Modern technology offers traders fast access to short-term stock watch lists. Free online services scan markets in real time and output leaders/laggards in many categories. But over time, skilled traders find that these listings don't address their growing needs. If this happens to you, consider creating your own custom databases and stock scans.

Scans provide an efficient method to uncover subsets of the market universe that match individual risk tolerance. Over time, traders develop an affinity for stocks at defined sectors, liquidity and volatility. Scan filters target these unique quirks and do an excellent job highlighting specific information needs.

Your CD or online market database should contain all the major categories and sectors that interest you. But don't be too restrictive. A tired small cap in today's stock market could become hot and liquid in a relatively short period. So make sure it's available for your filters to hit when it finally wakes up from the dead. Create a subset of this total market universe utilizing a combination of fundamental and technical analysis. Database services such as Telecharts 2000 and Quotes Plus let you define custom scans that include technical strength rankings and filter down using volume, market capitalization, and price/earnings growth.

Your first scans should apply to the entire market and filter out derivatives, REITs, ADRs and thin issues that have little interest for today's short-term traders. The resulting stock subset can be maintained as a separate watch list or a second filter can be applied to focus attention on defined elements of volume and volatility.

Make a realistic evaluation of how the size of your trading account impacts your watch list. In general, available capital will rule out trades over or under certain price levels. For example, many traders with limited accounts avoid issues over $100 while heavy hitters may avoid stocks valued under $20-$30.

Make sure to scan by exchange as well. NASDAQ's popularity for short-term execution makes it the preferred choice for day traders. But position traders often find the NYSE provides more opportunities for gain with controlled risk. Most traders can build an effective watch list using a simple method: retain the upper half of the NYSE but only the top one-third of NASDAQ. Avoid thinner NASDAQ stocks unless you can routinely trade between the spread. Without an execution advantage, these stocks will steal profits and ruin risk management.

If you trade primarily on the long side, consider a second filter to eliminate a subset of lower volume issues that made the first cut. Use relative strength scans and capture the rising issues from this group. Then add them to your liquid stocks that made the list regardless of current trend.

Also dump out utilities, insurance companies, RBOCs and other income issues unless they are natural momentum plays or moving sectors at the time. Polish the list after each updated database release to capture any changes and reflect new themes that you should keep an eye on, i.e. small cap rallies, Y2K, B2B, Linux, bank mergers, etc.

This new subset of 1000-3000 liquid stocks provides the raw material for your end of day trading analysis. Identify custom criteria for these issues to scan for short term trading opportunities. The size of your subsequent output lists should match the time that you have to put into analysis and trading. It makes no sense to uncover a listing that you can't review in detail each evening. It's better to know 25 stocks blindfolded than 250 in general.

Use these opportunity scans for both long entries and short sales. Greater liquidity is required for most short sales due to dangerous short squeeze characteristics in thinner stocks. You will also find that many of the best shorts rely on countertrend positions in uptrend issues.

In addition to immediate setups, use scanning to isolate short-term trends in stock activity. Review these hits visually to add prospects to a general hot list that can also be reviewed comfortably on a daily basis. Generally 50-100 of these is plenty to look at for the average trader.

Your final review of opportunity scans and hot lists will uncover your plays for the following trading day. If you can't manage a lot of information during market hours, create one final day list of 20-50 stocks and follow these on a tick-by-tick basis to locate your execution triggers. Alter this day list each evening but keep a core stock group in it for months at a time.

Some scans to consider:

• One and five day price % change, filtered by daily and average volume to eliminate wide spreads and other noise.
• Gap finder to locate important changes in trend
• One-day reversals to identify possible opportunities reflected by candlestick hammers and dojis
• Multi-time frame scans to filter high relative strength issues making short-term pullbacks and dips
• Volume alarms that locate unusual trading activity (3x-4x normal 60 day volume moving average, for example)
• Other breakouts and breakdowns
• Short sales