Build an effective watch list

The American Stock Exchange lists more than 8,000 questions, but the typical trader or fund manager can only get a small part of them because they have not established an effective watch list. Identifying stocks that fully support a work strategy requires a range of skills, but despite the learning curve, the effort is worth it because it creates a trading advantage that lasts a lifetime.

A well-organized watch list requires understanding our modern market environment, how different capitalization levels affect price development, and how different industries react to catalysts over time. Seasonality, sentiment, and economic cycles all play a role when picking the candidates you want to focus on daily, weekly or monthly.

Key points

  • You can build an effective watch list in three steps. First, collect a small number of leadership or mobility components from each major department. Second, add a scan list of stocks that meet the general technical standards that match your market approach. Third, rescan the list every night.
  • Many brokerage platforms also provide surprisingly detailed scanning functions to help you set up watch lists.
  • The database must be actively managed, using specific rules for adding and subtracting from the list, and size management to ensure that it only becomes as large as your management capabilities.
  • Don’t skip the departments you didn’t trade at the time, because if rotations hit the market and they suddenly become the darlings of Wall Street, you want to get up and running.

Set up watch list

The watch list can be consistent with the time the participants trade and pay attention to the financial market. Part-time staff who hold several positions each week can make things simple, picking a list of 50 to 100 questions every day to track.

Loyal home traders and market professionals at all levels need to spend more time on the watch list task, building a master database containing 300 to 500 stocks and a secondary list suitable for their trading screens.

As a general rule, each trading platform can accommodate 25 to 75 questions, depending on the space occupied by the chart, scanner, news code, and market depth window. It is best to use at least one screen entirely for stock symbols, and each entry only displays two to three fields, including last price, net change, and percentage change. If you are visually oriented, please add a single chart to this page, linking the code to quickly view the price pattern of the trading day.

Build the watch list database

The stocks that get attention on your trading screen every day may come from multiple sources, but a well-maintained database will provide most of these issues, while allowing continuous replenishment when specific securities decline due to technical violations, slow behavior, or a shift in market tone .

Start the database by adding a few market leaders or laggards (if you focus on shorts), from as low as $250 million in each major industry and capital level. These sector lists are widely available on the Internet and in most chart software packages.

Avoid the problem of light trading in this step, because most of them have wide bid-ask spreads that are not conducive to active trading styles. Next, create a list of your favorite stocks, which most likely include stocks commonly held by the trading community, such as Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), and Meta, Inc. (FB) , The previous Facebook. Add this list to the database as a permanent group, and you will observe all types of upward and downward trends.

Therefore, take the time to carefully study all groups, including REITs, utilities, and high-yield tools that traders tend to avoid when looking for opportunities. You can also add foreign stocks that are traded as ADRs (American Depository Receipts), as long as you insist on high liquidity issues and charts that will not be full of holes due to nighttime gaps.

Scan the market

Now is the time to scan the market and look for stocks that meet the specific criteria of your trading style. After adding these questions to the database, you will have a work list that can be rescanned every night for specific patterns and settings, as well as used to weed out questions you no longer want to follow.

Many chart packages can perform this function, but if you want to write detailed code that focuses on narrow output, a standalone program makes sense. The core program should also have the ability to scan for new issues and rescan existing lists.

Worden’s TC2000, Wealth Lab, and Trade Ideas provide heavy-duty database options for paying customers, but you can also use InvestingClue’s portfolio watch list experience to create one for free. Others offer more limited free and cheaper alternatives. These include Stockcharts, FinViz, Google Finance, Marketwatch and Yahoo! Finance, which provide limited watch lists and scanning capabilities.

Avoid being too specific in the initial scan criteria, because visual review after adding candidates is more valuable for finding specific opportunities. The goal is to identify candidates you can follow daily or weekly, and observe your favorite patterns and settings to work. After creating the database, use night scans to focus on narrower criteria, such as stocks at key resistance levels, which may explode in the next meeting. Combine simple techniques and basic standards to add stocks that may attract widespread attention in the coming weeks.

For example, scans that include “price and 50-day EMA” and “X quarter earnings growth” are well combined to find the same stocks that Wall Street analysts are looking at on their desks in Lower Manhattan. Spending hours creating the perfect scan code to find the perfect gem and no losers is a waste of time, because as long as you commit to checking the list every night or every week, your eyes will better fill in the missing parts.

Managing the watch list is a complicated process and requires routine maintenance.

Common ways to scan the market

These technical tools are the key to making trading decisions.

  • The candlestick hammer and doji indicate a single-bar reversal.
  • Securities with high or low relative strength are experiencing a contrarian pullback.
  • The pattern that may indicate a trend change, higher or lower.
  • Alarms that measure abnormal activity, such as 3 to 5 times the average daily trading volume, while the price has little or no change.
  • The percentage change for today, the past five days, or the past 30 days, filtered by greater than average daily transaction volume.
  • Popular breakout and breakdown signals.
  • A weak rebound in a downtrend becomes resistance.

Bottom line

You can build an effective watch list in three steps. First, collect a small number of leadership or mobility components from each major department. Second, add a scan list of stocks that meet the general technical standards that match your market approach. Third, rescan the list every night to find patterns or settings that may generate opportunities in the next meeting, while eliminating technical violations, mergers, secondary releases, or other activities that make you unlikely Issues of concern will be exposed.

The goal is to build a loose but effective list that increases and decreases as you progress, but keeps most of the entries for months at a time, rather than rebuilding from scratch every week.

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