Free Stock Screening Tools – Criterias For Success

It wasn’t long ago that in order to analyse the fundamental information regarding a particular stock you would have to painstakingly research each individual stock by hand. Annual reports with more than 100 pages would contain all of the information you needed, but finding it would take you longer than a trip to the Moon!

Thankfully, those days are long behind us. The internet has provided us with the opportunity to analyse and compare 1000’s of companies within seconds based upon whatever fundamental criteria you desire.

The premise is basic but incredibly effective, you tell your stock screening tool what type of stocks you are interested in and it will search an entire exchange for any company that meets the criteria that you have specified.

Why Use a Stock Screening Tool?

The obvious advantage of using a stock screening tool is that you can streamline your research process before investing or placing a trade. If you only want to consider investing in growth stocks, tell your stock screening tool to only return stocks which had earnings growth in the most recent quarter and the screener will only return stocks that had earnings growth in the most recent quarter.

If your list is still to big too make an informed decision you can add another screen and so on until the entire universe of possible investment candidates is reduced to a manageable enough size for you to begin a more thorough research. The less choice we have, the less stressful our decisions become and as any trader will know, the less stress we have the more profits we make!

Free Stock Screening Tool

While there are stock screening tools which you must pay a subscription for, we have always found that free stock screening tools have done just as good a job at helping us pinpoint stocks ripe for a trade. One of the best free stock screening tools we have used is provided by Finviz.

How We Use Free Stock Screening Tool

If you are a subscriber to our free stock trade alerts you will know that we place lots of profitable trades thanks to our technical analysis and mechanical trading strategies but you may not have known that we only place trades in companies which are already on the watch-list of stocks that we screen for at Finviz.

The Criteria We Search For

Using our counter-trend trading model as an example we use the free stock screening tool by Finviz to search for the strongest stocks from the strongest industries. To find those stocks we use the following criteria:

  1. Market Cap > $300 Million
  2. Average Volume > 200,000K
  3. Float Short < 5%
  4. Price > $5.00
  5. ROE > 15%
  6. Debt/Equity < 0.5
  7. EPS growth Q/Q > 20%
  8. Sales growth Q/Q > 20%
  9. Institutional ownership > 60%

As you can see, the criteria are quite basic but they do the job of reducing the initial universe of stocks to a list manageable enough that we can study the technical picture for each of them. Once we have created our list we only look at the stocks which are from industry groups that have passed our industry strength filter.

The results

At the end of each trading day run the screener you have created. Delete all the stocks on your newly formed list that are not from an industry that is outperforming the SPY over the past quarter. If any of the remaining stocks also meet your mechanical trading entry rules you simply place an order to buy the next days market open.

Here is a snapshot of all the stocks that have met the criteria of our Finviz free stock screening tool on the 17/02/14.

finviz screener

As the list illustrates, we have managed to reduce the number of stocks that we are willing to buy this week from more than 8000 to just 12. Now all we need to do is run one of our mechanical trading strategy rules on each of the 12 stocks to see if our entry rules are met.

Use Free Stock Screening Tools to Find Weak Stocks

There is an old saying that the data you get out of a machine is only as good as the data you put in…This is true for stock screeners too. For example, if you want a list of stocks that you think will go down in price you can use these criteria:

  1. Market Cap > $300 million
  2. Average Volume > 200,000 k
  3. Price > $5.00
  4. EPS growth next year Negative
  5. Negative EPS growth Qtr/Qtr
  6. Negative sales growth Qtr/Qtr
  7. Debt to Equity ratio > 0.5

Now all I need to do is check the technical situation on each of the stocks and wait for a trade entry on the short side.

The great thing about using free stock screening tools is that you can experiment with as many different criteria as you like. If your list is too small be less conservative with your criteria and if your list is too big be more conservative. The possibilities are endless.

For a step-by-step video guide to setting up and using the free stock screening tool provided by Finviz please watch our Honest Guide to Stock Trading video series.

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