How To Build A Watchlist
How can you trade stocks if you can’t find stocks to trade? Of course there are household name stocks that everyone knows, can trade and own. What about the stocks that have that extra edge? The stocks that smart money is trading on Wall Street.
There are thousands of stocks and equity vehicles that you can buy and sell on the open market. You need to ultimately narrow your scope to stocks that fit your criteria, your strategy, your strong suit as a trader. Which is something you will come to discover over the process of developing into a better trader over time.
Types of Watchlists
The first part to building a watchlist, is to know what you’re watching for. This could come down to a variety of options. Common watchlists will generally be made up of stocks that fit a certain criteria.
Common Watch List Criteria:
1. Price Range
2. Market Cap
3. Sector
4. General Interest
5. Outlook
A lot of traders will now use two forms of a watchlist. One of them being the common evergreen watchlist that groups stocks together by the criteria mentioned above. This is a way for traders/investors to continuously monitor their favorite stocks and categories of stocks. The other type of watchlist is a more short term approach to identifying stocks to trade for potentially just the day, or week ahead. These names can be derived from your main watchlists, as stocks that may have more potential for the week ahead.Â
This type of short term watchlist is highly beneficial because it helps put in action a trade plan with analysis and research done before any buying and selling takes place. After screening stocks from your general watchlists, you will identify stocks that you want to further analyze as potential trade candidates based on criteria you find favorable. This could be from technical analysis, fundamental analysis, recent price action, etc.
Before the market opens, take some time to set up critical levels on the charts where you believe there is demand and buyers. You will also want to identify levels where you would stop out of the trade because it broke down, but also where you expect to take profit on the trade. Use key levels of support and resistance, as well as moving averages to help make these decisions.
Here is an example of a watchlist. You can see how it’s based on data, logic, observation, patience, but most importantly you can how this can help get your head in the game when trying to find stocks to trade. As a trader, especially an investor, you will have homework to do. But if you are like most traders, you will find joy in the task.
There is no better way than to cement your foundation on market
Get Familiar With Common Trading Criteria
Stock Price – How many shares can I afford, how volatile is the range of price
Trade Setup – Where are the buy levels, where are the sell levels
Position Sizing – Plan to average into trade using a scaling method
Day of Week – Do I run risk holding over the weekend, Is there any catalysts happening this week
Time of Day – Is this a good time to enter the trade
Length of Hold – Am I holding this forever, or until Friday
Long vs Short – Am I long biased (buyer, want price to go up), or am I short biased (seller, want price to go down)
Catalyst for a Move – Is this a valid catalyst for a position, do I expect this catalyst to move the stock
Sector Volume – Is this stock trading with good volume relative to its peers
No matter what criteria you choose to sort your watchlists by or how you use your watchlist to shape your trading, a watchlist is a key component for any serious trader or investor. Take pride in the stocks you watch. Gain a deeper understanding of why you like these stocks and why you think they have potential. Become informed, because there is nothing worse than an uninformed trader!
Most trading brokers will give you the ability to build a watchlist, as well as many stock services, such as Benzinga, Trading View, or FinvViz.
These are tips on how to think about building a using a watchlist for trading. The more you learn, the more you earn! If you have any questions or comments about the best trading habits and practices, feel free to use the contact form below to get in touch with us.
