Price, % Change and Dollar Volume: Why Momentum Scanners Use These Filters
Thousands of US stocks trade every day. A scanner is only useful if it narrows them down to the few worth a look. The Momentum Bell watchlist does this with three basic filters.
1. Price range
Minimum price keeps out the very cheapest stocks. Sub-dollar stocks behave differently: their quotes move in large percentage steps, their spreads can be proportionally huge, and many have thin, easily manipulated trading. Maximum price keeps the list focused on the price zone where the kind of fast percentage moves momentum traders look for are most common. The exact limits are shown in the criteria panel on the live page and can change.
2. Minimum % change on the day
A stock that is already up strongly is one that has attracted buyers today, often because of news such as earnings, a contract, a regulatory update or a sector-wide move. Requiring a minimum gain removes the many stocks that are simply drifting sideways. It also means everything on the list has already moved, so the useful question is not “is something happening?” but “how much is left, and how risky is it to join now?”
3. Minimum dollar volume
Dollar volume is the number of shares traded multiplied by the price. For example, 500,000 shares of a $2.00 stock is $1,000,000 in dollar volume; 500,000 shares of a $20 stock is $10,000,000.
Share volume alone is misleading across different price levels, because a million shares of a very cheap stock represents far less money than a million shares of an expensive one. Dollar volume compares them fairly and works as a rough liquidity check: a stock with more money changing hands is generally easier to enter and exit without the price moving against you. A stock can look exciting and still be too thin to trade sensibly.
What the filters do not do
- They do not judge whether a company is good or a price is fair.
- They do not predict whether a move will continue.
- They cannot see news, dilution, trading halts or other risks. Always check these yourself (see the risks of momentum trading).
Once a stock passes the filters, the Momentum Bell Score ranks the survivors by how much trading attention they are getting right now.
Related
How Momentum Bell works · More guides · Open the live watchlist