How Scanners and Screeners Can Revolutionize Your Trading
If you are ready to move your trading up a gear then you need to invest in a scanner or screener. Find out why here.
If you invest in stocks then you already know that it is a great way to put money aside where it will work for you. But if you want to take your strategy to the next level, then you need to be looking at technology to take the strain.
When you consider that the NASDAQ and NYSE have upwards of 7,000 stocks listed, you may wonder how anyone can efficiently identify good targets.
Don’t worry if you aren’t a committed full-time day trader; these apps work just as well for the part-time investor who is looking to put away a few hundred dollars into good quality companies.
The good news is that by using a scanner or screener app, you can quickly find stocks that fall into your investing plan and snap up those bargains early.
Don’t worry if you aren’t a committed full-time day trader; these apps work just as well for the part-time investor who is looking to put away a few hundred dollars into good quality companies.
Scanner and screeners—what’s the difference?
Sometimes people will blur the lines between scanners and screeners. It is important to understand the difference because each are useful for different situations.
A stock screener is a filtering mechanism that will look at a market and filter out stocks that don’t fit your particular strategy.
For example, perhaps you only want NYSE traded stocks, in utility companies, with high trading volumes that have shown a 5% increase over the last week.
A good stock screener will give you a list of the companies that fit your criteria in seconds, providing you with targets to investigate further.
For most modern screener apps, the list of criteria you can choose is almost endless. This gives you the power to spot the type of company stocks you want to buy with pinpoint accuracy.
Stock screeners are one of the first types of apps for investors devised for the internet age. They are designed for people who might log on once a day, download a series of longer-term targets, and then do their research.
In general terms, stock screeners tend to be quite light on resources, which means that you can use them on pretty much any computer or device.
Screeners are great for investors as they give you targets to look for based on a series of attributes. However, they tend not to be used as much by day traders — for that, you need a good stock scanner.
Stock scanners may look similar to screeners but they are quite different. These apps are more useful for active day traders.
Stock scanners bring in real-time information showing stock movements based on a series of criteria that you set.
Because they are real-time, they tend to be used much more by very active day traders who need instant access to quality information.
Many traders look more at current movements in stocks rather than historical results and so they need to spot shares that suddenly have a large volume of trades or swing wildly in terms of price.
Day traders make money from volatility—this means that they need to be constantly looking for stocks that fit into their definition of a target.
Day traders make money from volatility—this means that they need to be constantly looking for stocks that fit into their definition of a target.
Because they take in huge volumes of data and process patterns, movements and fundamentals of stocks instantly, scanner programs require a large amount of computing resources. This means traders need a very capable PC or MAC.
Web-based scanners are available but can tend to be slower. When the difference between a good and bad trade is measured in milliseconds, day traders can’t afford to take a chance.
Scanners and screeners—just the starting point
It’s important to note that scanners and screeners are really only the starting point for a professional investing or trading strategy.
Screeners in particular will only identify potential targets for you to invest in based on the criteria you set. If you set the wrong criteria then you’ll get a list of poor targets—Garbage in Garbage Out (GIGO)!
Professional traders will take the results that they get from a scanner and use that as a jumping-off point to understand whether it is worth investing or not.
Depending upon the type of trader they are, they will look at the fundamentals of a company, including things like a ratio analysis and news research, or perhaps will chart the stock movement over a period of time and then make their move.
It is important to remember that an app really should be seen as one weapon in the armoury for professional traders and only by building up a rounded picture of a stock can you make successful trades.
Things to look for
If you are thinking about using a scanner or screener, then what should you look out for?
Here’s a selection of attributes that are important when looking at this type of tech.
- Price—This goes without saying. If you only trade a low volume of stocks then a high priced scanner could wipe out your profit almost instantly!
- Usability—This is really important if you are a full-time day trader. Burn out is a real thing and having an app that is easy to use can make life so much easier.
- Speedy links—When time is paramount, there’s no place for lags in the connection to the markets.
- Markets you like—Your app needs to be connected to the market you are interested in. Not all are.
- Understandable—Some older apps require an almost developer-level understanding to produce effective criteria. Make sure you take a trial before signing up.
- Multiple elements—Choose an app that can give you access to technical, fundamental, intraday and post-market information for your trades.
The best advice here is to make sure you take a trial (most apps offer free or low-priced trial periods) and really test all aspects of the software to make sure it does what you want, how you want it to.
Scanners and screeners can really make a difference
If you have been running your investment or day trading strategy manually until now then maybe it is time to take the leap.
Using tech to take the strain off of you will give you better access to more suitable targets faster than your peers, which will really ramp up your trading.
