The stock market is constantly changing. Stocks that were hot yesterday may be completely off the radar today or vice-versa. Therefore, you have to actively manage your stock lists to prevent them from growing stale and having no relevancy.
There is an assumption that keeping and managing a well-put and comprehensive stock watch list is difficult. However, this is not true and by following four simple steps, you will have the ability to create and optimize a watch list that yields maximum benefits.
1. Manage your list of stocks to constantly based on your trading style
How often you actively manage your list of stocks to watch will most likely depend on the type of trader you are. For example, a day trader will constantly manage and screen the stock lists during the entire trading session, while a swing trader can afford to manage their watch list at least for a day when looking for new opportunities. Since the stock market is highly dynamic and always changing, day traders may find that their watch lists are only good for about an hour.
For investors however, they do not have the pressure of managing their watch lists daily. This is because an investor is usually looking for a stock price that will represent good value when buying the stock. This means that an investor is looking to buy a stock at a cheaper or reasonable price relative to its fundamental value.
2. Have at least two separate lists of stocks to watch
It is advisable to have at least two or more watch lists of stocks you want to buy or short. To enhance your chances of success, you should keep them separate. This however does not mean that if one stock is on the buy then it cannot be on the short list.
As a stock trader or investor, it will be more helpful to keep watch of stock index from companies such as S&P 500 and Russell 1000. The main advantage of these index companies is that they give you a list of small and large caps. Thus, you can be able to flip through the charts and see the stocks that are hot in the market. By watching these lists of stock index, then you can add stocks you would like buy or short on your watch list. For an investor, you can watch for stocks you will likely want to avoid. Some find it useful having it all listed in one platform like CMC Markets tool.
3. Managing the number of stocks on your stock watch list
To maintain your sanity, it is advisable to avoid adding every stocks that pleases you. It is tempting to add every stock that tickles your fancy to your list especially if you are new to trading. This is also true for stock traders who have the mentality that if they do not add a certain stock at a certain time, then they may miss the opportunity and regret it later. However, it is important to understand that trading is filled will regrets and regrets are part of trading. Therefore, the earlier you get this into your head, the better and stress free it will be for you.
You should also not have too many stocks on your watch list. This is to make sure the list you have is manageable and you can track and give your full attention the number of stocks on your list. It also ensures you can respond quickly to the market when you have a manageable list of stocks to watch.
4. How to find stocks to add to your watch list?
Going through the thousands of stock charts can be intimidating if you do not know what you are looking for. While there is no one formula for choosing the stocks you want in your list, at least you can weed out the ones you do not want by looking for some parameters such as:
A. Stocks with low volume
B. Stocks trading in the single digits
C. Stocks with an extremely low beta
You can do this using the Worden’s TC2000 software chart, which is easy to learn and enables you to flip through the charts relatively fast. By weeding out stocks you do not need, you can narrow down to a manageable stocks list number.