Stock screeners are tools investors and traders use to filter through a database with thousands of stocks. First, the user defines screener filter variables, then the screener scans the market based on the specified criteria and displays a smaller list of suitable stocks for analysis.
Q3 2021 hedge fund letters, conferences and more
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy Read More
Stock screeners are available online, and you can choose the free ones or paid versions. Two of the most popular stock screeners with free-to-use functionalities are Finviz and TradingView.
When To Use Stock Screeners
Stock screeners can make things easier but, they do not eliminate all the work for you. You still need to do your research. You can use stock screeners to build your watchlist. After you get your list, you need to do in-depth research on the status of the shortlisted companies. If you are a beginner, you can use it at least twice a week. As you gain more experience, you can use it more depending on your investment strategy.
Even when using stock screeners, you still need to know how to screen stocks by yourself. You can use the screener to identify indicators and ratios and learn how to combine them. Once you get the right criteria, you will increase the chances of investing in profitable stocks.
Benefits Of Stock Screeners
There are benefits of using stock screeners, including saving time and improving your analytical skills. In addition, they can help you remove biases from your decision-making process, and you learn about investing in stocks that you might not have known previously.
Keep reading to learn why you can consider using stock screeners. The benefits of using stock screeners are:
It Saves Time
Imagine having to analyze thousands of stocks while looking for the ones to invest in. Traditionally, you have to go through each company's financial and performance details you are interested in. You also need to see if the company has potential and any risk factors.
All this is hard work that consumes lots of time. Time is money, and stock screeners can help you save on research time. You can get access to real-time stock quotes to help you decide the stocks to invest in.
It Improves Your Analytical Skills
Using a stock screener can help improve your analytical skills. Once it narrows down the list of companies, you can see the results displayed based on the defined criteria.
Here are some of the filters stock screeners use:
- The type of industry you are interested in.
- The size of stocks. Small, large or medium cap stocks.
- High volume stocks.
- Volatility of the stocks.
- Your budget.
- The preferred price-to-earnings ratio.
Once you get your results, you can now export them in Excel to compare fundamental data or use the charting functionalities for technical analysis.
Besides fundamental and technical analysis, those tools can also be used as a momentum scanner to identify stocks moving with higher momentum relative to the market average. That's especially interesting for investors with a shorter-term investment approach like day traders and swing traders.
Stock Screeners also allow you to save charts and analyze them later, you can make notes within the chart or draw trendlines for later reference. Some paid screeners have additional functionalities like a backtest engine to test trading strategies based on historical data. All the information you need will be available for your scrutiny on the application.
It Removes Behavioral Biases
Are there times that you make emotional decisions? Like most investors, you might find yourself investing through your emotions that can affect your returns. To be a good investor, you need to get rid of emotions and look at stocks from a logical perspective.
Using a stock screener can help you eliminate bias towards companies you have an emotional connection with. This will prevent you from making losses because you like a company. It will help you make logical decisions based on facts and eliminate your bias.
It Helps You Discover New Avenues To Invest
Using stock screeners can help you discover new investment opportunities. You will be surprised at how many companies there are that have excellent stock potential.
You can learn about companies you had no clue about that are great investment opportunities. Wise investors can use stock screeners to find unpolished jewels that will give them huge returns. You also get current stock updates that can help you make informed decisions.
How To Choose Stock Screeners
There are several variables to consider when it comes to choosing the best stock screener for you. You need to identify a stock screener that works with the assets you are interested in. The stock screener needs to look for stocks within your preferred geographical region. You also need to look for a screener that is easy to use to make navigation easy. Also look at the filters the stock screener uses to get results. You want a stock screener that can help you get the right stocks.
The cost is also a factor as you don’t want to break the bank. If you are a beginner, you can look for stock screeners that have free versions. Free screeners usually have limited filters and categories. Once you gain more experience, you can opt for the premium screeners that have more functions.
Stock Screener Settings For Use In Day Trading
If you are into day trading, you need to be on your feet so you can take advantage of any opportunities. Stock screeners can help you step up your game but, you need to know the right settings to use. Some of the settings you can use are geographical, revenue growth, market capitalization, and Price-to-Earnings.
Like most traders, you might not be interested in knowing if a stock is overpriced or not. Instead, you want to see the price action. This can help you determine if a stock has potential by making waves during the premarket. You also want to look at the 52-week stock performances.
Advanced traders can use technical tools in stock screeners to help them during the day trades. For instance, you can add a filter to screen stocks trading over the 50-day moving mean. This can help you identify stable stocks that make worthy investments.
Top stock screeners are an asset to any investor and help to find the right stocks to buy. They cannot replace you, as you still need to use your analytical skills. However, they can make your life easier and increase your chances of making suitable investments.
With all these benefits, you can never go wrong with free stock screeners. Getting the paid version can give you access to more sophisticated features, but not every investor needs them. Advanced investors can benefit from using paid versions while novice investors can use free versions to practice and improve their skills.. Now it's upon you choosing to trade hard or trade smart with smart screeners.