As a day trader or investor, the ability to shift through company information from thousands of available stocks is potential gold. A stock screener is a tool that investors and traders can use to separate stocks based on defined metrics. Stock screeners focus primarily on quantitative metrics like market cap, P/E valuations, debt-to-equity ratio, or other filters as a starting point for investors to perform in-depth research, including understanding the qualitative nature of potential investments.
Stock screeners are not a magic bullet for selecting stocks. However, a stock screener can offer valuable insight and save you time. Read on for simple steps to choose the best stock screener for your investment criteria.
What is a Stock Screener?
A stock screener is a software tool used by investors and day traders to search for and select stocks according to set criteria. Investors and traders rely on stock screeners to locate stocks that meet specific criteria based on price, dividend ratio, P/E ratio, and debt-to-equity ratio, market capitalization, and other pre-sets.
Some offer specialized search functions, such as undervalued large caps, day gainers, and portfolio anchors. Likewise, how many stocks appear in your search will depend on the number of applied filters. Filtering for a single factor may still return thousands of stocks, while filtering for multiple factors can significantly narrow down results.
Stock screeners are effective if users have the specifics in mind about investment criteria and filters, as well as understanding in researching qualitative aspects about the type of companies that they want to invest in. You can choose from various free stock screeners, as well as paid stock screeners with premium features.
How Does a Stock Screener Work?
A stock screener works by creating a list of stocks based on your filters or screening criteria that fit your investment targets. Investors have nearly 8,000 different stocks to choose from between the New York Stock Exchange and the Nasdaq. A stock screener can quickly and efficiently narrow down these stocks to help identify companies that have the potential for growth or other market indicators.
Once you have a filtered list of stocks, you can more deeply research the available options or choose short-term trading strategies based on volume and other market indicators.
For example, if you only want to buy stocks above $20 per share, or only purchase REITs with average dividends above 5%, you can easily filter for those criteria. Likewise, if you are looking for mid-cap companies with a low P/E ratio, you could screen for those criteria. You could also screen by industry, such as screening for tech companies, financial services, hotels, or the energy sector.
Stock screeners offer an additional unique value for investors in reducing noise about certain stocks. Rather than relying only on news or investor sentiment, you’ll get access to tools for quantitative analysis to combine with the news and other assessment tools. Technical analysis you can filter for with a stock screener includes:
- Earnings Per Share (EPS) Rating
- Relative Price Strength (RS) Rating
- Industry Group Relative Strength
- Sales + Profit Margins + ROE
- Accumulation/Distribution
- Composite Rating
5 Steps for Choosing a Stock Screener
Choosing a stock screener involves some of the same key steps as choosing stocks, which starts with deciding on an investment strategy. For example, whether you plan to use the stock screener as a day trader or for long-term investment can influence the most important features.
Step 1: Decide on an investment strategy
Stock screeners come with different unique features and pre-sets. Some stock screeners offer as many as 650 screening metrics, while others with more modest options have only 30 screening metrics. In this case, more is not necessarily better as no investor will actually use 650 screening metrics. That’s why creating a strategy and deciding on the most important metrics for your strategy are available in the stock screener is essential.
Step 2: Check data updates
Some stock screeners update every minute, or even in real time, while others only update one a day, or even once a week. For the most relevant, actionable advice, you need a screener with real-time updates to stay ahead of market movements. If you only plan to use a long-term investment strategy, updates once a day may be sufficient, but for day trading real-time live updates are essential.
Step 3: Read reviews
In addition to major media outlets, like Forbes Advisor, reviewing stock screeners, read reviews of individual investors to understand performance strengths and weaknesses. Investors often share individual situations where the stock screener worked well, and where it failed to perform as expected to help base your decision.
Step 4: Choose a price range
Stock screeners range from $180 to more than $2,000 annually. Of course, you get what you pay for. If you’re looking for basic filters, a low-cost stock screener will probably cover your needs. However, at the upper end of the price range, you can get advanced features. For example, Trade Ideas offers AI that simulates thousands of potential trades overnight and suggests the best market options. And Benzinga Pro offers news alerts ahead of major media outlets to allow you to act ahead of potential market movements.
Step 5: Get a free trial
Most stock screeners, even the most high-cost options, offer a free trial. The best way to determine whether the interface, screening features, app availability, and additional features fit your trading needs is to try it out! To get started, try Benzinga Pro for free and get exceptional screening features along with real-time advanced new updates, Twitter monitoring, and other features that can help you trade ahead of the market.
Pros of Using a Stock Screener
The pros of a stock screener are diverse. Here’s why you should consider using a stock screener:
- Saves time: Investors can easily filter for the desired investment strategy.
- Greater returns: While most stock screeners charge an annual fee, the scanning features should help traders optimize their strategy and build higher ROI.
- Reduces emotional trading: Investors with access to exceptional quantitative analysis and fundamental analysis tools are less prone to emotional reactions to the market that can lead to greater losses.
Cons of Using a Stock Screener
- Quantitative comparison: Most stock screeners only offer quantitative data points, which neglects qualitative analysis.
- Potential bias: Stock screeners may have a bias toward certain stocks, metric or criteria
- Requires trader’s skills: In addition to setting specific criteria, investors must have their own analysis skills to more accurately compare values.
- Ads and popups: Most free stock screeners come with annoying ads and popups that can distract from key features and reduce value. The premium screeners don’t have this problem.
The Bottom Line
How you use a stock screener depends on your investment strategy and goals. Like most aspects of trading, it also requires practice and understanding to get the most functionality out of a stock screener. A stock screener is a useful tool, but both trading and long-term investing depends on individual research. No screener can compensate for your own understanding and educated picks.
A stock screener gives you a list of stocks that fit your search criteria, but that’s not a final recommendation. Checking legal or economic news, investor sentiments, company management and past performance. Stock screeners give you a starting point to work from there. Be sure to check issues affecting the companies listed in the screener. A stock screener can help investors make informed decisions. Using the tools in stock screener can help make you a better trader.
Ready for next steps? Find the best stocks to day trade, best ETFs for day trading, or best swing trade stocks.
Frequently Asked Questions
Q: How do I find the best stock screener?
A: To start, you can try out free stock screeners including Morningstar, Finviz, Yahoo Finance, and TradingView. Then, you can check out Benzinga Pro’s free trial to try out one of the best stock screeners on the market and gauge how it affects your trading strategy.
Q: What criteria do you use for stock screeners?
A: Traders and investors can choose from pre-set critters for a stock screener, or specific common metrics like market cap, P/E, dividends, or
Q: Are stock screeners worth it?
A: Yes, stock screeners are worth it. Investing requires in-depth knowledge and research. Stock screeners can help you filter through thousands of stocks to choose the best options for your investment strategy.
Q: What is the most accurate stock predictor?
A: No stock predictor is completely accurate. It’s important to do your own research and assessment. Investing requires in-depth knowledge and research. Working with a stock scanner can help you filter stocks to choose the best options for your investment strategy.
Q: How do you screen for undervalued stocks?
A: To screen for undervalued stocks, you can use a stock screener to scan for the company’s ratios, market cap, the dividend yield, cash flow, and financials. You can also target stocks from undervalued sectors.