Stock screeners - How Technology Influences Trading

Tech touches every aspect of our daily lives and stock trading is no exception. In fact, stock trading today is an almost totally online experience with research, analysis and trading all using tech to an extent that would have seemed impossible fifteen years ago.

With connectivity around the world better than ever and the majority of people having access to smartphones, tech is at hand like never before.

So how has tech changed trading for the average investor?

Education

The world of trading is a zero-sum game. If one person wins another has to lose and the plain truth is that if a new investor embarks on a quest to earn money on the markets without any training, they are likely to be disappointed.

The way to avoid this is by investing in education. There are a large number of sites out there that will teach a newbie how to trade and give them an insight into what it takes to make it as a trader.

Some charge money and some are free but there’s likely to be something out there for everyone. Tech has enabled access to education like never before, with simple blogs, vlogs, podcasts and programmes all helping the new investor to understand the markets and develop their own strategy before they go and play with the big boys. 

Target Spotting

Imagine an average investor sitting at home wondering where to start.

If they just look at the NYSE, then they can expect to have to sift through almost 3,000 company stocks. If they want to add in other exchanges like the NASDAQ, then spotting a suitable target in a sea of stocks becomes impossible.

Stock screeners help sort the wheat from the chaff and remove the distraction of stocks that don’t fit into a particular strategy. 

Using integrated data, the screener will apply a predetermined filter that will separate out unsuitable stocks and highlight those that are particularly attractive.

Good versions will allow additional analysis and research tools to be brought to bear, giving the user a rounded view of a stock and its profit potential.

Research

There are any number of sites you may want to consult if you are looking at buying a stock but the problem is that the information is typically distributed across the entire web.

Simple tools like Google Alert can help highlight information about particular companies but to take it to the next level, specialist research tools are available that give traders access to data to increase their chances of making profitable trades.

Analysis

Collecting data is only half the battle. Once the trader has amassed information, they need to make use of it.

With so many data sources it could be an impossible task but tech again comes to the rescue. 

Some traders have made a career of trading stocks based purely on the analysis of charts and volume information rather than any particularly deep understanding of the company concerned.

Again, charts, volume data and technical analysis tools can be integrated with stock screeners that improve speed and capability.

Trading

Back in the day, a trader would need to be physically on the market to be making day trades and for the medium-term investors, a phone call to a broker was the order of the day.

Now anyone can open a broker account online and trade wherever they are in the world with just a smartphone. This has meant that there is a much lower barrier to entry for the ordinary investor and that commission charges have dropped significantly making day trading an option for the man on the streets.

Emotional bias

One of the biggest problems new traders face is an inability to separate emotion from fact.

The problem is that buyers will not only buy stocks that fall outside their strategy for the most spurious of reasons (maybe they like the name or they shop there), they will even alter their strategy so that a particular stock fits into it.

Having an app such as a stock screener that only shows stocks that fit the strategy and clearly highlights when there is some behavioural bias going on means that investors are less likely to make rash decisions. 

Speed

For day traders in particular, speed is vital.

 Getting information quickly and being able to buy ahead of the market massively increases the profitability of their trades and this is where tech has arguably made the biggest difference to trading.

At one time, the private trader could never hope to be as well-informed as the institutional buyer but the availability of information as well as being able to execute a trade instantly with a connected broker means they are in a much better position.

Which leads us to...

The level playing field

This is perhaps the biggest change that tech has made to the trading landscape.

For hundreds of years, institutional traders have had an inbuilt advantage when compared to the private trader. 

Now, the playing field has been leveled and tech has put the private trader and investor in a much better situation.

Tech has altered the trading world forever

There’s no doubting that tech has been a force for good in the world of stock trading. 

The greater availability of information and the processing capability has meant that the average investor has way more opportunities than his professional counterpart of 20 years ago.

Online training stops newbie traders getting scalped on their first day and stock screeners help people find, analyse and buy stocks quicker and more efficiently than ever before.

It’s exciting to see tech change the world for the better and it will be interesting to see what new innovations come along in the next few years.