Home Software How Can Stock Scanners Help You Trade Better?

How Can Stock Scanners Help You Trade Better?


Stock scanners allow investors to get a comprehensive list of stocks that fit their checklist. Essentially an algorithmic trading software, stock scanners allow investors to enter their preferences for the kind of stocks they want to purchase and filter the appropriate publicly trading companies which fit the checklist.

Stock Scanners – An Overview

Most brokerage sites offer a basic stock scanner on their platform, allowing investors to discover their desired companies out of over 6,000 companies listed in major indexes in the United States. This software is designed to revamp the investment strategies of people to factor in time-saving and efficiency.

The stock market is one of the most dynamic industries operating globally, as any minute macroeconomic or international event can cascade into major gains or losses across the exchanges worldwide.

Stock scanners allow investors to steer clear of excessive investment noise by solely focusing on the fundamentals of companies. For example, an investor can set his stock scanner requirements to a stipulated earnings growth percentage over the past five years, as well as price/earnings lower than the sector median.

This should allow a person to identify fast-growing companies, currently trading below their peers. Most stock scanners come with a “Watchlist” feature, permitting people to create their own portfolios. Investors can periodically monitor their favorite stocks, gauging their reaction to market developments.

Types of Stock Scanners

So, how should you use stock scanners and leverage their benefit to generate consistent returns? Presently, there are four broad types of stock scanners designed to cater to different investment requirements- 

  • Technical stock scanner

As the name suggests, these scanners allow you to filter stocks based on technical analysis parameters. Technical indicators such as 50-day and 200-day moving averages, trading volumes, and candlestick patterns are some of the most popular tools offered by the basic scanners to ascertain uptrends and downtrends.

However, advanced softwares, usually available on a subscription basis on multiple trading platforms, allow investors to single out stocks based on Bollinger Bands and MACD indicators as well.

  • Fundamental stock scanner

These scanners are ideal for value investors, looking for relatively cheaper stocks with sturdy growth potential. A fundamental stock scanner usually proves to be beneficial to identify long-term investments.

These scanners use valuation metrics such as P/E ratio, PEG ratio, Price/ Sales as well as growth parameters such as earnings and revenue growth CAGRs to determine profitable stocks.  

  • Post-market scanner

Post-market scanners reveal the most profitable investments based on a stock’s closing price and subsequent gains. Also known as end-of-day scanners, this software screens stocks which have the potential to register significant gains in the following day’s trading session, giving investors a first-mover advantage immediately as the markets open.

  • Intraday stock scanner

These stock scanners take into account the volatility of a stock on any given day, thereby allowing investors to profit off of the changing investor sentiment. As intraday trading requires swift identification of short-term emerging market trends, these ground-breaking scanners are wildly popular among day traders.

Stock Scanners in 2020

Trading volumes have reached record highs since the past year, allowing stock scanners to become widely popular. With people accustomed to the remote lifestyle, consequently having increased free time, and millennials and generation Z entering the workforce, stock market investing has garnered immense popularity.

Also, the bullish trends in the global stock markets observed over the past year, at a time when the major economies are tussling with recession added onto the uptrend. Surging unemployment rates as a result of the global shutdown and slow revival have also caused many people to take up trading as an alternative income source.

The United States, for example, reported an unemployment rate of 6.9% in October 2020, 340 basis points higher than the pre-pandemic rate of 3.5% observed in February last year.  A Bloomberg article released in September last year noted the rise of millennial day trading in South Korea while commenting on growing trading related addictive behaviors among the nation’s youth.

Future Outlook

The stock market rage is unlikely to die down as we head into 2021. With more and more people taking an active interest in the publicly traded companies rather than rely on 401k passive investment strategies. As such, stock scanners should attract a higher volume of active users, as people try to streamline their investment techniques.

While many trading and finance sites offer primitive scanners free of cost, investors can also avail of the advanced platforms against the usage fee to get more comprehensive insights and screening parameters.  

However, it should be noted that stock scanners only consider quantitative factors, and therefore are beneficial for shortlisting potential investment avenues. Following this, primary in-depth research into the company should be conducted before trading.