While investors want the maximum profit they earn, they aim to minimize the risk by choosing the best stocks. But choosing a good stock is not easy. Choosing a good stock is challenging, especially in large-volume companies. The volume of data obtained through the Internet makes things more difficult by causing information pollution. But despite all this, you still have a solution proposal. With a quality stock separator, it becomes possible to choose the stock that best suits your investment strategies.
If you have a specific information infrastructure of the company you want to invest in, stock filters will be very useful for you. If you don't have the stocks you focus on specifically, it is absolutely not possible to watch thousands of stocks alone. Stock filters working with software only scan stocks that meet the criteria you specify and present them to you.
Working Mechanism of Stock Screens
Stock scanners are generally preferred by traders who trade on a daily basis. In this way, they try to determine which stock is most suitable for them among thousands of stocks in global exchanges. You can also use stock scanners to make more accurate decisions about the stocks you invest in.
The purpose of the stock screening process is to search and find companies that meet the financial criteria suitable for the investor. A stock separator has three components:
- A database of companies
- A set of variables
- A search engine that finds companies that match these variables and generates a list of matches
You can easily start using a separator by answering a number of questions such as:
- Are you interested in large capital or small cap stocks?
- Are you looking for companies with stock prices at all-time highs or stocks falling in price?
- What is your acceptable range for the price-earning ratio (P / E)?
- Are you looking for stocks in a specific industry?
Quality separators allow you to search by any criteria you specify. After you have searched by determining all your criteria, only the list of stocks that you want and exactly fit your needs remains
Users can perform quantitative analysis using stock scanners because the scanners focus on measurable factors that can affect a stock price. This means that the screening focuses on concrete variables such as market value, income, volatility and profit margins, as well as performance ratios such as the P / E ratio or the debt to equity ratio (D / E).
There are many free stock separators on the web. Some of these are Google Finance, Finage, StockFetcher, Chart Mill, Zacks, and FinViz. The common feature of all of them is that they offer their users two different viewer options, basic and advanced. For example, using Finage Stock APIs, you can find companies that have fallen or exited below a market value (for example $ 200 million) that you specify after filtering their stocks by market value.
There are many free and basic filtering apps on the market. But if you are looking for the latest technology and the highest quality service, you need to subscribe to a browsing service.
To explain with an example, we are looking for a food company traded on the New York Stock Exchange (NYSE), with a K / E ratio below 30, EPS growth of more than 15% in the last five years and a debt / equity ratio of more than 0.1. let's think. After entering all the criteria we are looking for in the browser, the companies that meet all the criteria we have set appear before us. But there is an important issue to be aware of. Since there are fluctuations in the stock market at all times, your search result can constantly change with the newly published financial reports.
Considering all these, we will have a new stock list on which we can deepen our analysis if we are confident in the accuracy of the values we scan. Because companies that pass the filter in the browser are as valuable as the search criteria we entered. Because the screens are not the analysis itself, it cannot guarantee that the stocks of a company that we determine all the criteria ourselves are the most accurate purchase. For this we need to learn more
Knowing What to Screen
The biggest problem you will encounter while using a scanner is which values you have to enter in the scanning screen. Due to the hundreds of variables and different combinations in the criteria list, your results become almost infinite. If you don't know what you're looking for and why, few people can do something for you. However, to help investors, there are stock scans on websites that have pre-entered variable values.
The following sites are just a few examples of what you can use for predefined scans:
Yahoo Finance: This site includes three preset screens: Trashy Caps, Day Savers, and most importantly, Portfolio Anchors.
MSN Money: This includes a number of popular screens that can be further filtered and sorted by category.
Finage: This screen includes a signal dropdown that filters criteria such as top winners, recent insider purchases, and wedges.
Limitations You Should Be Considered
Although they are useful tools, there are some things to watch out for in stock scanners:
Many stock browsers only focus on quantitative factors. Qualitative factors such as lawsuits and customer satisfaction that may affect stock prices cannot be taken into account by software screens.
Always keep up to date with the data. Searching in browsers that do not have up-to-date data will not do.
Track industry-specific blind spots.
Another important issue you should take care of on the screens is that there are ads in the free versions. Providers have to show ads to their users because they have to make money somehow. It may not be pleasant to be faced with an advertisement while buying your investment mojo. For this reason, you can use providers that offer premium features without advertising by paying low amounts. In addition, many premium versions offer special services such as charts, real-time price charts
Do your own research
There are many useful financial tools available such as stock scanners that can make your business easier when investing. However, if you do not know for what purposes you will use the tools, you cannot benefit from the advantages of any of them. Therefore, be sure to do your own research before entering search criteria in the stock browser. Because the stock browser will only give you a list of stocks that match the factors you have entered.
As we said earlier in the limitations section, screens only consider quantitative data that affect companies. In order to make a profit from your investment, you should follow the news in the market closely and make your decisions accordingly.
Technology exists not to do all the work for us, but to help us save time. And we can never rely solely on software data on a subject in which the human factor is the biggest variable. Using financial tools to perfect results after doing our own research will take us a few steps ahead.