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There are around 7500 stocks listed on the BSE and NSE in India. If a person wants to invest in the best stocks they would have to do thorough research for which they may not have the time and the required resources available. They may have their jobs or business to attend to. So what can the investors and the traders do to make money in the stock market? There is help available in the form of stock screeners.
Stock screeners are tools that help investors and traders to sort out a list of thousands of stocks according to their search criteria. Both fundamental and technical analysis can be carried out with the help of screeners and these are available free of cost on many brokerage sites while some of them are available on a subscription basis. When a person enters the input to the screeners the field of investment opportunity is narrowed and it becomes easier to select the stocks according to selection criteria.
The stock screener begins to filter out the stocks after you have entered your search criteria. The stocks remaining in the list are the ones that fit your desired criteria. The remaining stocks can be used to make an investment decision or if you can still do more research you find out the stocks that help you to meet the investment goals. The stock screeners help the person to save time and quickly identify suitable stocks according to a strategy.
The search criteria for an investor and a trader will be different. Investors who prefer fundamental analysis may use the criteria of price-earnings ratio, earning per share, dividend yield, market capitalization, dividend, volume, return on investment, and 52-week price change. The data will help you construct a portfolio for the long term.
Traders who like to do technical analysis may use the screeners based on technical indicators like moving average, average directional index, moving average convergence divergence, relative strength index, etc. You can set alerts on a particular stock when that stock crosses a set price level or when its RSI is overbought or oversold.
Example- Let us say that you are a fundamental investor and use the stock screener to select from among hundreds of stocks. You want to invest in Indian stocks and select the sector where you wish to invest and it may be from the textile, chemical, auto ancillary, banking, engineering, or hospitality sector. You have a price of Rs 75 or below for a share in any of these sectors and additionally stocks that give 10% or above as dividends. The filtered stocks would now be displayed on your screen.
The more the number of filters used in the screener the lesser would be the number of stocks being displayed. The screeners themselves can’t tell you which stock to invest in. They will only narrow down the list to a few stocks and you will have to do further research to find the best stock among them. Before using the screener to find a stock it is always better to have investment goals and strategy in place. The final action to be taken from your side is to spend time researching a company to ensure that it is a good investment.