Stock Screening Techniques That Work

Are you looking for a stock picking technique that delivers real results? Are you tired of selecting any old company’s shares based on news of the day or gut feelings? Anyone who has ever played the market in hopes of earning a profit knows how frustrating it can be to wallow through hundreds of potential candidates that all look alike. What’s the answer? First, it’s important to realize that there’s no secret formula for choosing winners. However, there are reliable strategies for culling all the possibilities down to a few that are more promising than all the rest. Here are a few suggestions that have worked for others. Consider combining the techniques or alternating through them to see which ones work best for your style of trading.

Screening by Performance

One of the oldest ways to decide which securities to invest in is based on performance. Most online brokerage firms include free screening tools that let account holders whittle down their options based on key performance indicators like earnings per share, volume, recent highs, and more. Performance metrics are not a holy grail, but they do introduce the idea of objectivity into stock-picking and can help uncover companies that have been consistently doing well in terms of profits and general business performance. They can also help determine which investment carries the least risk as that is a personal preference that varies from person to person.

Opting for Penny Stocks

Trading penny stocks, shares priced below $5, offers investors a fast, effective way to narrow down their choices. Many people prefer buying and selling these low-cost shares for the profit potential. Some of the world’s most successful corporations started out offering low-priced shares. The first step is to review a reputable penny stock trading guide that lists all offerings under the $5 cutoff point. Some investors choose to use a lower dollar figure, but $5 is the most common dividing line. Don’t forget to include both exchange-listed and OTC stocks when shopping for low-priced picks.

Using Moving Averages

Traders who lean toward the statistical side of things often look to moving averages to gain insight for building a portfolio. A moving average is simply a mathematical number that, based on a set number of days, represents a stock’s average price over that period. Comparing the 50-day to the 200-day moving average can shine a light on upcoming moves. Using the method often entails only making buys based on issues whose 50-day moving average has recently crossed above the 200-day line, which in many cases portends an upcoming improvement in pricing.

Copy Trading

If you don’t want to do the measuring and choosing for yourself, tell your broker to sign you up for a copy account. Then, you’ll be able to follow the picks of an expert and not give a thought to what companies represent the best opportunities or bargains. The method is not infallible, but it can be a useful way for newcomers to the markets to learn how to trade and operate their holdings.

Sticking With Dividend Champions

For long-term profitability, some trading enthusiasts stick with dividend aristocrats. Those are companies that have a 25-year or longer history of increasing their annual dividends without ever missing a payment. Fortunately, there are about 20 or 30 such corporations to choose from, which makes the selection process a much easier one.


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