By Aniket Bose. Edited by Arjun Chandrasekar.
What is a Stock Screener?
A stock screener is a set of tools for investors that allows them to sort through the myriad of stocks available to them very quickly according to their criteria. They are most typically available on brokerage trading platforms (and are usually free), however, some subscription-based stock screeners are independent and available to investors. Investors love using stock screeners as a part of their investing tools because they give inventors the liberty to implement their methods about what makes a stock/ETF valuable (long-term traders) or even to spot potential trading opportunities (shorter-term trades).
How do Stock Screeners Work?
Stock screeners allow investors to navigate through the extensive field of potential financial investments from the investor’s criteria itself. The users of stock screeners start the process by selecting specific investing parameters, based on each investors individual criteria. For example, more fundamental investors may be more interested in market capitalization, recommendations from analysts, earnings per share (EPS), operating cash flow, multi-year return on investment (ROI), dividend yield, and the sort. However, more technical traders would be more interested in moving average levels and crossovers, relative strength index (RSI) levels to represent momentum, average directional index (ADX) readings to indicate different strengths, and chart patterns.
The more criteria that the investor/trader adds, the smaller the pool of potential securities to be able to invest in becomes. The key takeaway is that stock screeners typically have something for every investor and they should be able to see what information is available before entering a trade or investment in stocks, funds, bonds, etc.
Example of a Stock Screener
Most investors are typically overwhelmed when they first encounter a stock screener, which is pretty common. There are numerous categories for an investor/trader to analyze, both for the technical side and the fundamental side. It is highly recommended for investors/traders to choose which form of stock screeners they are going to use; they have to choose between fundamental or technical. When deciding which form of stock screener they should choose, they look at what their priorities are and what financial instruments they are most interested in.
If an investor/trader’s main focus is more on the short-term side, they are more likely to be attracted to more technical tools available: charting, momentum studies, RSI, and more technical studies. When an investor/trader is focused on a particular stock or ETF, they can set alerts for when that particular stock crosses a certain price level, or when its RSI is overbought or oversold.
If an investor/trader’s main focus is more on the long-term side, they are most likely to find plenty of fundamental data (also referred to as technical data), such as EPS, average daily volume, market capitalization, etc. These data can help investors/traders in constructing a portfolio that reflects that they have a long-term interest in the company and not just what the latest headlines are.
Overall, stock screeners are a beneficial tool for investors to analyze and select their stock picks based on their personal criteria. If you’re beginning to invest in stocks, we highly recommend you to use stock screeners and create an analysis routine to follow for all your investing decisions.
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