What is a Stock Screener?

The stock market is a labyrinth. Navigating this complex world and selecting the right stocks to invest in can go from extremely challenging to downright confusing. Investors are always looking for various tools that can help them in the pursuit of choosing stocks for their portfolios.

One such tool that can help make the process of selecting stocks a lot easier is the stock screener. In this article, we are going to delve into the intricacies of this tool, understand how it works and check out some of the key benefits it offers. 

What is a Stock Screener? 

A stock screener is a powerful tool designed to filter and identify stocks based on specific criteria set by the user. The tool sifts through the myriad of available stocks and instantly identifies those that align with investors’ investment objectives and preferences.

Also known as a market screener, it is available in various forms, ranging from simple web-based platforms to sophisticated softwares often used by trading firms and financial institutions. Irrespective of its form, the underlying principle of a stock screener remains the same: to simplify the stock selection process and facilitate more informed investment decisions.

How Does a Stock Screener Work? 

Now that you know what is a stock screener, let us look at how it works. Here is the process flow for most stock screeners available in India. 

Firstly, investors dictate the filtering process by selecting certain parameters or criteria. These criteria can encompass factors, such as fundamental metrics, technical indicators, shareholding patterns, price actions, volume and delivery metrics, and candlestick patterns, among others.

Once the investor selects the desired criteria, the stock screener instantly goes through the various stock listings across exchanges, eliminating those that do not meet the specified requirements. The result is a curated list of stocks that meet the investors’ selected criteria. 

Out of the curated list of stocks, investors can further narrow down potential investment opportunities with their own research and analysis. 

Example of How a Stock Screener Works 

Here is a hypothetical example to help you understand how a market screener typically works. 

Assume you wish to filter out stocks with strong bullish reversal tendencies. With the number of stocks listed on the Indian exchanges, manually looking at the price charts for each stock to identify bullish reversal candlestick patterns is practically impossible. Here is where a stock screener can help. 

All you need to do is select the stock filtration criteria on the screener. Let us say that you chose the bullish engulfing pattern as your criteria since it is one of the strongest bullish reversal candlestick patterns. 

The market screener will instantly sift through the price action charts of all of the stocks listed on the Indian markets, displaying a curated list of companies where the bullish engulfing pattern has made an appearance on their price charts. 

Now that the screener has filtered the stocks down to a curated list, researching and assessing the investment potential of each of these carefully handpicked stocks should be much easier.

Benefits of Stock Screener 

A stock screener is a handy tool for both beginners and experts alike. Here are some of its benefits. 

• Saves Time and Effort   

Market screener automates the stock filtration process, making it more efficient and less time-consuming. Since you don’t have to manually look into and sift through stocks to identify companies that match your requirements, you can save a lot of time and effort, which can be redirected towards other, more productive activities. Also, the tool enables you to identify potential trading and investment opportunities more quickly. 

• Customisation Options 

Most stock screeners available in India offer a plethora of predefined criteria for stock filtration. Some tools even enable you to construct your very own multi-screeners using variables from different categories. This lets you tailor your search criteria according to your unique investment goals and risk preferences.  

• Facilitates Better Investment Decisions 

With market screeners, you can get access to a wealth of financial data and metrics that can help you make better and more informed decisions. Using the analytical capabilities of screeners, investors can identify potential trends and investment opportunities that may not be readily apparent.  

Things You Should Know Before Using Stock Screener

Although a screener offers a plethora of benefits, you must exercise caution and diligence when you use it. Here are some key things you need to keep in mind. 

• Know Your Investment Objectives

Having a clear understanding of your investment objectives, risk tolerance and time horizon is crucial before you use a screener. It will help you tailor your search criteria accordingly and avoid using parameters that are not aligned with your investment goals. For example, if your objective is short-term trading, you need to focus more on technical indicators than fundamental indicators. 

• Get to Know the Basics of Fundamental and Technical Analysis 

A basic understanding of what fundamental and technical analysis entails is also very important since it will enable you to accurately interpret the results generated by the stock screener and make informed investment decisions.

• Verify Data Accuracy

Stock screener uses a lot of financial data, all of which may not always be accurate or up-to-date. Therefore, before you act on the results produced by them, it is advisable to verify the accuracy and timeliness of the data to ensure that it is reliable. 

Conclusion

A stock screener is a useful tool that can significantly enhance the effectiveness of stock selection. By automating the stock filtration process, the tool helps you save time and energy and helps you make informed decisions. 

If you are looking for a comprehensive market screener, the Research 360 platform of Motilal Oswal can help. The platform’s ‘Screeners’ feature lets you filter stocks based on price, technical indicators, volume and delivery metrics, fundamental indicators and candlestick patterns, among others. Each category has several sub-criteria that you can select. What’s more, you can create multi-screeners of your own by selecting up to 10 parameters. Sign up for Research 360 today to get access to one of the most extensive stock screeners in India.