October 19, 2020

In this video, we are going to dive deeper into how to use a stock screener. You will find answers to the questions below: Why should you even use a stock screener in the first place? When should you use a stock screener? When you should not use a stock screener? Does your investing approach matter when it comes to using a stock screener? What kind of criteria are there? How do you use those criteria effectively? How does technical analysis factor in? How does fundamental analysis? What should you do AFTER you use a stock screener?

90% correct transcript

So welcome back to my channel. And in this video, we're going to walk through how to use a stock screener. Exactly. And we're going to talk about when you should use it, why you should use it, and what are the, some of the comments criteria you should use depending on what kind of investor you are. So with that being said, let's dive into it. So before we start, I just want to celebrate another case study within investing accelerator, where Chris made an unusual profit from the Malaysian stock exchange. So he made 27% within one trading day from UMW. So after he learned the materials within investing accelerator, he applied it to the Malaysian stock has changed. So that's actually quite interesting. I think he's my first Malaysian students that actually bought a Malaysian stock using the materials within investing accelerator. So congratulations Chris for doing a fantastic job.

All right. I look forward to your next profits. So in terms of the giveaway this time, we are doing a free book giveaway for a hundred likes. So if we reach a hundred likes within this video, then we'll give away a free book, which is the second volume of harmonic trading. So this book is really around technical analysis and it is one of my favorites. It's almost like textbooks on technical analysis. So these are more advanced strategies and more advanced patterns that you can study. When I was studying technical analysis, six, seven, eight years ago, it is one of the most useful books that helped me a lot to master technical analysis. So if you want to win this book and get this book for free, that you can like this video, leave a comment below. And once we reach a hundred likes, then I'll select one person within the comments for this book so we can get started.

So before we jump into the exact criteria you should use, let's talk about stock screeners and why you should use it. And when you should use it, because I think there's a lot of hype around stock screeners, but there's actually a lot of work that needs to be done after you screen for a stock. And let me explain. Now, when you're investing, you are competing with a lot of different people. There are mutual funds, there are hedge funds. There are people who are actually focuses and analyzes different industries day in, day out. They get paid hundreds of thousands of dollars each year, just to analyze and focus on specific industries and stocks. So when you are investing, you should always start with the companies. You know, you like an interest, but if you decide to use a stock screener, because you want more ideas, which is usually the reason, then that's what this video and training series is all about.

So usually people use a stock screener because they want more ideas and that is totally fine, but you just gotta be prepared to do the work afterwards. Once you find a potential candidate. Now, when should use use a stock screener, you should use a stock screener at the very, very beginning of your trading journey. Before you have a list before you build up any ideas, and somehow you're looking for new ones, you can use a stock screener could base on a couple of criteria as to find some good starting points. And sometimes you might want to do it on a monthly or a quarterly basis to see if there's any additional stocks to the added, to your watch list. And that's really the purpose of stock screener. And when you're dealing with the whole population or the whole universe of stocks on NASDAQ or New York stock exchange, you really want to use some sort of more restrictive criteria.

So then you only focused on a handful of company he's probably less than 30. So then you don't need to do that much research on it. And that is really important because you have a full time job. You know, you have a family, you want to spend time with the family. So you don't want to be glue in front of the computer all day because that's just wasting your time. So when you're thinking of criteria, you want to be very selective. You want it to be meaningful and you want it to be restrictive. So then you start with a very small population of good quality stocks, and then you go from there. So now let's dive in to the stock screener. So, like I mentioned earlier, I'm going to be using chart mill to do the tutorials for the next couple of videos, because I think it gives me a bit more criteria to choose from.

So then I think that would be more beneficial to you as well. So before you even touch the stock screener, one of the things you need to determine is what kind of investor you want to be, and you need to determine your investing approach before you start playing around with the stock screener, because unless you have some sort of plan or, you know what you're looking for, then you're just going to be wasting a lot of time on your stock screener from my experience after investing or trading 12 years or so, there are usually two main types of longterm investors. And now I'm just excluding day traders here because it can get really complicated with day trading. So there are two main types of longterm investing. One is momentum, which you focus on price increasing very rapidly. And the other one is focused on discount, which means you're trying to buy stock status cheap after a fall and so on.

So then it's safer for you to make money depending on what your investing philosophy is. So for myself, I focus on value investing. I focus on finding stocks that are on a discount. So that's what I like, because I like protecting my downside and I really dislike buying at a top. So if I suddenly got caught off guard or I make a mistake as a momentum investor, then I might be buying at a top, which is what I want to avoid. So let's first start off with general. Now here, the most important criteria that I find is usually market cap. If you have been following me for a while, you will know that I don't invest in penny stocks or small caps, because I think those are quite risky from a financial perspective and also investing. So here are usually what I would recommend you is to focus on mid size, which is it's really the bare minimum to mega and large.

Okay. So here, if you want to select these three together, then you will do what is called, have lease mid. So here I'll go back up at least mid size. So that is the criteria I would recommend you to use. So this will screen out a lot of penny stocks, the ones that are very, very risky. So save you a lot of pain going through it, and this will actually reduce the population by lots. So if I go back up here, I click all, you will see that stares like 19,000 stocks. And just by doing at least mid cap, this will already help you get down to around 3000 stocks immediately. So that's actually quite good. Now, the next criteria I want to go through with you. It's really technical analysis. And let me just take a look at my notes here.

So I want to go to, weekly EMA SMA. This is really a tricky one because it depends on what kind of investor you want to be. Now, if you are a discount focus investor like myself, then you want to find a stock that is kind of below a certain EMA. Now, if you actually go to the comments section and you join a free chart course, then you'll realize that I use a hundred weekly EMA as a criteria, but of course, for chartmill a hundred weekly, EMA is actually not available. So the closest thing that I can find to 100 weekly EMA is this one is 30 weekly SMA. So that is simple moving average. That's actually what it means, which is fairly close. I mean, ideally it should be 50, but I'm not to fuss about it. And what you want to choose is actually above the price.

So the EMA, which is the average is above the price. That means price right now is below this weekly average. So this is an indication or a potential indication, all the discounts. So that's what I would look for. If I'm using a stock screener, obviously I already have my watch list built out. So I don't really need to use a stock screener. So, but this is what I would do if I need to use one. So if I do that, then this will already bring me down to 616, the one stocks. So see, I'm really cutting down the population here later on. I'm going to talk about if you want to have your stocks or your, your criteria is too restrictive, then perhaps you can actually expand out a little bit and get more stocks. But before you get to less than 20, I don't think you need to worry too much about it.

Now, of course, I forgot to mention you do want to choose yeah. Our industry. But for now, I'll just leave it as you can be in anywhere. You don't need to focus on the same industry that I focus on, okay. So this is the one you want to choose. If you are a discounts, focus investor. Now, if you are a momentum focus investor, then it can be quite tricky because it depends how you define momentum. So for example, a momentum investor might want to just focus on a daily SMA, but if you are doing that, then I would still recommend you to have some sort of weekly one. But basically if I'm a momentum investor, then what I would choose is the price needs to be above the 200 SMA, which let me just go here. A S a is below price. Let me just find that.

Oh, okay. So I didn't select that correctly. So it's actually here where you get price versus SMA. So you want to use price is above SMA, which you want to choose 200, which is right around here, prices above 200 SMA. And then you probably want to use another criteria, which is priced as above a hundred SMA. And as you go down and you add more of these SMA and how it is above, it shows that the price is continuously above the average, which means that it's going up, which means it has momentum. So they won't even want to do 50. And if once it gets too restrictive, then you can consider removing it. So for example, price is above the 20 SMA, which is actually the last 20 days. That's pretty short. So now there are 700 stocks. So that's what I would do if I'm a momentum investor, which I'm the opposite of.

Okay. So for now, I'm just going to stick with my SMA weekly 30 and below. So price is below the 30 SMA here. Okay. So SMA 30 is about price. That's what I'm looking for. Now, the next tab, you can really choose this fundamental analysis. And when I'm investing in stocks, one of the criteria I like to use is really the revenue criteria. And here you'll find that revenue growth. Now I'm not too concerned about the exact revenue amount, but the growth of the revenue is important to me here. I have 661 stocks at the moment. I can actually increase this to be at least 0%. So that means there's at least revenue growth for the last five years, because I do kind of want a company that is growing. And if I want to be more ambitious, because this is five years, right? So you got to take this 0% and divide by five.

Let me just zoom in, see if I can assume it for you. So I want to maybe have at least 10% growth in five years. So if you take 10% divided by five, that's really 2%. So it's not a lot. When you think about, you know, a company that is dominating the markets or whatnot. So here I'm getting 128 results. So that is pretty good. So I can actually make this a little bit more aggressive we're gonna apply other criteria as well. But in this case, let's just for fun. Make it 15 or even 20%, 25%, 30% across five years is growing around 6% a year, which I think is fairly reasonable. And right now the price is below. Okay. So that's fantastic. So now you can see there's a shortlist of stocks that you can work with and you always want to start off with something that is much smaller and much more restrictive.

And if you can't find an opportunity there, then you can expand. So this is really pretty much how you would use a stock screener when you're using chart mill, or when you're using Finviz. You can actually see this link here. And this link is actually changing. The more criteria you are selecting. So this is actually quite useful because you can just bookmark this link and the next time it could come back and all the criteria will already be set for you. So you don't need to redo the whole thing again. So that's actually quite good. Now once you find a short list, then what I would do is I would actually go through the chart individually and figure out whether, and meets my criteria in the comment section below, I actually included a link to my free chart course. So if you haven't grabbed that yet, then you can actually go in, click the link and join.

But what I would do is I'll actually go to a trading view.com, which is my charts. And here you actually see my charts and in the free chart course, I explained how you read each of the lines so on and so forth. And for example, let's say I'm interested and PTCT, okay. I don't know actually know what this is, but I'm just picking one out so that I can demonstrate it to you, then charts PTCT and then I'll look at it and I'll analyze it based on my technical analysis. So I don't rely on the technical analysis here. You see the rating. It actually doesn't really matter to me. What matters is that I'm looking for a specific stock, which is a great company that is on a discount that I think will have a very high likelihood of winning.

One of the downside of using the stock screener is that after you do the technical analysis here and you think it's okay, then what? So once you do technical analysis and you figure out that it is okay, then you need to do fundamental analysis, which is still okay. It's still part of our regular process, but there actually are a couple of additional steps. Abs you need to do in order to be comfortable with the stock that you're picking, you need to understand the business strategy of the company. You need to understand what management has been doing. You need to understand why that company is succeeding within the market. So you need to do more research compared to stock that you already know you already like, and you already trust because for example, I just pulled up PTCT but I have no idea what this company does.

What's their background, how many products they have? When are they launching new products? Are they even making money so on and so forth? So you do need to do that additional layer of work, which is why I usually don't recommend people to use a stock screener because it's kind of time consuming. But if you've got time on your hands and you really want to use one by all means, go ahead. And finally, you do need to analyze the news and operations as well. And if that company is like a retail or whatnot, then probably you want to kind of just try out their products to get a feel of what they're selling. So that's pretty much what you need to do after you figure out stock that you want to dig deeper into. My name is Eric seto. I'm a CPA and I've been investing for 10 years.

And this is really the video training series that I released for free to teach you how to use a stock screener. I was going to put it within the program, Investing Accelerator, but then I decided it is more beneficial for me to release it for free. So then you can enjoy it and become a better investor. And my goal is really to help people without a financial background, to target 30% a year from the markets using an hour a week or so through a coaching program called Investing Accelerator. So if you want to learn more, I actually prepared a free case study in the first link below or to comment section. So you can click on that and you can register for the free webinar, how to get 30% from the market in 12 months. So just type in your name and your email, and you can watch that immediately.

And if you want to grab the free chart course, like the chart I'm using right here, and you want to understand how to use them, how to read those indicators. Then by all means it's also in the comments and the description below. So you can click on that and you can grab it for free. And in terms of this video's giveaway, if we, if we reach a hundred likes for this video, then I'll be giving away harmonic trading too, which is a very beloved technical analysis book with a lot of different patterns within it. So I think it will definitely help in terms of becoming a better technical analysis investor. So if you want to get that book for free, then make sure to like this video, click subscribe, and I'll see you in next video for the next video, we're going to dive more into the criteria and I'm going to talk about the five tips to use a stock screener, to find profitable stocks. So make sure you watch that one. I'll see you in the next video.


About the author 

Eric Seto

Eric Seto is an investor with over 10 years of experience. He travelled around the world to help with auditing, accounting, purchase and sale of companies.

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