Each evening, daytraders can use TradingMarkets Indicators to quickly...

• Get a handle on the short-term direction of the overall market.
• Find the best stocks in the best sectors, and the weakest stocks in the worst sectors.

Here is a game plan that will enable you to do it. You can use it "as is," or modify it to suit your trading style.

Step 1. Short-term Directional Bias of the Markets.

To find out what direction the overall market is poised to move in:

1. Click to the Market Bias Indicators, to determine in which direction the market poised to move. These indicators were developed by Larry Connors for his hedge fund to determine the short-term direction of the overall market. Here is your rule of thumb: Look for multiple signals that agree with one another. The more signals there are, the higher the probability of an explosive short-term move! Note that you should place more weight on the signals from the Market Bias Indicators than the more subjective interpretations from 1b, 1c and 1d. More advanced CVR alerts and indications for individual stocks are available at Connors Nightly VIX And Volatility Service.
   
2. Go to the Tools And Research page, and pull up charts of the major indices to determine the short- and long-term trend of the market. Make a note of the trend of the S&P 500 and the Nasdaq Composite over the past seven days. A strongly trending market may tell you to have more of a directional bias in your trading.
   
3. Zoom in to a three-day period and change the time frame to five-minute bars. At what price levels do you see the bounces occurring? These may be the key "support and resistance" levels that influence tomorrow's trading.
   
4. Look at how the market closed today, paying close attention to the final hour of trading. Remember this: If you see strength or weakness surging into the market in the final hour of trading, that action could carry forward into the next trading day.
   

Step 2. Strongest and Weakest Sectors

Find out what the strongest and weakest industry groups are. As much as 70% of an individual stock's movement is tied to the industry group to which it belongs. If you're going to better your odds, then you want to buy stocks in a strong industry groups and short stocks in weak industry groups

1. Check the Strongest Sectors of the Past Five Days and the Weakest Sectors of the Past Five Days.
   
2. Determine which groups are strongest and which are weakest. As you proceed to Step 3, you should be able to see stocks within these groups as major "themes" in the Indicator Lists. (More about this concept in Step 3.)
   

Step 3. Finding Stocks -- Indicator Lists

Create your pool of stock candidates. To do this, look at the Daily Indicators page. If the market in the short-term is biased to the upside, focus on buy candidates. If to the downside, focus on shorting candidates.

An important point on themes: Pay close attention to whether many of the strongest or weakest stocks belong to the same or related industry groups. Do these industry groups match those that were found in your sector analysis in Step 2? If so, that serves to corroborate your big-picture analysis. A good sign.

Here are good places to start your search:

1. To find powerful buy candidates, run through all the stocks in the Proprietary Momentum List. For shorts, go through the Proprietary Implosion List. Click into and look at every chart in both daily and intraday time frames, confirming the strength of the trend and looking for the price levels at which intraday setups may form the next day.
   
   Repeat this process with the following lists:
   
   For Longs

1. Pullbacks From Highs List
   
2. New 60-Day Highs on Double-Volume

For Shorts

1. Pullbacks From Lows List
   
2. New 60-Day Lows Double Volume List

2. To find stocks that have the potential to explode to the upside or downside, check all the stocks in the Explosion List. These are stocks that are trading much more quietly than usual. Through research conducted when he was managing his hedge fund, Larry Connors found that these stocks tend to explode. While it is impossible to predict the direction of the explosion with anything approaching 100% accuracy, you certainly improve your odds by looking at the information that accompanies each stock on the list.
   
   1. For longs, look for stocks with high short-term relative strength, ADX readings over 30, and DMI indications that are "Up."
      
   2. For shorts, look for stocks with low short-term relative strength, ADX readings over 30, and DMI indications that are "Down.
      
3. To find highly volatile stocks, go to the "Trading Where The Action Is" list. These stocks are the most volatile stocks in our database over the past 50 days. Look at the charts and focus on those that are exhibiting big intraday swings. Also, as with 3b, you can determine the directional bias of each of the stocks listed by looking at the following information.
   
   1. For longs, look for stocks with high short-term relative strength, ADX readings over 30, and DMI indications that are "Up."
      
   2. For shorts, look for stocks with low short-term relative strength, ADX readings over 30, and DMI indications that are "Down."
      
4. For strong candidates that have trades in the process of forming, check TM's Nightly Daytrader's Report. There you will find explosive setups which we call Slim Jims, stocks likely to open strongly or weakly in the next day's trading -- and much, much more.
   

Step 3a For Haggerty-Style Traders

Kevin Haggerty developed his unique aggressive style of trading using the insights he developed when was senior vice president for equity trading at Fidelity Capital Markets for seven years. His perspective gave him an edge at identifying specific patterns that are indicative of massive institutional money flows into and out of stocks. These patterns are available at TM and are listed below. To learn how to trade with them, take Kevin's "Trading With The Generals Course."

1. S&P 500 Index Screen
   
2. Nasdaq 100 Index Screen
   
3. 3 Day wake up call
   
4. Change in Direction
   

Step 4. Finding Stocks -- The Stock Scanner

You can also find trading candidates through the Stock Scanner. By specifying your own parameters, you can identify additional daytrading candidates on the long and short side that meet your own special criteria. Here is one set of parameters that will get you strongly trending stocks with high short-term relative strength, good liquidity, and good intraday moves. Feel free to tighten the parameters if this gets you too many candidates. But don't loosen the parameters. A lack of candidates may be indicative of a market that is best watched from the sidelines.

1. Closing price of 30 or higher. Higher-priced stocks tend to have greater intraday trading ranges.
   
   
   
2. 50-day average volume of 300,000 shares/day. To do this, you enter 3000 because the Stock Scanner automatically adds two zeros. This enables us to get the liquidity we need for easy entries and exits.
   
   
   
3. ADX of 30 or greater. Along with an ADX of 30 or greater, look for stocks with an "Up" DMI for longs and stocks with a "Down" DMI for shorts.
   
   
   
4. 3-month RS of 80 or higher for longs, and 3-month RS of 80 for shorts.
   
   

We've barely scratched the surface of what you can do with the Stock Scanner. Play with the numbers and parameters. You will be amazed at what you can accomplish with a small investment in time experimenting with this tool.

Step 5: Tips On Knowing When And What To Trade

The obvious final step is to narrow the choices to the stocks which have the highest potential reward and the lowest potential for loss. Also, no matter how good the setups look, you need to decide whether it's appropriate to trade any of them, given other factors.

Here is a checklist:

1. Do not trade against multiple market-bias signals. For example, if all your stock candidates are to the long side, but you have six CVR down signals, it's better to focus on shorts or stay on the sidelines.
   
2. Check the news on the stocks you are considering trading. Many traders will be cautious or not trade in front of Fed announcements, earnings reports, or other types of major announcements. Surprises can work both for or against you.
   
3. Make sure that the buy candidates you are considering are in the hottest sectors or industry groups and that your shorting candidates are in the weaker groups.
   
4. Be cautious when your list doesn't contain very many names. When there aren't many buying candidates to choose from, it is a sign of overall market weakness. Remember that the market is made up of stocks. When many stocks are behaving well, there is a greater likelihood that the overall market is healthy.