Stock Screener: Definition, How It Works, and Example

What Is a Stock Screener?

A stock screener is a set of tools that allow investors to quickly sort through the myriad of available stocks and exchange-traded funds according to the investor’s own criteria. The best stock screeners are typically available on brokerage trading platforms for free, but there are also some independent subscription-based stock screeners available. Stock screeners allow investors to employ their own methodology about what makes a stock or ETF valuable (longer-term traders) or spot a potential trading opportunity (shorter-term traders). 

How Stock Screeners Work

Stock screeners allow investors to weed through the extensive field of potential financial investments using their own criteria. Users begin the process by selecting certain investing parameters, based on their personal requirements. For example, a fundamental investor may be most interested in market capitalization, analyst recommendations, earning per share (EPS), operating cash flow, multi-year return on investment (ROI), dividend yield, and the like.

The more criteria the user adds, the smaller the pool of potential securities to invest in becomes. The bottom line is that stock screeners typically have something for every investor and should be used to see what type of information is available before entering a trade or investment.

Stock Screeners and Technical Analysis

Within some stock screeners, you can integrate technical analysis tools to elevate the precision of your stock selection methodologies. This makes the stock screener feel more like a technical analysis tool rather than a filter to find potential securities.

These analytic tools serve as quantitative measures, allowing investors to delve into the intricacies of price movements and market dynamics. Stock screeners may incorporate a bunch of different technical indicators including:

• Moving Averages: Moving averages, such as the simple moving average (SMA) or exponential moving average (EMA) are fundamental for trend analysis. Stock screeners employ moving averages to identify trends by smoothing out price data over a specific period once you click into the selected security you're interested in.
• Relative Strength Index (RSI): RSI, a momentum oscillator, gauges the speed and change of price movements. It is a valuable tool to assess whether a stock is overbought or oversold. Again, some screeners may display the RSI over time once a particular securityis selected.
• Moving Average Convergence Divergence (MACD):
  MACD, a trend-following momentum indicator, has two lines: the MACD line and the signal line. Stock screeners leverage MACD to identify changes in momentum and potential trend reversals.
• Bollinger Bands: Bollinger bands consist of a simple moving average line and two outer bands representing standard deviations. Within stock screeners, Bollinger Bands are utilized to identify volatility and potential price breakouts. Stock prices approaching or touching the outer bands may indicate heightened volatility.

Tips When Using Stock Screeners

If you're not entirely sure how to get started, consider some of the following advice when setting up your filters or queries.

• Learn to use Boolean logic (AND, OR, NOT) effectively in your screening criteria. This allows you to be more precise and tailor your filters, narrowing down your stock selection with greater accuracy.
• Identify and prioritize key financial ratios based on your investment strategy. Whether it's Price-to-Earnings (P/E) ratio, debt-to-equity ratio, or the current ratio, focus on the ratios most relevant to your goals.
• Include volume as a screening parameter. Stocks with higher trading volumes often have better liquidity, ensuring smoother order execution.
• If income generation is a priority, incorporate dividend yield as a screening criterion. This helps identify stocks that offer attractive dividend payouts relative to their stock price. Note that a company that has historically paid out dividends may choose to no longer do so at any point.
• Tailor your screening by including specific market capitalization ranges. This allows you to focus on stocks that align with your preferences, whether it's taking on more risk with small-cap or playing it a little safer with large-cap securities.
• If available, integrate analyst ratings and recommendations into your screening process. This external perspective can provide additional insights into a stock's potential performance. It can also provide an opportunity to better understand what the industry is thinking should you choose to intentionally invest in opposing ideas.
• If environmental, social, and governance (ESG) factors are important to you, leverage screeners that allow filtering based on sustainability and ethical considerations. Note that stock screeners may dictate this term on inconsistent or varying definitions.

Example of a Stock Screener

When you first encounter a stock screener, you’re likely to be overwhelmed. There will be dozens of categories to view, both on the technical side and the fundamental side. So before you dive in, decide which side of the valley you’re on—technical or fundamental. Consider what you're looking for, what your priorities are, and what types of financial instruments might be of interest. Then you can begin to explore what the screener has to offer.

If your focus is on the short-term, you are likely to be drawn to the multiple technical tools available: charting; alerts; momentum studies, RSI, and more technical studies. If you’re focused on a particular stock or ETF, you can set alerts for when that particular stock crosses a set price level, or for when its RSI hits overbought/sold, for example.

If you’re a longer-term investor, you’ll find plenty of fundamental data (sometimes referred to as technical data), such as EPS, average daily volume, market capitalization, and the like. Such data can help you construct a portfolio keeping in mind that you have a longer-term interest in the company, beyond just the latest headlines. 

Popular Stock Screeners

There's many stock screeners to choose from. Below are three of the more widely used stock screeners that have become go-to tools for both novice and seasoned investors.

Finviz

Finviz stands out for its user-friendly interface and comprehensive set of features. Investors can quickly screen stocks based on various criteria, visualize data through charts, and stay updated with real-time market information. Finviz's heat maps and performance charts add an extra layer of depth to the screening process.

Yahoo Finance

Yahoo Finance is a household name in financial news, but it also offers a robust stock screening tool. Integrated seamlessly with its extensive financial news and analysis platform, Yahoo Finance's screener allows users to filter stocks based on a wide range of fundamental and technical parameters. It also includes analyst recommendations and financial statements.

StockFetcher

StockFetcher caters to traders and investors who appreciate the flexibility of creating custom filters. With a powerful scripting language, StockFetcher enables users to define intricate conditions for screening that may be a little more technical than the options above. It's a great choice for those who want to fine-tune their strategies and identify stocks that align with specific technical patterns or criteria.

The Bottom Line

Stock screeners are powerful tools that allow investors to filter and analyze stocks based on specific criteria, streamlining the process of identifying investment opportunities. These platforms provide users with the ability to customize searches, leverage technical analysis tools, and access real-time data.