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Stock Screening Technology

Many traders and investors analyze stock charts in an attempt to identify certain patterns, or setups, in the stock’s price and volume history before considering a trade.  Unfortunately, manually viewing individual charts to identify these patterns limits the number of stocks that can be considered for trading.  Some of the most sought-after trading patterns may only occur, on average, once a year, if at all, for a given stock.  Given these probabilities, a trader who views as many as 100 charts an evening may only uncover as few as two potential trading signals per week – a lot of tedious work with very little reward.  

This can understandably lead to frustration.  Combined with a little impatience and the trader may begin to trade less-than-optimal setups – the type of trades that look tempting initially, but when viewed after closing the position with a loss, make the trader wonder what they were thinking when the trade was initiated.  This is where a stock screener comes in. 

A technical stock screener is essentially an automation tool used by traders, and assists in the identification of stocks that meet certain pre-determined technical criteria, which constitute a pattern, or setup.  We use the term “technical” to refer to historical stock price and volume action, as opposed to “fundamental” information, which refers to the performance of the company (such as free cash flow, revenue, and profitability), but not necessarily the stock.  

Typically performed on a daily basis, a screener analyzes a given universe of stocks and performs one or more screens.  Searching for one particular pattern, or setup, constitutes a screen.  Filtering out all the stocks that do not meet the criteria for each of the screens, the stock screener provides for the trader a list of the few stocks that do. 

With the results of an effective stock screener, a trader can quickly and easily identify the trades that will be considered for the following day, or, at times, trades that will be considered further into the future.

Types of Technical Stock Screeners

Before discussing the benefits associated with using the Turning Point screener, it is important to understand the different types of screeners available, how they work, and the advantages and disadvantages of each.

A majority of the stock screeners presently available operate in one of two ways.  The most common is the predefined screener, while the other is the programmable screener.  

Predefined screeners typically present the output from a set of screens that have already been performed for the user.  While the simplicity of being provided with the screener results is certainly convenient, there are drawbacks common to most predefined screeners.  The main problem is the simplicity of the screener criteria.  While easy to program, using simple criteria rarely identifies inspiring or valuable setups, often does not exclude certain undesired setups from the results, and can produce so many results that the user is overwhelmed, or is at least given more information than can be processed on a daily basis.  And isn't the purpose of a screener to limit the number of stock charts that need to be viewed at the end of the day?   

Additionally, the typical screener output is nothing more than a simple list of the stocks that met the screened criteria.  Isn't this exactly what you were looking for?  Perhaps, but when you are sifting through a result list containing more than 100 candidates, wouldn't it be helpful to know which of the results qualified by a large margin and which just barely passed, or which don't even belong?  Rarely, if ever, is this information provided in screened output.  Finally, most screeners will show you what stocks passed a given screen, but few screeners, if any (other than the Turning Point screener), tell you what screens a given stock passes, which provides a very powerful way of analyzing the market. 

Programmable screeners of many different flavors are available to the trader, and range from being quite rudimentary to fairly sophisticated.  The problem here is that the rudimentary screeners are limited in much the same way as the typical predefined screeners, and the more sophisticated types are often fairly cumbersome to program, can be quite time consuming to get the desired output while excluding the undesired output, and still can be quite limited to in their screening ability.  Output can rarely be qualified or cross-referenced by stocks.  As each screen is run separately, impractical amounts of time may be required to run all the desired screens on a daily basis, much less examine the results.