Investing Tech – Can Stock Scanners Help?

Investment Analysis

If you are an active investor it can feel incredibly difficult to not only keep a check on your portfolio but also identify real targets with potential.

For day traders, the need for information is even greater because they need real-time data to enable them to make trades fast.

Whilst it is possible to choose targets manually, the truth is that getting a suitable piece of tech to take the strain makes so much sense it is almost no-brainer.

This is where stock scanners come in so let’s look at how they can help.

What is a stock scanner?

A stock scanner is a piece of software that sifts through mountains of data to find the shares that match your investing strategy.

There are many different types out there but some of the most powerful products are installed systems on a local PC, just like software used to be back in the day!

The reason for this is simple. Speed.

A stock scanner is most useful when it is able to spot trends and activity and report them as close to real-time as possible and so a scanner that sits on a very capable machine on your desktop is usually going to be much quicker than one that works through your browser.

In use, you’ll set a series of criteria for stocks that fit your particular trading style.

You may set your filters based on a fundamental analysis of the company, only flagging businesses that fall within your parameters.

Alternatively, you could look at market analysis, seeking to trade based on the activity on a share. Perhaps you particularly like companies whose share price has suffered a recent drop or one that is riding high.

Whatever method you have for choosing a particular share, you can plug into your scanner and it will rapidly produce a target list for you to consider.

How do stock scanners help?

Stock scanners make life so much easier and your dealing a lot more efficient.

As noted above, you can set your criteria according to your trading strategy and let your scanner do the rest.

Admittedly a scanner doesn’t do everything; you still need to carry out your own research, refine your strategy and actually make the trade but with a massive capacity to analyse and filter data it certainly makes life an awful lot easier.

Scanners also help you stay on the straight and narrow with your trading strategy. The psychology of trading forms a very large part of the chances of success and so often people go wrong by choosing shares on a whim.

Setting up a scanner so that it only shows you stocks that fit into your predefined strategy removes a lot of the temptation to just have a quick trade on something though emotion or nostalgia.

The life of a trader, especially if you are day trading can be really hard and using tech really can help with trader burn out by taking away a lot of the drudgery around identifying your new targets.

Day traders need access to potential trade information super-quick so a good quality scanner is a must if you trade in this way. A fast connection means that prices update virtually in real-time and in a sector where milliseconds can make the difference between a good and bad day this is super important.

What to look for in a stock scanner

There are a large number of scanners out there on the market and choosing the right one for you can be a bit of a chore.

The first thing to look for is that the product is actually a real-time scanner. If it’s not updating quickly then it’s little more than a glorified spreadsheet.

You need to pick a scanner that links to the markets you are interested in. This may sound obvious but some scanners will only link to one or two markets and if they aren’t the ones that fall into your trading strategy then they are a waste of money.

Whilst we are talking about money, price is important but here’s where you may be surprised.

If you are trading seriously then choosing the cheapest won’t be the greatest idea. You get what you pay for in life and if something seems too good to be true then it probably is.

That’s why we wouldn’t suggest buying the cheapest scanner because it is likely that it won’t have the speed, functionality and availability that a serious trader needs.

Usability is vital. Some scanners look like little more than computer coding devices and whilst it is possible to learn how to set up your criteria using a fairly opaque method, why would you bother?

You are better off spending your time trading rather than learning how to set up criteria so look for a system that has great usability and is intuitive.

The heart of a trading strategy is a watchlist and you may decide that you want to run several. Perhaps you have a live watchlist and alongside this, you want to run a dummy account to test new strategies or tweaks to your existing one.

Having the ability to run multiple strategies, across multiple markets is very valuable for someone who is running a sophisticated operation.

Finally, learning is at the heart of the journey to become an excellent trader so look for a company that will back you up with extensive, free learning resources so that you can develop your trading skills.

Stock scanners are extremely powerful programs that can revolutionise your trading practices. 

Investing the time to learn and set up a scanner can be time very well spent and using a really good stock scanner can take your trading to the next level.

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