Chapter 15

Getting Started Screening and Backtesting

You already know the importance of screening and backtesting after reading Chapter 1. And you also know what kind of trader you are or what kind of trader you want to be, especially after seeing all of those great screening strategies and stock picking ideas. There’s something very exciting about each and every one of them.

So now what? The first step is getting started screening for stocks. And it doesn’t have to be complicated.

Screening for Stocks

Screening for stocks is like putting together a shopping list. Think about what you want and write it down. Start with the basics:

  • Price: Do you want cheap stocks under $5? Or do you want higher-priced stocks? Simple question. But whatever the answer, put it into your screen. Why waste time looking at stocks under $5 if you have no intention of buying any of them? Same thing with high priced stocks. If you’re not interested in high priced stocks, exclude those from your screen too. (By the way, if a stock’s price is high, that does not tell you anything about its value, only about the price it costs to buy it. So don’t shy away from high priced stocks because you think they might be overvalued. A stock’s price will not tell you that.)
  • Volume: The stock has to have enough volume to trade it. Even if you’re a smaller investor, you still want enough participation in your stock. But if you’re managing a lot of money, you’ll want to pay extra attention to this. You can plug in a share ...

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