Your watchlist is a necessary tool to monitor prospective or current investments and plan your next move in the market.
One of the most important things you can do is be prepared, and having a list of viable stocks ready to go in any type of market gives you a leg up on the competition.
Most trading platforms give you the ability to create a watchlist to monitor the criteria you’re looking for – find out how to use it to the best of its ability.
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Now it’s time to build the watchlist.
Before you start – know the difference between a portfolio and a watchlist. The main difference is that portfolios only list the stocks that you own.
Watchlists, on the other hand, display securities that you own, along with ones that you’ve selected even if you have no investment in them.
So watchlists will give you insight into which stocks you may eventually want to add to your portfolio.
1. Keep It Simple and Keep It Fresh
Create separate watchlists based on current factors, and use your previous watchlists as a reminder of the research you’ve done, in order to fine tune your trading in the future.
Go through your list often – plan a personal schedule of how often you’re going to comb over your list and see if the stock still matches your criteria.
If they no longer meet what you’re looking for, delete the stock, so you can have a list of stocks that are all close to buy points.
This way, you can keep yourself from being completely overwhelmed by an enormous list of stocks.
You may want to consider capping your list off at a number that’s comfortable for you to manage, so you don’t have a huge volume of stocks to watch, which can cut focus.
Typically, 12-16 is a safe number to aim for.
Download this cheat sheet for 5 tips to efficiently building a daily watchlist.
2. Start Off Big, Then Go Small
Be a deductive reasoner. Start with broader sets of criteria for your issues, and later as you watch trends, you’ll be able to narrow down stocks according to what you’re looking for.
And it’s important to know what you’re looking for. You’ll slowly weed out what stocks aren’t working for you and then have a clean, effective database to work from.
The stock market constantly reinvents itself, so you’ll also have to constantly reinvent your list.
As with all stocks, your success depends on what type of securities you’re trading and the strategies you’re following – try to have as a specific focus as you can from the get go, but when you’re getting started, narrowing down is necessary.
3. Play Favorites
These are likely going to be issues that are held in a high volume by others. Think of these as the bar.
They’ll set the stage for you to watch the downtrends and uptrends, so you can compare them to the stocks that you’re considering buying.
Over time as you learn, you’ll be able to ditch these bigger companies and have your own favorite stocks to watch – often, these are underdog companies with room to grow.
4. Find What You Want
Scan the market and know the specific criteria you’re seeking. There’s countless factors to consider here, and your preferences may fluctuate with time.
Filter by one criteria at a time; you can make multiple lists for different factors.
Common rules of scanning include:
- Analyzing patterns that could indicate higher or lower trend changes
- Signals that measure any potential unusual trends, such as relatively low change in price with a high increase in average daily volume
- Daily percentage change, especially if the issues have higher than average daily volume Stocks that have hit 52-week highs or 52-week lows
5. Stay In The Know
Orchestrating an efficient watchlist requires knowledge of the stock market environment, which comes at a learning curve. Once that understanding is reached, the rewards are worth the work that it takes.
Familiarize yourself with how the changing levels of capitalization directly affect the way that catalysts react to different sectors.
Economic cycles take time to analyze, but factor into building a comprehensive understanding of the potential issues you want to build into your watchlist.
Over time, you’ll cultivate your own investing style and get comfortable assessing the trends of the stocks on your list.
Settle into a strategy, get up on the trends, and watch your stocks turn you a profit.
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