Internet Trading - How to use stock screeners effectively - Motilal Oswal

Internet Trading: How to use stock screeners effectively

Internet trading has grown by leaps and bounds in the last few years. With internet trading becoming increasingly interactive, the stock and sectoral screeners is increasingly becoming an important tool for investors to take investment decisions. Brokers like Motilal Oswal offer a variety of elegant and incisive screeners for investors to take informed decisions in the market based on solid data and solid research. Here is a sample of a few screeners that can add tremendous value for you as an internet trader..

Advanced Charting Tools..
For any stock trader, technical charts form the core of their trading decisions. Technical charts are based on the intelligence of past data by identifying subtle underlying trends and extrapolating such trends into the future. Some popular technical charts like Bollinger bands, Moving averages, MACD, Exponential Moving Averages and Stochastic are heavily used by traders to decide on the timing and level of entry and exit into stocks. Even investors who are taking a fundamental approach to buying stocks can use these advanced charting tools to identify the optimal levels of entry and exit for that extra ounce of alpha.

Tick-by-tick action watch screens..
Tick by tick data is extremely useful for identifying stocks that are actually available at lower than the spot rate. For intraday traders and short term traders, the tick-by-tick data adds a lot of value since the compressed periodicity ensures that the trader is able to catch and trade more subtle variations and turnaround in the market. More importantly, the TBT data acts as a very powerful lead indicator for the likely movement of actual stock price!

Multi-asset watch list screen..
A multi asset watch list covers a cross section of asset classes like equities, derivatives, commodities and currencies in a single screen. How is it useful? Remember, there is a very strong inter-relation between select asset classes and stock prices. For example, the price of stocks like Titan and Mannapuram tend to be positively related to the price of gold. Stocks like Hindalco and Tata Steel are related to the price of aluminium and steel on the commodity exchanges. Similarly, stocks like Infosys, Lupin and TCS are impacted by rupee movements. This multi-asset watch screen allows the investor to taken such logical asset class decisions at one go.

Financial screens..
These screens allow the investor to shortlist and select stocks based on some objective criteria like growth, profitability, margins, asset efficiency, P/E ratios, and dividend yield ratio. The advantage of this screen is that it offers you multiple investment options once the basic theme of investment is identified. Since the screener also offers a variety of related financial data at the click of a button, the investors is able to take more holistic picture based on this screener.

Trade signal screen..
This screener is extremely important for short term traders, especially intraday traders. Most short term traders are not very particular about the direction of the stock price but focus on the opportunity as it presents itself. The Trade Signal identifies critical pivot points for the stock price and automatically throws up buy and sell signals for the stocks. This is very useful when you are trading stocks that are having momentum in their favour as it offers a more scientific and empirical proven methods of making profits in the market.

Derivative Chain Screener..
This is a unique screener that is extremely useful for traders in the futures and options space. Every stock has a chain of contracts that are built around the central price. The Derivatives chain screener allows the trader to judge the impact of a price movement on a multiplicity of strikes of puts and calls so that you can trade the short term situations profitably. This also helps you to identify underpriced and overpriced options with reference to their intrinsic value.

Portfolio Health Check..
This is one of the most important screeners for the investors as it gives them a holistic picture of their financial balance sheet. The beauty of a portfolio approach is that it not only looks at stocks in isolation but also at stocks combined as a portfolio. You may have high quality stocks in your portfolio but if all the stocks in the portfolio are highly correlated then it defeats the purpose as it adds to the risk rather than reducing the risk. That is where a portfolio health check helps you to constantly review and rebalance your portfolio.
Screeners form an important component of the online trading experience. Your online broker offers you unfettered access to these screeners so that it enables you as an investor to take more informed and meaningful decisions while trading.

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