One of the most invaluable tools of any penny stock trader is the stock screener. So, what is a stock screener and how exactly do they help penny stock traders? Here’s a quick overview.
There are currently thousands of penny stocks available for trading. Among them, very few of them are potential winners. But choosing these potential winners is not an easy feat. You have to perform intensive research on the penny stock before deciding to trade or invest in it. This is where stock screeners gain importance.
What are Penny Stock Screeners?
Stock screeners are automated online tools that help in filtering out the stocks based on user-defined parameters and metrics. Knowing how to effectively utilize stock screeners would cut down your efforts in stock research by a great percentage.
For instance, if you want a list of stocks whose price is between 50 cents and 75 cents, you need to just enter this criterion into the screener. The screener then disregards every other stock that doesn’t satisfy this criterion and quickly displays the stocks those share prices meet your criteria.
There are many free and paid stock screeners available for use. The figure below shows the stock screener from yahoo finance.
Benefits of Using Stock Screeners
Following are the advantages of using stock screeners.
Helps generate ideas: With the help of stock screeners, you can identify many solid and undervalued investment ideas. This is obviously a better alternative than reading about every stock from A-Z.
Helps avoid emotional entanglements: By using penny stock screeners, you can eliminate emotional entanglements and bias regarding any stock. The whole process becomes mechanical, allowing you to simply make decisions based on the merits of the stock than emotions.
Quick and Easy to Use and Setup: It is relatively quick and easy to set up stock screeners. After a brief upfront work, you can simply hit enter on the stock screener to get the customized list of stocks of your preference.
Popular Search Criteria of Stock Screeners
Following are the popular search criteria of stock screeners.
Stock Price: This is one of the easiest methods for screening companies.
Exchange: To avoid lo-quality penny stock, it is best to choose stocks based on the exchanges. The various exchanges in which penny stocks are available is covered in depth in the professional penny stock course.
Type of Industry: This is another good way to screen penny stocks. Screening by the industry gives lesser results, which helps you to quickly identify possible penny stock winners faster.
New Highs: Some screeners allow you to screen penny stocks that have formed new 52-week highs.
Trading volume: This helps in screening for stocks with huge increases in the buying and selling activity. For instance, the screener can identify companies that have 3-times the average trading volume.
Volatility: Using stock screeners, you can choose stocks with the specific amount of volatility depending on your risk appetite.
Fundamental Criteria: Some traders prefer to trade stocks which have fulfilled certain fundamental criteria. For example, traders prefer stocks with a specific value for price to earnings (P/E) ratio.
As you can see, stock screeners are quite helpful for identifying potential penny stock winners. You can learn more about stock screeners and a list of useful stock screeners from the professional penny stock course.