Filter

A set or sets of conditions that help an investor or trader to find a stock he wants to trade.

Since there are tens of thousands of stocks trading, it is impossible for the individual investor/trader to cover them all by himself. An investor or trader may have certain ideas about what makes a stock a good buy and can use a filter to narrow down his choices. For example, some people believe that when a stock’s 50 day moving average crosses over its 200 day moving average, that may signal the stock is in an uptrend. They would enter the conditions into some program, and then screen for the stocks that fit the criteria for further scrutiny.

Filters are useful tools to narrow down the universe of stocks to a manageable number, however the fundamental soundness of a filter is important as well, as “garbage in” leads to “garbage out”.