If you’ve ever wondered how to use a stock screener to find top stocks, you’re in the right place to learn how!
But first, let’s define what a screener is and how it works.
A screener is software that lets you choose various parameters to filter stocks according to what you are looking for.
The whole stock market universe is about 10,000 stocks, so using a screener can reduce this to a more manageable and useful number.
Depending on the screener software, you can screen for just about any parameters you wish.
There are many ways to screen – I have over 50 screens in my charting software that I use on a regular basis.
Some of the most useful screens are:
One of the best aspects of a screener is that it will bring to your attention stocks you may not have heard of but are great performers.
It’s the best way to consistently find those undiscovered winners, those stocks that are not yet on everyone’s radar, but are showing all the characteristics of huge winners in the past:
Using my screens, I have found many great stocks I had never heard of before like The Trade Desk, Paylocity, Chegg, Audiocodes, and many others.
There are lots of free screeners as well as paid ones. The better free ones give you a decent amount of parameters but are limited to the number of choices you have.
Paid screeners offer an extensive menu of options so you can screen just about any way you want.
Most trading platforms provides very good free built-in screeners. TD Ameritrade’s Think or Swim platform has a very good screener that can be customized to just about any parameters you want.
Let’s take a look at a screen I created in Finviz, a free screener tool.
I want to find mid-cap technology stocks that have had an IPO within the last 5 years, and have an average daily volume to be at least 500,000 shares. These stocks are new merchandise and historically many IPOs turn into big winners over time.
The screen came up with 15 results, that I have sorted by best performance year to date:
(click to enlarge)
I can now do some research on these companies to find the most promising candidates to buy. I then would look at their charts to find proper entry points.
I use Marketsmith as my screener. In my opinion, it is by far the best screener and stock chart platform available.
It’s not inexpensive, but it gives you superior screening ability, access to Investor’s Business Daily’s ratings system, and tons of other features that make finding the top growth stocks easy.
Here are the parameters for some useful screens. Depending on your screener software, you may or may not have access to all the parameters I show.
After screening for stocks that are promising candidates, you should put them in a watchlist. A watchlist is just a list of stocks that you want to keep an eye on.
All the major trading platform allow you to create watchlists that will also provide news, charts, and technical and fundamental data on each stock.
One of the important things about having a watchlist is that each day you see which stocks are strong and which are not.
In the following watchlist from TD Ameritrade’s Think Or Swim trading platform, I notice that the stocks in green have been leading the market and tend to be at the top of the list day after day.
Seeing the same names show up as the best performers each day tells you that these are the leaders. These are the stocks I will be looking to buy.’
Watchlist in Think or Swim
(click to enlarge)
Be sure to keep your watchlists updated so when these stocks make a move, you are ready!
For the stocks I am watching carefully, I like to create alerts that will send me a text when a certain price is reached. This way I don’t miss out if I’m busy and not watching the action at the time.
Using a screener is the best way to find top quality stocks.
And as an added bonus, you’ll come across great stocks that you’ve never heard of, undiscovered gems that could well become the next Amazon!
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