Stock Trading
Nov. 23, 202014 min read

How to Do Stock Market Research With Stock Screening Software

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Written by stockstotrade

If you’re looking for the hottest stocks to trade every day, and you’re not using a stock screener, ignore this at your own peril …

A stock screener is the smart way to, well, screen stocks. You put the wonders of modern computing to work to more easily comb through stocks. Thousands and thousands and thousands of stocks.

The result? Every day before the market opens, you have a list of the stocks with the highest potential.

Think of it this way: There’s no way you can go through every stock traded in the U.S. That’s over 18,000 stocks!

You don’t have to find the needle in the haystack — technology takes out the grunt work. A well-designed stock screener makes the job much easier.

And even if you currently use scanning software each day, keep reading. This post will give you some pointers and angles to chew.

Let’s get into scanning. Read on …

What Is Stock Market Research?

You must research every stock you want to trade. Here’s what that entails …

Researching a stock allows you to make educated buying or selling decisions. It’s the number-one way to help make your stock market activities more profitable.

Now, how to go about that research …

Some traders have very creative ways to research stocks — and modern technology certainly helps. Here are a few reliable methods:

  • Fundamental Analysis: Analyze the company fundamentals: earnings, balance sheet, management, business model, and so on.
  • Technical Analysis: Analyze the price and volume behavior of the stock. Look for patterns that indicate imminent price stock price movements.
  • Catalyst Analysis: Analyze any events that can bring attention or excitement to the stock, thus pushing the price up or down. These can be SEC filings, news articles, or social media hype.

It’s up to you to mix and match the research methods that fit your needs and criteria.

Many long-term investors rely more on fundamental analysis. They’re often looking for the most solid companies for the future and not so worried about short-term momentum.

On the other hand, day traders often focus on technical analysis and short-term catalysts. They’re looking for the hottest stock movements over the coming day or two.

Whichever method you use, it has to make sense to you and fit within your trading plan.

The Importance of an Effective Stock Market Research Process

Back to that needle in the haystack … there are currently over 18,000 stocks actively traded in the U.S.

You want to trade successfully (of course), but first you need to set your criteria. What are you looking for in a company? What are you looking for in a trade?

Next you need to locate the stocks that meet your criteria and allow for the most profitable trades. And guess what? That’s probably just a handful.

Now imagine trying to find that handful of stocks among 18,000 candidates — all before the market opens for the day. That’s a near impossible task … if you don’t have an effective research process. Research is absolutely key.

Every successful trader has a research method that helps them find the best opportunities.

A solid research process can be as simple or as complicated as you like (or need) it to be. In general, remember KISS: “keep it simple, stupid.”

It’s what works for many of the best traders.

  • First step: Figure out exactly what you’re looking for. It may be stocks with new all-time highs or tickers starting to explode in volume. Whatever criteria your trading plan requires.
  • Next: Search through the universe of stocks. In the ‘old days’, this often meant clicking through hundreds or even thousands of charts, quickly looking for your setups. But today you can use stock screening software.
  • Let your computer to do the heavy lifting for you.

Read on to learn how to use a stock screener to quickly find your best trading candidates with the least amount of work …

How Do Stock Screeners Work?

A stock screener is a piece of software that allows you to scan and filter through stocks, looking for the exact criteria you set.

Once the screener locates a list of stocks that fit your criteria, you can quickly turn your focus to the exact stocks that fit within your trading plan. It makes it easier to spot your ideal trades according to your preset criteria.

Sound like something that can make your trading day way easier? Good. Now let’s dive deeper into how you can fully harness the power of a stock screener …

How to Do Stock Market Research With Stock Screener Software

Stock screeners are often robust tools. They allow you to select all kinds of criteria to find in your list of stocks.

When you use a screener for a while, you’ll find what works for you. Develop your own process. Find a groove.

Let’s look at an example of the process that many traders use today. Here’s a brief rundown of the process a day trader may go through to find stocks that are likely to show high-momentum moves in the upcoming trading sessions.

#1 Build a List of the Top Daily Gainers

With over 18,000 stocks to choose from, you first need to cut the list of potential tickers down as quickly as possible.

A common first-level filter is to look for stocks that were one of the top 200 daily gainers for the previous trading session. This means that the stock recently made a standout move upward in price, implying that the market is getting excited about the company.

Once you build your top-daily-gainers list, move on to filtering the list down to stocks that further meet your criteria.

#2 Find Stocks Showing Your Favourite Chart Patterns

Many traders use chart patterns as their main form of stock analysis.

A good chart pattern shows the psychology of other market participants. It can indicate what the next move of the stock will likely be. And it often helps you, with a price level, to intelligently place your stop loss.

A proper setup of a stock screener allows you to use it to scan for chart patterns automatically. Some traders like to use their eyes for this step — simply clicking through the charts. If you know what you’re looking for, it should take no more than 10 seconds or so per chart to know if it shows your setup.

#3 Filter the List for Stocks With Enough Trading Volume

There’s no point in finding the most exciting, high-potential stock if it doesn’t trade enough each session to allow you to get in and out without pushing the price around too much. That’s why many traders filter their stock lists to find only those that provide enough trading volume each session.

For example: Depending on the size that you trade, you can set your stock screener to only display stocks that trade more than $1 million each day in volume.

#4 News Catalysts

A news catalyst can be an article that mentions the stock, an SEC filing, or even rumblings about the stock on Twitter.

News catalysts show that people are taking notice of the stock. That can indicate that traders will be looking to jump onboard the stock, with the increased activity pushing the price up or down.

It’s not always necessary to read the article or filing. The mere fact that the stock is garnering attention is often an exciting sign — as long as your chart setup is there.

Good stock screeners allow you to scan for news catalysts. This is a popular filter for traders looking for imminent volatility.

#5 Add Those Stocks to Your Watchlist

Now, you’ve got your list of stocks. It shows your required chart patterns, trading volume, and whether the stocks are likely to move soon.

Your next step: Build a watchlist of stocks to keep your eye on when the market opens.

Important note: When it comes to your watchlist, less is more. It’s better to focus on the very best two to five candidates than to try to watch 20 stocks. Sure, sometimes you might miss out on a great move, but over the long run, focusing on only the very best opportunities will put the odds in your favor.

In five easy steps, you’ve taken a massive list of stocks and cut it down to just a handful of the most compelling opportunities. See how exciting — and useful — a stock screener can be?

Key Trading Tips for Stock Research Process

There are many tricky situations in the stock market. If you’re going to make a success of trading in the long term, you have continue to learn.

Learn. Learn. Learn. Seriously, it never stops. 

Here are a few more tips you should strongly consider incorporating into your research process:

Don’t Trust Promoters

If you’re reading this blog, you’re probably looking for stocks that make the biggest, quickest moves. You’ll likely be trading stocks at the smaller end of the market — often penny stocks.

Know this: The penny stock world can be rife with scams, bad companies, and dodgy people. But don’t be scared. If you know what you’re doing, those bad elements can create many profitable opportunities.

In the penny stock world, there’s the stock promoter. That’s an individual or company hired to hype a stock. Don’t believe the hype. Here’s why …

Promoters have bags and bags of tricks:

  • They might place newspaper ads announcing a company as ‘the next big thing.’
  • They can send out mass email blasts — enticing investors to jump on the stock.
  • Maybe they’ll use fake accounts on message boards or Twitter, trying to generate buzz about a stock.

Bottom line: Promoters aren’t usually out to enrich the general public with amazing stock tips. They’re looking to help insiders increase the value of their holdings so they can liquidate their shares. Or they’re helping to allow the company easier access to raising funds.

Don’t fall for the promoter hype, no matter how good the story is. Instead, educate yourself. Learn about the manipulative tricks they use. Then look to profit from the pump-and-dump nature they create in a stock.

Only Trade Volatile and High-Volume Stocks

You’re in the markets to make money right? And preferably sooner than later …

If that’s the case, then don’t bother trading dead stocks.

Dead stocks may look good fundamentally — maybe you hear how awesome and amazing the company is. But these stocks have no volume and no big price moves.

You want to go where there’s volume and volatility. You need stocks that other traders are jumping in and out of, where the price is moving — up or down.

When you trade volatile stocks, you generally don’t need to sit in a position for months to get a small gain. You can catch a big move in a month, a week, or maybe even a single trading session.

Quicker trades mean quicker exits. You’ll be looking for your next trade sooner. This is an opportunity! Speed up your learning curve. See more trading action. Make more decisions. And if you’re a trader with a small account, volatile stocks can be your best friend.

Here’s the thing: When your trading funds are limited, you’re probably not going to mimic mutual funds. Sitting on a portfolio of blue chips looking for a multi-decade investment just won’t be your speed. Instead, you’re conducting a business buying and selling stocks, looking to make a profit as the market ebbs and flows.

On a very fundamental level, the two most basic things you need are volatility and volume … always seek those two things out!

Choose the Best Stock Market Research Tools

Here’s a rule of thumb in trading: The best traders tend to use the best tools.

Even if you’re just starting out, opt for tools that can help your trading for the long haul. Invest in the best software and learn how to use it. The right software can save you time and streamline your research and trading process. That can help preserve your mental energy and sanity each trading day. Trust us, you’ll need it.

There are a lot of stock research tools out there. Some are hard to use and may require some programming knowledge to do even a basic scan. That’s one of the many reasons we created the StocksToTrade platform. As traders, we wanted to build the very best tool to make our trading lives as easy as possible.

How good is StocksToTrade? Let’s just say it’s no mistake that elite traders like Tim Bohen, Tim Sykes, and Tim Grittani use the platform every day. If nothing else, that’s a lot of Tims.  

We firmly believe StocksToTrade is the very best platform on the market for the individual stock trader. So grab a trial of StocksToTrade for only $7 today and use exactly what the big-time traders use.

Benefits of STT as a Stock Screener

Since this post is about using a stock screener to find the best potential trades, let’s take a closer peek at how the StocksToTrade screening capabilities can make your trading life easier.

The main goal behind creating this stock screener was to build a single platform that can scan for all your stock trading opportunities. Before the market opens, you only need to open one program, run your scans … and that’s it. No clicking between clunky programs.

Running a scan is simple: point and click. Tap a few buttons and within 10 seconds you can run a reasonably complicated scan. No programming skills required.

No matter what criteria you’re scanning for, the program can fit your needs — percentage changes, top percent movers, pre-market movers, new highs, new lows. You can even add in many of your favorite technical indicator setups. We’re adding more options all the time. And if you need more than technical criteria, you can also scan by fundamentals. You can scan by float, earnings-per-share, P/E ratios, and more. These are often great for longer-term investors.

You can also check for catalysts, like earnings announcements, SEC filings and news related to a stock.

There are so many options to screen for stocks with … check out a 7-day trial for just $7. See how easy it is to find the hottest stock trades using STT!

The Bottom Line

The process of researching stocks to find the best trades used to be long and tedious. Now, thanks to modern scanning technology, it’s nearly effortless.

With a great stock screener, you can filter stocks to find your best potential setups based on your criteria. That means you start the trading day focused. You’re prepared and in the zone. Most importantly, you’re ready to take on the market!

It takes a bit of time to learn which criteria to filter for. Too tight, and you miss out on some great trades. Too loose, and you can make too many sub-par trades. Whatever criteria you use, it must fit within your trading plan.

Remember, try to keep things simple (KISS!). The best traders do exactly that.

How many stocks do you have on your watchlist when the market opens? Got any screening tips to share? Leave your answer in the comments!