When you create a watch list it’s a good idea to check the general market such as the S&P 500 to have an idea where most of the stocks are heading. If the market is bullish it’s best to add stocks to your watch list which are in an uptrend. You can add stocks (for the sake of simplicity I will use only stocks) to your watch list different ways:
· You can use a screener to look for stocks which meet certain criteria. From the result you can pick the ones you really like.
· Sometimes simply seeing a chart is enough to decide if you want that particular stock in your watch list.
· You can also check out some of the popular stocks. Usually they have high liquidity and that is good for your trades.
· You can also simply pick stocks from the strongest sectors (if the market is trending up)
You don’t want to have a very long list. A too long watch list can easily become unmanageable. Don’t put more than 25-30 stocks in your watch list. A shorter watch list can help you to almost memorize the charts for all of your stocks in your watch list. If you have 100 or more stocks in your watch list you can get easily lost.
Once you have your watch list you can closely monitor the stocks with good trading signals. To find the stocks with the best trading signals you either screen your watch list for those criteria or simply look at the charts. You also want to see the bigger picture so if you trade the daily chart always look at the weekly chart as well.
Once you find a couple of stocks with a good trade setup in the near future closely monitor them on a daily basis so you will be ready to hit the buy button.
Even if there is an excellent trade setup don’t take unnecessary risk. Don’t get greedy don’t put too much money into one trade. Enjoy the trading process itself and not only the profit. If you will able enjoy your trades the profit will come too.
Once you have a watch list it doesn’t mean that it will stay the same forever. A good watch list is dynamic, constantly changes. You delete stocks you don’t like for some reason and you add other ones with better characteristics. You just don’t want to change your watch list too often. Another thing is that you don’t want to be emotionally attached to some of stocks in your watch list. Just because that particular stock gave you several good trades it doesn’t mean that it can’t change.