Stock Screeners: What They Are, How They Work, and How to Implement Them Effectively

Stock Screeners

What you invest in goes on to impact your total stock market performance and might be the difference between surpluses and deficits. Therefore, having the tools to locate and assess the numerous stock options accessible to you. However, the number of options can be extremely overwhelming, especially if you are getting into the world of stock. More than 8,000 different stocks are between Nasdaq and the New York City Stock Exchange in the USA alone. When it comes to the whole world, the number rises to a staggering 45,000!

A specialized tool or a set of ground rules and guidelines is necessary to differentiate among all the potential stocks worthy of investment. This is where stock screeners come into play. Unfortunately, many investors relay the stock-picking responsibilities to other experts. While this might not be a bad option for stock market newbies, taking charge of your investments is ideal and recommended. The purpose of this article is to provide you with a clear idea of stock screeners for you to choose wisely when you do.

What Exactly Is a Stock Screener?

It is safe to presume that most of the readers of this article would be amateurs in the world of stock. Thus, we begin by explaining what a stock screener is. In terms of utility, a stock screener is a searching tool that enables an investor to look through and categorize stocks that fall within the same criteria that they intend for. In simpler terms, a stock screener is similar to Google, in the sense that both return search results based on the parameters set by the user.

Renowned investors and venture capitalists have always recommended using stock screeners to potential investors. Many of these tools are free to use, although they might have premium features that require a paid subscription. You will find that a handful of these tools are web applications, which means they are pretty easy to access.

Examples of Popular Stock Screeners

Below is a list of popular stock screeners that have been in use for a long time and are widely accepted as practical tools for the process of screening through numerous stocks.

  • Power Gauge Report by Chaikin Analytics.
  • TC2000.
  • Trade Ideas.
  • TradingView.
  • Stock Rover.

The Power Gauge Report by Chaikin Analytics

The Power Gauge Report is a stock market research newsletter that Chaikin Analytics publishes. Readers need to purchase a monthly subscription to access its biggest drawback. One particular aspect is the invaluable data published in the report. The Power Gauge stock ratings provided are top-notch and can effectively pinpoint where stocks are headed.

The contributors to the newsletter implement cutting-edge analytics to dig out under-the-radar companies that are on their way to a breakthrough. Purchasing stocks from such companies is one of the critical aims of stock market enthusiasts worldwide. We suggest you buy a subscription in the newsletter and start studying how different stocks shape up in the long run. Take your time to learn the variations and changes. Then, start investing only after comprehensive market research.

How Do Stock Screeners Work?

As you already know, stock screeners operate by assembling an array of stocks and filtering them out based on the criteria set by you. After the search, the results would be the stocks that fall into your desired category. Then, you can either start making investment plans regarding the stocks in the result or can choose to keep looking for better options.

Many experienced investors who have an ample amount of knowledge on the stock market also refer to screeners all the time. This ensures that the knowledge they have remains relevant to the latest trends. Stock prices and their conditions keep changing continuously. Thus, it is essential to keep an eye on the ones you have or are willing to invest in.

Not only does referring to a stock screener save time, but it also helps investors formulate specific strategies to deal with upcoming variations in pricing. Let us look at a hypothetical example: suppose you are in the market to purchase dividend stocks worth $30 per share. A stock screener will take this criterion and generate a list of relevant choices as per the pre-set parameters. The screener can also pinpoint specific companies that fall within the sector of your choice, like financial services, hotels, manufacturing industries, and many more.

Furthermore, a stock screener omits the noise and chaos around particular stocks. Specific equities fall prey to investor sentiment, superstitions, or the latest news. While this may derail the thoughts and plans of many would-be investors, stock screeners ensure that these aspects do not cloud their judgment too much.

What NOT to Expect From a Stock Screener?

Despite the many benefits of using a stock screener, its biggest drawback is one particular aspect. The fact that stock screeners act as a search engine means that there is no single answer to any question you pose to the system. These tools cannot tell exactly which stock to invest in but instead point you to many potential stocks. They are great at narrowing down the list but do not go all the way to select a particular stock for you. Thus, even with a stock screener, you would need a general knowledge of the stock market to make informed and calculated investment decisions.

Tips to Use a Stock Screener Effectively

If used properly, stock screeners can drastically reduce your chances of investing in an insufficient stock. However, the results can be heavily misleading if the pre-set criteria are not designed carefully. The following sections describe some of the steps you can take to build an effective stock screener.

Include Simplistic Criteria

The best way to extract the ideal information is to keep the parameters simple and straightforward. When it comes to building a stock screen, less is more! The more information you add for the screener to consider, the more difficult it gets to identify relevant stocks. The results respond well to changing market conditions of the vast search scope. If you must run a complex search, try adding the complexities one at a time into the system.

Give More Importance to Outputs Than Inputs

Many believe the challenges lie in setting the parameters of a stock screener. While this is partially true, in reality, the outputs are the ones that truly matter. Therefore, as you go ahead with the searches, make sure you keep an eye on the outputs generated by the screener. If you think the results are not consistent with your inputs, know that something is wrong with the pre-set parameters. Unless the screener succeeds in providing you with potential trading opportunities, it is of no use whatsoever.

Consider the Timeframe

Specific stock screeners allow customizing the timeframe of the input parameters. For instance, you may screen the stocks depending on a moving average of 20 minutes or even 20 days. Plan on a suitable time frame based on your goals and strategies before fixing the filters accordingly. Make sure all the metrics are working in the same timeframe.

Take a Realistic Approach

Make sure the criteria you provide to the stock screener are realistic. Unfortunately, with such a powerful tool at hand, many investors tend to lose their heads and start making rash decisions, which come back to haunt them in the future. Do not fall into this trap by any means. As you know by now, stock screeners help narrow. However, they do down the possibilities but do not isolate a single stock out of numerous others. Moreover, despite all the filtering, the final decisions still need to be taken by you. Thus, providing simply not feasible information will only make matters complex and largely uncertain for you.

Final Words

Be it an effort to set up an offshore company for trading stock or a small initiative to start trading from your bedroom - stock screeners can help you in any relevant situation. Stock trading involves real money - and a lot of it. Thus, making rash decisions can go a long way in diminishing everything you have in no time. Take time to understand the dynamics of the market. The more knowledge you have, the better your final decisions will be. Even after all that, you may still end up losing money in trades. Make sure you keep an open mind and accept the initial losses as part of life and trading stock. If you keep learning the market, you will soon be showered with successful returns on your stock investments.

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