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How To Choose The Best Stock Screeners

Stock traders are always looking for the best stock screener to help them make informed decisions

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How to Choose the Best Stock Screener For You?

Stock traders are always looking for the best stock screener to help them make informed decisions when investing in the stock market. A stock screener is a tool that investors use to filter stocks based on user-defined criteria and metrics. This allows investors to narrow down a large universe of stocks to only those that meet their specific criteria and investing goals.

In this blog post, we will discuss the benefits of a stock screener for stock traders, as well as how to choose the best one for your individual needs.

Stock Screener's Benefits for Stock Traders

Stock screeners allow investors to employ their own methodology about what makes a stock or ETF valuable. Since stock screeners allow investors to set up their own criteria, they are able to curate stocks based on their own personal investing strategy. This allows investors to select stocks or ETFs that they believe will generate the highest returns based on their individual methodology.

Stock screeners also make it easy for investors to quickly sort through thousands of stocks and ETFs based on the criteria that they have set up. This saves investors time and energy when trying to identify potential investments. Additionally, stock screeners can be used to set up alerts when certain user-defined parameters have been met. This makes it easy for investors to be notified of potential investment opportunities in real time.

Overall, stock screeners make it simple to curate thousands of stocks based on specific criteria, while also allowing investors to employ their own methodology about what makes a stock or ETF valuable.

How to Choose a Stock Screener

Before attempting to find the perfect stock screener, it is important for investors to assess what type of features they need in order to execute their investing strategy. This includes features such as technical indicators, charting tools, fundamental data, and real-time quotes. Additionally, investors should consider their individual goals and investing strategy in order to find one that meets their needs.

Once investors have identified the features they need in a stock screener, they can begin the process of selecting one that meets their needs. It is important for investors to compare different stock screeners in order to find one that has the features they need at the best price point.

Types of Stock Screeners

There are many types of stock screeners available for all different price points. Below is a breakdown of a few of the more popular types:

Fundamental Stock Screeners

Fundamental stock screeners help an investor locate a company or stock to invest in based on the financial performance of the company, the valuation of the company, the sector of the stock, the industry of the stock, the geographic region the company operates in, the size or market cap of the company, and the trading characteristics of the company such as its trading volume and whether the stock can be traded using stock options, preferred shares, warrants, or other derivatives.

Fundamental stock screeners can identify companies with solid financial performance and track records of performance. Common stock screens would look at revenue this year against last year, earnings this year against last year, revenue growth over the past five years, earnings growth over the past five years, the debt of the company against the assets of the company, the price of the stock against the earnings of the stock (P/E ratio), the price of the stock against the sales of the stock (P/S) and so forth.

The benefits of these stock screeners are that they enable a person to sort through a large amount of information relatively quickly. One drawback to using this type of stock screener is that the investor is must have knowledge of investing and financial metrics in detail to know what he/she is looking for. Another drawback to using this type of stock screener is that it does not provide any context or event-based information. For example, a company's dividend yield may look very attractive. But without an understanding as to the events affecting the stock which drove down the price, an investor may be buying a company that is about to cut its dividend due to some recent event or series of event that has other investors fleeing from the stock.

Another drawback to using this type of stock screener is it does not provide any information about the current environment for that type of company. For example, a company which did well selling protective gear to doctors during the peak of the COVID-19 outbreak in 2020 would not necessarily do well in 2023 when the supply chain issues and shortages have already been addressed. Investors can be tricked into thinking a company with good financials in previous years will have strong financial performance in future years unless these view the events surrounding the company and the macroeconomic events affecting all companies.

For this reason, it's best to always include qualitative research via news searches and company press release reading to better understand the context around a company's performance. Using AI event monitoring tools like LevelFields can speed up the process of searching for events affecting a company to provide this context.

There are a variety of fundamental stock screeners available such as Zacks and those within brokerage accounts that enables searching for stocks that seem like quality.

Technical Stock Screeners

Technical stock screeners help investors identify price movements that form patterns on charts. Many consider this strategy effective for swing trading, timing the bottom, or understanding when to short a stock. Common patterns include double top, double bottom, cup and handle patterns, continuing wedge, breakouts, and various others.

Research on the effectiveness of trading using solely technical indicators is dubious at best. Some have found the patterns to be self-fulfilling prophecies. That is, traders who believe in patterns trade on the patterns thereby creating the patterns in actuality. Others feel the patterns are just one of many factors to take into account when trying to understand how to make an investment and to find the right price.

There are a variety of technical stock screeners available that can help identify trading opportunities for short term trades and swing traders. These include sites like Finviz and Swingtraderbot. Many brokerage firms also have technical pattern screening tools to identify common patterns.

Technical stock screeners are helpful for determining the right entry and exit price, or for identifying when something is happening with a stock. They work like a flag, identifying the movements. However, these types of stock screeners do not offer insights into why a stock price is changing and the patterns are subject to change rapidly when events affect the stock or the macroeconomic climate. It's wise to always use a technical stock screener alongside a contextual analysis tool like LevelFields to better understand the reason for the underlying movement of the equity.

News & Event Stock Screeners

News outlets have their reporters scouring for meaningful events disclosed by companies which may affect their share prices. Tools like Google News and signing up for certain news alerts via news outlets can help investors locate meaningful events affecting stocks they are interested in. News events can profoundly impact share prices as investors are used to reacting to the news quickly, and when many news outlets circulate the same event, the information can reach many people. As the investors all react to the news event, the volume can drive the stock prices tremendously. Savvy traders can take advantage of these events and yield huge returns and losses if they play it wrong. Many hedge funds have developed advanced strategies for trading the news.

There are a few drawbacks to trading the news like this. First, using screeners like Google News can be frustrating due to the large number of news findings that are unrelated to stocks or investing. While free and easy to use, Google's search is based on keywords and not context and cannot be limited to focus solely on public companies.

Similarly, news outlets are largely generating their information from materials given to them or published by media relations professionals at public companies. Often by the time the media writes about the event, other investors have already read about the event and traded on it. This can lead to investors trying to trade the news becoming the "bag holders," or those buying while others are already selling the news. And because news outlets make their money on ads and ad revenue is based on the volume of news pages consumed, they do not enable great filtering of the types of news alerts that go out which can be frustrating.

This is why using more advanced news monitoring and event monitoring tools like Meltwater, Muckrack or tools developed specifically for financial events, like LevelFields, provide an edge to investors seeking high quality filtering of information and the ability to control the source of the information. Not only will it save time, but it's likely to yield far superior market returns.

In conclusion, stock screeners are useful tools for stock traders because they allow them to quickly sort through thousands of stocks and ETFs based on specific criteria. Additionally, stock screeners can be used to set up alerts if certain user-defined parameters have been met.

When choosing a stock screener, it is important for investors to define their investing goals and strategy before attempting to find the perfect one for them. They should assess what type of features they need for a screener, and compare different stock screeners in order to find one that has the features they need at the best price point.

Overall, stock screeners provide numerous benefits for stock traders, including the ability to quickly sort through available stocks and ETFs, deliver alerts if certain user-defined parameters have been met, and curate thousands of stocks based on specific criteria.

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