stock. Three studies likely to help a beginner trader include:

• Simple moving average1

• Volume

• Relative Strength Index (RSI)2

The chart's default time frame is set to a one-year daily chart (1Y:1D). To make adjustments, select Style on the upper-right of the chart, select Time frame setup, and then input the preferred time frame.

Then, from the Studies menu (also to the upper-right), add SimpleMovingAvg by following this sequence:

  • Select Studies > Add Study > Moving Averages > SimpleMovingAvg.
  • Next, change the parameters to 50 by right-clicking 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 the volume isn't displayed, it's possible to add it within the Settings menu.

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

Chart the trade

Chart illustrates the results of adding an SMA and RSI to a stock chart after finding a symbol.

Source: thinkorswim platform

For illustrative purpose only.

Using the information on a thinkorswim stock chart, a trader can answer the following questions:

1. Is the stock clearly trading above the SMA (blue line in chart), or has it recently crossed above the line?

2. Has the indicator line on the RSI crossed from below the 30 line to above the 70 line recently?

3. Is volume increasing or higher than normal? A trader can gauge this by observing when current bars are higher than prior bars.

Technical analysis of stocks can provide visual data to complement a fundamental stock outlook. This combination can be critical for traders when planning to enter or exit trades based on their position within a trend. While past performance is no guarantee of future performance, and there's no guarantee that any trend will continue in the future, using scanning tools can be a way to find new investment and trading ideas through technical analysis and charting.

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

1A simple moving average (SMA) is a technical indicator that’s calculated by adding the closing price of a stock or other security over a specific period of time and dividing the total by the appropriate number of trading days. For example, a 20-day SMA is the average closing price over the previous 20 days.

2The Relative Strength Index (RSI) is a technical analysis tool that measures the current and historical strength or weakness in a market based on closing prices for a recent trading period. The RSI is plotted on a vertical scale from 0 to 100. A reading above 70 is considered overbought, while an RSI below 30 is considered oversold.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure document titled "Characteristics and Risks of Standardized Options"  before considering any options transaction. Supporting documentation for any claims or statistical information is available upon request.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.