Are you interested in increasing your chances of success in the stock market? If that is so, you may be interested in learning that there are powerful tools available that can significantly improve your trading decisions. Stock scanners do just that, and they are designed to filter through thousands of stocks in select criteria to help you identify the best trading investment opportunities.
Currently, algorithmic trading accounts for nearly three-quarters of all stock trading on U.S. markets. So what are you waiting for? Here are the different types of stock scanners in use today and how they can increase your market success.
1. Fundamental scanners
These scanners are your go-to tool to discover trading opportunities that rely on fundamental factors related to a company’s financial health. Such factors include a firm’s profitability, share structure, average revenue, debt, and other criteria. You can get several advantages by using fundamental scanners:
- You can evaluate a firm’s intrinsic value and its long-term viability
- It allows you to look beyond seasonal market fluctuations and keep your eyes glued to the core fundamentals of a firm or company.
- Analyzing the fundamentals of different companies enables you to seize opportunities across various sectors and reduce your risk by spreading your investments.
2. Technical scanners
When you want to narrow your search to one or more technical criteria, such as the exchange rate that a stock trades on or if it just had a MACD crossing, you turn to the trusty specialized scanners.
This indicator can help you identify potential price changes in the future based on chart patterns like breakouts, support and resistance levels, moving average crossovers, or even momentum indicators.
3. Sector scanners
A sector scanner is an indicator that you can use to specify movements and opportunities within a specific industry sector or market segment.
For instance, you believe that a certain stock in the renewable energy sector will gain shortly. You can perform a sector scan to locate areas with the possibility of investment.
4. News scanners
If you are up to date on the latest news sources, press releases, and social media channels, a news scan is a perfect tool to assist you in reacting quickly to market changes that can impact a stock’s short- or long-term performance.
5. Options scanners
As an options trader, you can use options scanners to view better contracts with high implied volatility, unusual options activity, or specific option strategies.
You can afterward use the results of your analysis to determine the best time to close out on a position or to take a different trading strategy.
7. Social media sentiment scanners
Social media sentiment scanners dig deep (using sophisticated AI and Natural Language Processing (NLP) algorithms) to make sense of social media chatter on sites like Twitter, Reddit, financial forums, and others.
They do this to “see” what stocks people watch to estimate the general mood of the market. Traders can then use this revelation to make prudent investments on the “where’s and how’s of buying stock.
You can incorporate the above scanners into your stock analysis toolbox to leverage trading chances. However, you must remember that the stock market is very volatile, and these tools should only help you to do research and should not be used as the main driver for your buying or selling decisions.
Before trading, you should always conduct thorough market research, trends, and company fundamentals.