Why Scanners Suck And Bad Robots Suck Worse

Most traders or investors who want to get into trading eventually start using a scanner to help them find day trading and investment ideas.  For those of you that don’t know what this is, its simply a computer scan of the market designed to highlight stocks meeting certain criteria in real time (or end of day, both are available).  Now don’t get me wrong, these things do have their place and can save a lot of time as no single person can possibly watch 2000 stocks at one time or more.  The biggest issue is the simplicity of what can be scanned for – everything is a true or false, yes or no answer.

The problem is the market never deals in absolutes.  Its always in shades of gray.  When W and X happen the stock goes up sometimes.  When Y happens, if Z happens too it often sells.  The problem here is not the flag – that is fine – its that a basic scanner does nothing to tell you of the qualtity of what you are scanning for.  One huge thing no one thinks about is every single stock is unique – they have their own personality which changes slightly over time, but is based on the people who trade the stock on a regular basis.  Just because a scan works on IBM and seems to call when it will move up does not mean at all that it works on Walmart.  Or Walmart may need a third, fourth, or even fifth confirming thing at that same time in order to be reliable.  Or it may need something counted and tracked that happens prior to the scan being true.  On and on this type of stuff can go, all of it really is not talked about.

This is why more and more traders are looking for an intelligent day trading robot that is able to track statistics on what it is watching in real time, learn how to adapt to changing market conditions, and basically put scanners to shame.  What sets them apart is a day trading robot is able to use statistics and other tracking devices to turn on certain filters, adjust the parameters, or learn to not trade in certain situations.  The key to using a day trading robot is to realize that its simply a tool.  It is not your road to riches nor is it infallible.  It is basically a more intelligent market scanner that is actually able to trade and track the status of signals that it finds – a scanner just finds the signals but tells you nothing about the quality.

One word of caution though – do not use any trading robots that claim to trade penny stocks – really.  I have never seen one that can prove it can make anything.  This does not mean they dont exist, just from my observation these prey on people looking for a get rich scam to throw some money at.  And throw away they do.  Most of these types will have some kind of cool video showing how it works to find “hidden” chart patterns, then they show the next day the stock going up.

First off – do a little research – look at the symbol in the video, go to the date they are talking about on a chart and look yourself.  Most of them literally have no volume AND have no price pattern at all.  Often times they have serious gaps in the chart (days where no trades happen at all).  I would love for them to show me how a computer can read patterns in data that does not exist – the answer is the reading is false and made up, that is why.  The volume spike comes as a result of the robot’s followers all trying to buy an illiquid stock.  If these penny stock robot’s are really good – make a version that is different than the one they are distributing, meaning no one has a copy, and put a different stock list in there.  Show me how it picks a name in real time, we watch the name (but its not allowed to broadcast anything) and lets see what happens.  I am sure I will stare at a blank screen as nothing happens.  Penny stock robot’s suck.

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