While some traders swear by the effectiveness of identifying undervalued stocks and waiting them out, others prefer to jump into powerful trends with the objective being to make profits in the short-run. The latter method is known as momentum trading (or simply momo).
It works best for day trading and short-term swing trading strategies. And for those looking to improve their chances of success with momo, it might be a good idea to seek the services of a well-made momentum scanner.
A good scanner can help you identify when a new trend is building up so you’re not too late to get in. It can also alert you when the trend is just about to reverse so you can exit the market when your trades are still profitable.
Top Momentum Scanner for Traders in 2022
They come in all manner of colors, shapes, and sizes. The truth, however, is that momo scanners are not equal. And that’s why, in the next few paragraphs, we focus on the best scanners when it comes to hunting for momentum.
1. Trade Ideas
Trade Ideas is an intelligent stock scanner. However, most platforms available out there already have built-in scanners, so why should you settle for Trade Ideas in particular?
Well, if you are a momo trader, you’ll want to have the freedom to customize your scanner to meet a very specific criterion. For instance, you want to target stocks that have sufficient volumes, or ones that are breaking resistance points and so forth.
The beauty about Trade Ideas is that it enables you to do all that either through its pre-built scanners or custom ones.
If you prefer to set up a custom scanner for momentum trading on Trade Ideas, all you’ll need to do is define your preferred criteria. For example:
- It might be a good idea to aim for stocks that are setting new highs, and in that case, you can check the New High box on your scanner
- You might also want to filter your stocks based on volume because high volume stocks tend to perform better for momo trading (>10,000)
- You can also use a factor such as the percentage change in price to track the highest movers of the day (>10%)
- Stocks that set premarket highs or ones that cross their daily high resistance point might also be ideal to aim for
Another key advantage that comes with using Trade Ideas for momentum trading is that you can open multiple alerts windows at once. So, you can have an alerts window specifically for stocks that are breaking out on volume and another one for the High of Day (HOD) scanner among others.
And with built-in broker integration (to Interactive Brokers), Trade Ideas gives you the opportunity to open trades super-fast immediately there’s an alert.
We particularly like the fact that Trade Ideas has been one of the most consistent stocks scanners out there in the world. Indeed, their AI system is one of the best there is and has been beating the market for as long as we can remember.
Although Scanz is not as sophisticated as Trade Ideas is, it still is a fantastic platform for anyone interested in momentum trading.
One way to use Scanz to locate those elusive high momentum stocks of the day is through its built-in moving average stack filter.
Simply set the scanner’s criteria to focus on stocks whose SMA (Daily, 10) for the 1m interval is greater than the analytic SMA (Daily, 50) for the same time interval.
The idea here is that the SMA scanner can spot stocks that have continually sustained a certain trend over time.
Normally, the short-term moving average will remain consistently above the long-term moving average to confirm a strong bullish trend (and vice versa for bearish trends).
And just like with Trade Ideas, you can add some more filters to this scanner so you can eliminate the noise and focus on the winning stocks. For instance, you could add a rule that limits your scope to stocks cross the daily high resistance point i.e., ones that hit 52-week highs, and so forth.
Of course, that’s just one way to make use of Scanz as a momentum trader. With a bit of experience, you can even configure it through the moving average convergence divergence (MACD) method or by introducing a technical indicator such as the Average Directional Index (ADX).
3. Benzinga Pro
You can only underestimate Benzinga Pro at your own peril. It’s one of the best stock scanners out there, plus it comes with a host of features that you can use create a custom criterion for momentum trading. And of course, it’s possible to develop a personalized watchlist immediately you have the scanner’s built-in features doing the heavy-lifting for you.
The first way to track momentum on Benzinga pro is by filtering stocks based on volume. This is because momentum rides on volume.
You can also track some of the low float stocks of the day using this tool. To do that, simply load the screener tool. On the menu, you'll see the filtering functionalities for float and percentage float. A good idea might be to focus on stocks that are less than or equal to 3M float.
You can then narrow your search using the relative volume modifier and/or the percentage float modifier.
Granted, Benzinga Pro might not have as many filters and modifiers like Trade Ideas but the few ones available can be quite powerful if used right.
What Is Momentum Trading?
As a momentum trader, you trade by betting on trends. For example, if the Apple Stock (AAPL) is showing bullish tendencies, you can bet that it will sustain that momentum for the foreseeable future. So, you buy the stock and exit just before the trend reverses.
The key thing to winning it big in momentum trading is to know when to enter the market and when to exit. Ideally, you should enter the market just when the trend is commencing and exit just before it ends.
Another way to look at it is by looking at a momentum trader as a surfer who jumps from one wave to another. The surfer identifies a wave, sails up to its crest only to jump onto the next one before the first one crashes.
Momentum trading can be thrilling if you do it right. Unfortunately, it also can be highly risky if certain things are not done right.
To Use a Scanner or Not? The Art of Trading Momentum
There are two ways to trade momentum. The first one is to manually study the market looking out for stocks with clear trends and high volumes. Of course, this can be quite demanding as there are thousands of stocks listed on the major exchanges.
Plus, while it is easy to determine the direction a trend will take, finding out its strength is not always easy.
This is why it makes perfect sense to use the best momentum scanner available to zero-in on stocks that meet your preferred style of trading.
Now, if you believe in working smart and making the most of your time, these software programs are indispensable.
Why Traders Need Momentum Scanners
Ask any Wall Street veteran and they’ll tell you that on any given day, markets are filled with noise. Only those who are able to filter through this noise are able to identify the right candidates to invest in.
And the same rule applies to momentum trading. A good scanner can make you more agile enabling you to economize your focus on stocks that hold the greatest potential.
Another thing, market scanners never go to sleep. And so, they provide you with a reliable pipeline of trading ideas so you can keep your winning streak alive.
And above all, these tools are able to keep track of crucial market data thereby ensuring you get in the market just in time and exit when the trend is still valid. Also, the software can keep vigil on your trades watching for any changes or news events that have the potential to prematurely alter the pattern and alert you about the same so you can protect yourself accordingly.
We can go on and on but we think our point has been made. Momentum scanners are tools that can be highly useful in enhancing your ability to monetize the right kind of opportunities.
Whether you opt for Trade Ideas, Scanz, or Benzinga Pro, one thing is for sure. Momentum trading is a high-octane style of trading that can transform your fortunes fast if used right. As such, it makes perfect sense to go for the best momentum scanner available.
That way, you can have an easier time learning the ropes and building a powerful strategy that has your investment growing from strength to strength.
Trading Review’s mission is to help you become a better and smarter trader/investor through in-depth reviews of courses, trading software, and more.