How To Use Stock Screening to Find Great Stocks
The task of stock screening is usually broken down into obvious and effective steps that direct you to brand-new trading prospects swiftly. This is how it functions:
Initially, you need to catch all of the appropriate data in the stock screening software. If you're a value player obviously you're going to want the last 4 years of annual financials, together with most recent quarterlies. If you are a short term trader, you're probably interested in price patterns, candlesticks, or supply-demand data on a shorter term time frame. So you have to select the data set on which the screening rule is going to be utilized.
Further, you want to create the selection restrictions you would like to use in the stock screening tool. If you are a value-oriented investor, your new rule might look something similar to this: Inform me of all stocks on the New York Stock Exchange which has market cap less than 200 million, debt-to-equity ratio less than 1.8, and average quarterly revenue growth rate over the past 4 quarters of at least 10%. This screen will select small cap companies with conservative leverage and growing cash income which is a decent sign of financial health. If you're a price-based trader, your rule might be: Find me all stocks on the Toronto Exchange with closing price below 17 and higher than 2, which have RSI greater than 60, a rising 30 day moving average, and a 4-day fall off in price. This filter will select all companies that are in an uptrend, with relatively strong internal strength, and are pulling back in price that might be a buying opportunity.
Next, you must be able to drill down and deeply analyze the options that the stock screening tool identified from the entire universe of stocks. As a traditional investor, you want easy accessibility to the more detailed table data for each stock chosen by the screen. As a price trader expect to see the prices on a time chart, with multiple indicator chart studies.
Once you've done the further drilling down, you can select stocks to buy. This procedure should be constantly done to make sure you are always choosing from the best available companies that match your approach. Essentially, this is how one does stock screening optimally.
Article Source: FxTradingStock.com
About the Author
Wondering how to begin stock screening with the right tool? Check out this site for a great example: http://www.financial-edu.com/stock-screener-professional.php
by: Gerald B. Akins
Total views: 22
Word Count: 379
Date: Fri, 17 Dec 2010
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