Every investor basically wants the stocks they choose to meet their financial needs.

To find stocks that match the expected criteria, one approach that can be used is to conduct stock screening.

Stock screening is the process of filtering the list of stocks available on the market based on certain criteria that have been determined by the investor.

The goal is to help investors find stocks that match their investment preferences, both in terms of fundamentals, technicals, and other indicators.

What is Stock Screening?

Stock screening, or often referred to as stock screening, is the process of finding companies or issuers that meet certain financial criteria that have been set by investors or traders.

This process is carried out with the help of a tool called a stock screener, which functions to select company stocks based on the desired investment standards and strategies.

In order for the stock screener to work optimally in filtering suitable stocks, the criteria used should be specific.

For example, these criteria can include the industrial sector in which the company operates, the type of stock desired, the ideal P/E ratio limits, and various other specific parameters.

The stock screener will carry out screening based on quantitative factors, such as market capitalization, company revenue, volatility level, net profit margin, and P/E ratio performance.

The results of this process can then be used by investors as an initial step to conduct quantitative analysis of the selected stocks.

Also Read: Dissecting 8 Types of Stocks: Which One is Right for You?

Why is Stock Screening Important?

Stock screening is an important first step in the investment process because it helps investors sift through thousands of stocks in the market and find the ones that best suit their goals and strategies. Here are some of its benefits.

Saves Time

There are thousands of company stocks to choose from on the stock exchange, but finding the ones that fit your criteria can often be time-consuming. The manual stock selection process can be a long and tedious task for investors.

With a special tool like a stock screener, the stock screening process becomes much more efficient. Investors simply enter the desired criteria, and the stock screener will work automatically to filter stocks that meet those criteria.

This will certainly save a lot of time while providing more targeted results.

Reduces Emotional Bias

One of the main advantages of using a stock screener is the ability to avoid emotional bias when selecting stocks.

Emotional bias often influences investment decisions, making investors more likely to act on feelings rather than data.

With the help of a stock screener, the list of stocks generated is completely based on pre-determined objective criteria.

This helps investors make more logical and data-driven decisions, reducing the risk of losses due to irrational emotional decisions.

Improving Investment Decisions

The main purpose of stock screening is to help investors find stocks that fit their strategies and goals. By selecting stocks based on targeted analysis, the opportunity to increase investment returns becomes greater.

Stocks that have gone through the screening process tend to be the best choices according to investor criteria, both for short-term and long-term goals.

Thus, stock screening is an effective strategic step to achieve the desired investment target.

Also Read: Top 10 Fastest-Growing American Technology Companies!

Finding Potential Stocks

Stock screening also provides investors with the opportunity to find potential stocks that were previously undetected. Sometimes, there are undervalued or high-potential stocks that are not on the investor’s radar.

However, with a focused screening process, these stocks can be found because they meet certain criteria.
Finding stocks like this is like finding a hidden gem in the market, opening up promising investment opportunities.

Stock Screening Methods

In choosing stocks for investment, there are various screening methods that can help investors filter stocks that fit their criteria and goals.

Each method has a different approach, ranging from the simplest to the more technical, allowing investors to find stocks with the best potential.

Here are some common stock screening methods that are important for traders and investors to know.

A. Manual

One method often used by novice investors to screen stocks is the manual method. This method is considered simpler and faster than other methods.

In this approach, you only need to determine the stocks you want to study, then observe the price movement graph over a certain period of time.

From this observation, you can see whether the stock price tends to experience positive growth or continues to decline.

B. Fundamental Analysis

In the following analysis, the approach used refers to the company’s financial data to assess its performance and long-term prospects.

This approach includes examining the income statement which provides an overview of the company’s ability to generate profits, as well as the structure of its revenues and costs.

In addition, financial ratios such as P/E (Price-to-Earnings), D/E (Debt-to-Equity), and EPS (Earnings Per Share) are used to evaluate the company’s valuation and overall financial health.

Other aspects that are considered are the company’s revenue and dividend growth, which show the company’s consistency in generating income and providing dividends to shareholders.

Also Read: Dividend Per Share is: A Surefire Investment Strategy

C. Technical Analysis

Technical analysis focuses on price movements and stock trading volumes to predict future price direction.

This approach uses various technical indicators that help investors make decisions based on market data.

Some commonly used indicators include the Moving Average (MA), which shows the average price movement over a certain period.

Then, there is the Relative Strength Index (RSI), which measures the strength or weakness of a stock price based on price fluctuations, and Bollinger Bands, which describe the range of price volatility by taking into account the standard deviation of the average price.

Also Read: What is the Difference Between Fundamental & Technical Analysis? Here’s the Explanation

1. Fundamental and Technical Combination
   It is also important to note that combining fundamental and technical analysis is a strategy that is often used to produce more mature investment decisions. By integrating the two methods, investors can get a more complete picture, combining the strength of the company’s financial data analysis with predictions of market price movements.
   This combination approach is considered capable of providing more optimal results because it not only focuses on financial aspects, but also takes into account market trends and emerging technical signals.

Stock Screening Criteria

In conducting stock screening, investors need to set certain criteria to filter stocks that match their investment goals, including the following:

• Market Capitalization: Stocks are grouped based on company size, such as large (blue-chip), medium, or small, which have different levels of risk and potential returns.
• Financial Ratios: Ratios such as P/E (Price-to-Earnings) and D/E (Debt-to-Equity) are used to assess a company’s valuation and financial structure.
• Revenue Growth: Long-term revenue growth trends are an indicator of a company’s future prospects.
• Dividends: Stocks with stable or high dividends are attractive to investors seeking passive income, reflecting the company’s financial health.
• Technical Indicators: Trading volume and volatility measure the liquidity and risk of a stock, with high volume indicating good market activity.

Also Read: Top 7 American Blue Chip Stocks with the Largest Dividends

Tools for Stock Screening

To make the stock screening process easier, investors can take advantage of various available tools. Here are some of the most recommended ones.

A. International Stock Screeners

Some popular international stock screeners are Yahoo! Finance, Finviz, and Stock Rover. These tools will help investors to easily screen stocks based on various financial and technical criteria.

B. Supporting Applications

In addition to stock screeners, there are also various supporting applications such as Investing.com and TradingView that provide market analysis, interactive charts, and other tools to help investors make more accurate decisions.

Stock Screening Steps

To make it easier to find the right stocks, investors need to follow certain steps in stock screening. Here are the steps that can be followed in conducting stock screening.

 

1. Determine the Criteria

Adjust the screening criteria to the investment goals you want to achieve, whether it is for the long term, focused on dividends, or short-term trading.

2. Use Screening Tools

Choose an application or software that suits your investment needs and preferences to simplify the stock screening process.

3. Analyze Screening Result Data

Compare stocks that pass the selection by considering fundamental and technical aspects to ensure investment potential.

4. Monitor Selected Stocks

Add selected stocks to the watchlist to monitor price movements and further performance before making an investment decision.

Practical Tips for Beginner Investors

To start investing in stocks, here are some practical tips that are important to know, especially for beginner investors:

• Focus on stocks with strong fundamentals so that investments are more stable and low-risk.
• Avoid stocks with extreme volatility if you have a low risk tolerance, because large price fluctuations can be risky.
• Take advantage of free screeners first before investing in paid tools to understand how they work and adjust to your investment needs.

Common Mistakes in Stock Screening

Here are some mistakes that investors often make in the stock screening process, including:

Relying on only one method (fundamental or technical only), even though the combination of these two approaches often provides more optimal results.

Not setting clear criteria before starting screening, which can cause the stock selection process to be unfocused or less efficient.

Ignoring booming stock sectors or industries, even though developing sectors can provide profitable investment opportunities.

Conclusion

Well, that was an interesting discussion about Stock Screening: The Secret to Choosing Potential Stocks that you can read in full at the Crypto Academy at INDODAX Academy.

In conclusion, stock screening is a very useful tool to help investors manage their investments more effectively.

By using the right method and the right tools, investors can filter stocks that suit their goals and risk profiles.

However, it is important to always set clear criteria and not rely on just one method in the screening process, as well as pay attention to developments in the appropriate sector or industry.

As a disclaimer, make sure to always do in-depth research first and consider other factors that can influence investment decisions.

As additional information, INDODAX will soon introduce a new investment option that allows users to invest in stocks from the United States (US).

This latest feature provides the opportunity to expand your investment portfolio, not only with crypto assets, but also with more than 50 US stocks, all accessible through one account integrated into the INDODAX platform.

 

FAQ

1.What is stock screening?

Stock screening is the process of screening stocks based on certain criteria, such as financial ratios, market capitalization, or technical indicators, to help investors select stocks that match their investment goals.

2.Is stock screening suitable for beginners?

Yes, stock screening is very suitable for beginners because it helps narrow down the choice of stocks based on certain criteria, making it easier to make investment decisions.

3.What are the easiest tools to use for stock screening?

Some easy-to-use tools are Yahoo! Finance and MNC StockRadars for investors in Indonesia. Both have simple interfaces with adequate features for stock screening.

4.Is it better to use fundamental or technical analysis for stock screening?

Both are important, depending on your investment goals. Fundamental analysis is suitable for long-term investing, while technical analysis is more effective for short-term trading.

5.What are common mistakes when doing stock screening?

Common mistakes include:

• Not setting clear criteria.
• Ignoring relevant industry sectors.
• Relying on only one method (fundamental or technical).