A new method for finding connected components from binary images is presented in this article. The main step of this method is to use a contour tracing technique to detect component contours and also to fill in interior areas. All the component points are traced by this algorithm in a single pass and are assigned either a new label or the same label as their neighboring pixels. Experimenting on various types of document images (characters, pictures, newspapers, etc.), we find that our method outperforms the other sequential methods using the equivalence technique. Our algorithm, moreover, is a method that not only labels components but also extracts component contours at the same time, which proves to be more useful than those algorithms that only label components.