The stock market universe consists of thousands upon thousands of stocks of all shapes and sizes. There are countless sectors and sub-sectors along with emerging growth categories that few have heard of months ago. One of the more common categories that dominated financial headlines in late 2020 and generated many opportunities for day traders were special purpose acquisition companies or SPACs.
And once an investor fully familiarize themselves with SPAC deals, a new emerging category showed up in early 2021: non-fungible tokens, or NFTs.
Successful entrepreneurs are busy enough as is with running their own business so dedicating hours towards understanding confusing stock market trends is out of the question. But at the same time, they could be missing out on once-a-year trading opportunities, like Takung Art Co that gained more than 200% in one day alone.
According to StocksToTrade’s stock scanners guide, a stock scanner can save a busy person a few hours each morning as the software works for you in the background. Let the experts worry about identifying what SPAC or NFT stock is worth jumping into for an easy trade.
Table of Contents
What Exactly Is A Stock Scanner?
As the name implies, a stock scanner refers to software that scans the entire universe of stocks to sort a collection of tickers that satisfy specific criteria. Some full-time traders prefer to do the grunt work themselves but part-time traders with a full-time occupation simply can’t dedicate the time or effort due to their work obligations.
Scanners are designed to help people identify trading opportunities based on an individual’s specific trading strategy. Want to find every stock that is trading near 52-week lows to identify rebound opportunities? A stock scanner can be set to do exactly that.
Want to find every stock trading at a 52-week high to ride the momentum higher? A stock scanner can also do that.
Source: StocksToTrade.com
The Four Types Of Scanners
As noted in the StocksToTrade guide, there are four major types of scanners that are available to the public.
The first is a fundamental stock scanner. In this case, a scanner will identify stocks that satisfy certain fundamental criteria. Examples include earnings per share above or below a certain dollar amount or a return on equity above the user’s desired amount.
The second is a technical analysis scanner. Traders that want to trade off the charts, price action, technical indicators, or volume criteria will certainly get good use from the software. One simple example includes identifying all stocks trading above a 50-day moving average.
Moving on, the third type of stock scanner is a post-market stock scanner. This would be particularly useful for busy entrepreneurs that can’t dedicate part of their day to trading. Instead, a post-market stock scanner runs outside of the regular trading session that takes place from 9:30 AM ET to 4:00 PM ET.
Also, read What to Consider in a Stockbroker Before Investing
Companies report earnings before or after a regular market session so it is not unusual to see extremely volatile moves in either direction during what is mostly a quieter period. The post-market scanner can identify the rare stock moving higher or lower on heavy trading volume.
Finally, the intraday stock scanner is the last type of scanner that busy entrepreneurs can take advantage of. The intraday stock scanner, according to StocksToTrade, is the most robust type as it essentially has no limit to how it can be used.
The scanner only works best when the trader acts quickly and decisively because the data is changing in real-time. Of course, the user is in complete control so they can easily input multiple criteria for their stock scanner. For example, a scanner can be programmed to look for a stock that fits each of the following parameters:
- Price: Between $3 per share and $8 per share.
- Volume: At least 4 million shares traded.
- Percent change: Shares are up at least 8% since the market opened.
- Float: At least 10 million shares.
Stock Scanner Versus Stock Screener
A common misconception among many traders and investors is that a stock scanner provides the same data as a stock screener. While both scanners and screeners are valuable tools to traders, there are some very key differences.
For the most part, stock screeners are outdated tools that provide good value to investors but little to no value to traders.
Screeners mostly consist of websites that predate the surge in day trading interest seen in the 2010s with the creation of brokers like Robinhood that offered free trading options.
Finviz is among the more popular screeners and it is a great tool for longer-term trades. Of course, traders can still use screeners to help identify shares that fit in with the risk parameters of their portfolio.
Conclusion: Scanners Save Time
Stock scanners should be considered an essential tool for all traders looking to save time. Entrepreneurs are busy enough as is so access to advanced software and technology to quickly identify trading opportunities could be the difference between making a profit and giving up on trading.
Entrepreneurs understand perhaps better than others the importance of investing in tools to improve efficiency and generate superior return on investments. This decision should be no different than any other productivity tool.
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