Stock screeners and scanners help even the odds with thousands of eyes “scanning” the market for opportunities and information. In this 24/7 computerized age, without the help of scanners there are too many stocks to trade, too much market data, and too much news for people to process. Investors and traders will both find scanners are also essential for your analysis. Whether searching through fundamental statistics (company financials), technical analysis indicator signals, news and information, scanners are beautiful tools that make your life a lot easier. Scanners are very common stock market software often included with online brokers, trading platforms, and free on websites such as FINVIZ. Next time that you’re overwhelmed trying to find the next big trend or just analyzing a niche market, use scanners to focus in on opportunities with the best odds.
4 basic areas to assess before you choose your stock screener & scanner software tools.
- Experience. This is the most important question you should ask yourself. And please don’t lie to yourself...If you’ve only traded the market for 2 days, don’t think that you can pickup the latest scanner tools from Worden (on the TC2000 platform) and be able to trade like a pro. For beginners, scanners allow you to search through data for studying specific niche markets, sectors, companies and/or setups. This way, you’ll have a better understanding of the way specific market mechanics correlate to outcome. It’s a way for adjusting parameters and observing data. If you wanted to setup a back-testing model (or regression model), scanners can help you obtain specific coefficients and/or parameters for your model. For seasoned trader, in addition to back-testing, stock scanners are a means for finding the newest trends and/or studying the efficiencies of your current strategies compared to other strategies (a more extensive type of back-testing). In this way, based on experience, scanners can be used for completely different things, but are extremely useful tools to help the gain the trading advantage.
- Trading Style. Who Am I? Ask yourself if you are looking into something long-term or short-term. Are you an active trader who will monitor your investments daily or someone who doesn’t want to watch your investments more than a few times a year (anything less than a once a month of money management, and you should seriously consider visiting our Advisors & Managers section to find a professional to manage your money or take a look specifically at some mutual funds, fixed income or index-correlated investments). Are you a fundamental investor? Technical trader? Do you like hedging and spread techniques? Different stock scanners, mutual fund scanners, and even options volatility scanners are available for searching through various types of data based upon your trading style.
- Risk Appetite. How much will make you cringe? Active spread management tools and techniques are out there for those who are risk averse or not 100% certain about a trade. Stock scanners can help you figure out which are the most risky investments whether your decision is based off fundamental performance ratios or based off implied volatility measurements. Remember, if you’re not confident that a trade has good odds of success, just use the scanner to find the next opportunity. There’s no one putting a gun to your head forcing you to risk your hard earned money. Scanners will helpidentify and classify risk factors, but only you can determine the threshold of risk that you can tolerate.
- Asset Class. Which asset classes are you most comfortable with? Based upon the aforementioned questions, you can determine what asset class is most for you. If you are trading global data or macroeconomic news, you might want to invest in Forex rates. If you are trading long term (greater than a year), large cap stocks with high dividends and steady growth might be your target. No matter what asset class you trade, scanner software tools are incredibly important to parse out the appropriate equity or derivatives in the market that fit your parameters.
Below is a guide to the different major types of scanners:
- Types: Real-Time News and Data Scanning Tool
- Pros: In-depth, Wide variety of parameters, Incorporates variety of other scan types such as volatility, setups, etc into a full functional, all-in-one tool
- Cons: Confusing at times due to volume of parameters and data, Inefficient, Slower speed
- Summary: Market Scanners are great for news, fundamental data, ratios, trends, etc. These scanners are most useful if you have no clue what you’re looking for or if you just want the most general starting point from which to start filtering. Market scanners are useful for both beginner and seasoned traders, but are most useful for those who already know what they are looking for, but just need a wide variety of parameters to better filter for a particular trade potential.
- Types: Setup Scanners, Trending Scanners, Financial Data Scanners, Complete Stock Scanners
- Pros: Scan & sort stocks by different parameters, Increased efficiency for studying behavior for a specific portion of the market, Useful for analyzing stock trends, Useful for back-testing & regression testing for investment strategies
- Cons: Limited to stocks, Limited only to available parameters,
- Summary: These are scanners that are particularly focused on stocks. These scanners usually have both fundamental ratio and data as well as technical analysis type setups. Sometimes, stock scanners also include news & information, quarterly data, etc.
- Types: Setup Scanners, Volatility Scanners, Parameter Scanners
- Pros: Useful for options setups, back-testing strategies & regressions, Useful to analyze contract spreads & rates
- Cons: Limited comparable analysis abilities since much wider variety of derivatives that accomplish different goals
- Summary: Derivative scanners are increasingly useful for scanning & finding particular exchange traded contracts with certain parameters, but has limited comparable analysis abilities due to the wide array of derivatives that exist