Picking Stocks for Your Watchlist That Win

picking-stocks-for-your-watchlist-that-win

There are thousands of stocks on the market, not to mention multiple exchanges, sectors and industries. Learning how to find the best trades can be frustrating; and you may be tempted to outsource your homework. Don’t fall into the trap of purchasing pre-made watchlists and spending valuable trading capital on faulty predictions. Picking stocks doesn’t have to be mind-numbing; it can actually be quite fun and rewarding once you get the hang of it.

 

A winning watchlist isn’t created by choosing a random set of stocks from a laundry list of analyst articles. Be your own detective. Research trends, analyze charts and sleuth to find the most profitable setups. Over time, you’ll improve your ability to spot stocks that work best for your trading strategy and more quickly identify opportunities to make consistent gains.

 


What is a watchlist?

A watchlist is a filtered set of stocks you monitor in anticipation of making a trade. While not all stocks on your watchlist will be winners, the idea is to apply a consistent set of criteria to more predictably find the most promising bets on the market.

 

Types of watchlists

Build watchlists across multiple timeframes, including daily, weekly or monthly, depending on how soon and how often you anticipate taking trades. You may have multiple lists — one for potential short sells and another for bullish prospects. Track your favorite stocks in one list; and flag problematic stocks in another.

 

Watchlist size

Your goal is to maximize potential profits; so be choosy about where you invest your time, energy and capital. Narrow your focus by setting a maximum size for your watchlists. Consider watching three to four symbols for immediate trading, 15-25 for mid-term trades, and up to 100

 for long-term bets.

 

How often to build a watchlist

 

How often you go about building your watchlists will depend on your personal preference and style of trading. For example, momentum traders build new watchlists every day to stay current with the most volatile price action moves. Mid-term traders keep quarterly watchlists that coincide with earnings reports. Long-term investors may refresh their lists on earnings, news and as new IPOs emerge. Regardless of frequency, your watchlists should continuously evolve with trends in the stock market.

 

How to get started

All you need to get started with building a watchlist is an open document and the internet. Charting and scanning platforms combine a number of technical indicators to help you navigate the noise and find trending stocks. Finviz is a free and intuitive scanning platform used by traders of every experience level.

 

Technical and fundamental analysis

By applying technical and fundamental analysis, you can increase your probability of getting into trades that grow your account.

 

 Technical indicators are pattern-based analytics most often used by momentum traders to predict future price moves based on historical performance. Fundamental analysis is used among position traders to assess the overall health of a stock in relation to the market.

 

Price, volume and float indicators are commonly used by traders to scout their next moves. Earnings reports, financial statements and market analysis offer additional insights. Depending on your trading style, the way you prioritize these criteria when compiling your watchlists will vary.

 

 Let’s start building

picking-stocks-that-win Now that you’re familiar with technical and fundamental analysis, let’s explore some of these indicators and how to use them to build your winning watchlist.

 

Price and price action tells you the spread of a stock’s price, including opening and closing prices, highs and lows, and everything in between. Understanding a stock’s price and historical moves can help you set targets and calculate your risk-to-reward ratios.

 

Apply to your watchlist

Filter stock prices based on your account size and how much you’re able to risk per trade. It can be helpful to choose a price range you’re comfortable with trading, for example, under $10 or over $100. Then, find trending stocks by filtering for unusual price changes, looking for 4% or more price movement off averages.

 

 Volume can tell you a lot about a stock’s popularity by measuring the number of shares traded over a period of time. Popular stocks with higher than average volume have the potential to

 

make larger gains over time. Sharp increases in volume can alert you to new trends to the upside or downside.

 

Apply to your watchlist

Look for higher than average volume when building your watchlist (think 4% or more). Also consider setting a minimum volume to ensure you’re watching the most popular stocks. Your target volume will vary depending on your trading style; but we generally scan for stocks with 500,000 average volume or more. Do your own research to find what works for you.

 

 Float provides insight into a stock’s volatility by revealing how many shares of a particular stock are being actively traded on the market in comparison to the total number of available shares.

Simply put, float measures supply and demand. The higher the demand in relation to supply, the more volatile a stock’s price action will be, and the more quickly it will fluctuate between highs and lows.

 

Apply to your watchlist

We look for low float stocks with 200 million outstanding shares or less. What you define as a “low float” may vary depending on your trading strategy. If you’re shorting a stock, you may also consider a short float which indicates how many shares of total outstanding shares are shorted at any given time.

 

Catalysts include press releases, earning reports, mergers and acquisitions, IPOs and other news that can change or catapult the trajectory of a stock price. Catalysts will vary based on the sector and industry you’re trading. For example, biotech stocks frequently move based on FDA drug approvals, trial results and go-to-market activities.

 

Apply to your watchlist

When building your watchlists, filter for stocks with recent news and upcoming earnings. Keep in mind, the way a stock responds to news is entirely subject to market interpretation. “Positive” news doesn’t always mean a stock’s price will increase; and vice versa. Never rely on one indicator to choose a stock. Build the strongest case possible by using all your available research.

 

Moving forward

A well-researched watchlist can make a difference in your trading performance. Once you’ve done your scans and gathered sufficient data, get organized by flagging your favorite picks at the top of your watchlist. Get rid of any stocks that are not serving you. Keep updating your watchlists daily, weekly, monthly or as needed; and refine your criteria as you gain more experience. Now, get out there and test your watchlist on the market!

Get out there and crush it!

For real-time insight follow me on Twitter! @Mv3Trader

Comment below with your opinions and questions.

Trading Essentials: The Most Common Software, Platforms and Tools Explained

trading-tools-trading-essentials

There’s an endless list of trading tools and resources at your fingertips, from stock screeners, to charting software, news streams, chat rooms and trading platforms. As a beginner trader, it can be overwhelming to determine what you absolutely need and what is nice-to-have for getting started. Subscription-based software will give you the most features; but depending on your trading style, you may be just fine with free options.

Before spending all of your trading capital on complex contraptions, begin with the basics. If you’re simply investing, all you need is a search engine and a broker — one tool for researching trades, and another to execute them. However, the more detailed your strategy, the more benefit you will find with paid resources.

Once you’ve gotten comfortable with the fundamentals of how to find, analyze, buy and sell stocks, you will have more clarity on what tools you need to supercharge your trading.

Here are the most common trading tools explained.


A brokerage is your door to the stock market, connecting you to various exchanges and
executing transactions on your behalf.

Brokerage

What to look for

The best place to start when looking for a brokerage is your trading or investment strategy. After you’ve defined your trading goals, approach and technique, it’s time to identify a brokerage that aligns with your needs.

Access to charting tools: If you don’t have capital up-front to invest in trading software and platforms, you might consider a broker that offers free charting and analytics tools, like TD Ameritrade’s Thinkorswim. Thinkorswim also offers a free trading simulator so you can practice your trading strategy without risking real money.

A support team: Some brokerages offer investment consultants who analyze your trades and provide recommendations on how to organize your portfolio. If you’re a passive investor looking

to build a balanced portfolio long-term, you may find it helpful to have a brokerage partner who can provide ongoing support and ideas.

Mobile optimization: For the active trader, brokerages now offer mobile and desktop applications to keep you connected on-the-go. If you plan to trade via mobile, be sure to select a platform with minimum lag and maximum responsiveness.

Pay-to-play fees: Thanks to Robinhood, most brokers have removed commission fees for trading stocks. However, if you choose to trade futures or forex, commissions and exchange fees still remain. Depending on the volume of your trades, you can negotiate lower commission fees with your broker. Even with no commissions, you may be required to maintain a minimum account size; deposit an initial amount; or pay margin rates, data and exchange fees.

If you plan to day trade with a small account, consider an offshore broker due to the pattern day trader (PDT) rule that requires you to maintain a minimum $25,000 account size.

Before choosing a broker, do your research. Ask other traders what they use. Find the top five most popular brokerages and compare them. You can also open accounts with multiple brokers and test them out until you find the right fit.

Trading platform

Trading platforms, like brokerages, often allow you to trade the market directly. However, they also offer added bonuses by combining a number of tools, including scanners, watchlists, data and news streams in one platform.

What to look for

User friendliness: Learning how to trade is hard enough without the additional learning curve of a trading platform. Choose a platform that is intuitive, easy to use and offers hands-on customer service. You can always explore more features as you get comfortable with the essentials.

Low-latency and responsiveness: Many trading platforms execute trades through your broker. Manage your risk and minimize slippage by choosing a reliable platform with quick response times.

Notifications and alerts: If you’re managing many trades at once, desktop, email and mobile alerts can help you stay organized. Choose a platform that allows you to customize your charts so you receive alerts when indicators are triggered.

Simplicity: Platforms like Robinhood and Webull are simple to use and allow you to connect information from other sources.

Versatility: Choosing a platform that combines the most commonly used tools in one space can be efficient, convenient and cost effective. Thinkorswim, Interactive Brokers (a broker with their own charting platform), Tastyworks, TradingView, Sierra Chart (futures), and NinjaTrader are just a few all-in-one platforms to consider.

Charting software

Use charting software to analyze stock trends and make informed decisions about when to buy or sell stocks.

What to look for

Compatibility: While web-based platforms are easily accessible and can be used without downloading clunky software to your computer, desktop platforms have more complex software requirements that may be incompatible with some PC or mobile operating systems. Do your research to ensure compatibility between your preferred charting software and trading devices.

Speed and responsiveness: Your trading style will determine the requirements of your charting software. Time is of the essence for momentum traders who hold stocks for minutes or hours.

You’ll want a charting platform like TC2000 that enables real-time technical analysis on multiple time frames, with the flexibility of viewing several layouts at once.

News and analytics: A simple charting platform with access to earnings reports and news alerts may be more fitting for position traders who hold stocks for months to years and rely on fundamental analysis to make decisions.

Fundamental and technical analysis: Charting software that offers a combination of both fundamental and technical analysis is essential for swing traders holding stocks for days or months. TradingView is one option that provides technical indicators, along with a stock screener and watchlists. With the right broker, TradingView can also serve as a trading platform.

Stock screener

With thousands of stocks on the market, how do you choose the best trades? Stock screeners (or scanners) allow you to filter stocks for potential winners by setting specific parameters.

What to look for

Simplicity and ease of use: Most stock screeners follow the same simple setup; but not all are created equal. For a free, intuitive stock screener, you might consider Finviz or Yahoo! Finance. Some brokers and trading platforms also offer stock screeners as part of their service.

Complex screening criteria: Depending on your level of technical analysis, you may need access to more expansive screening criteria and indicators that go beyond price action, volume and volatility.

Watch lists: Some stock screeners , like Benzinga Pro, allow you to build personalized stock lists based on your criteria. This can be a helpful way to narrow your focus down to only a few key trades and save your favorite go-to stock picks over time.

Data feed

Data feeds provide real-time quotes and historical market data by the day, minute and tick. Make sure to check with your broker for complete details as access and possible fees vary for each broker.

What to look for

Newswire: Press releases, earnings and announcements can sway the momentum of a stock. Follow news streams to keep a pulse on real-world events that trigger trends in the market.

API integration: Stock news APIs can be integrated into your platform of choice, helping you stay up-to-speed with market news anytime, anywhere.

Additional Fees: Certain instruments, such as Futures, can have additional fees associated with data for charting. Data required to populate your favorite charting software for Futures is not the same as stocks. While some brokerages offer access to this data for free, you may be required to pay for this data via a provider, such as CQG or Rithmic.

Community forums

Chat rooms are a great way to stay in-the-know of trending trades. The more interest a stock generates, the more momentum it will have. Be careful to trust your own gut. Don’t jump into a trade on recommendation. Do your own analysis and research to make informed decisions that match your trading style.

What to look for

Free communities: Social media is a great place to start. Follow your favorite traders on Twitter and Facebook. StockTwits is a free chatroom that offers simple charts, trending stock alerts and real-time news feeds.

Continued education: Trading communities like Real Life Trading and Trappers Anonymous (Wallstreet Trapper) require a fee to join in exchange for online courses, stock reviews and strategy sessions.

Now that you’re familiar with the various tools and resources at your disposal, now it’s time to choose your adventure. Start by determining what you will trade, i.e. stocks, futures or forex. Then, choose the platform you like the most and are most comfortable with. If you’re unsure, request a demo and take it for a test drive. Be sure to pick a broker that supports your platform of choice, and vice versa. Pay attention to commissions and other fees for processing trades, depositing and withdrawing funds. Seek out top-notch customer support and check with other traders for credibility.

Remember; less is more. Don’t try to use all the tools and resources available. Take what you need and leave the rest. Keep it simple.

 

Get out there and crush it!

For real-time insight follow me on Twitter! @Mv3Trader

Comment below with your opinions and questions.

Behind Every Great Trader is a Great Trading Strategy


Trading can be fun and profitable. When done well, it may even change your life. But, before you become totally obsessed with rewriting your own Cinderella story, keep in mind, once the novelty has worn off you will encounter highs and lows. When you’re frustrated or bored, you may be tempted to take short cuts and skip important steps. How you navigate these moments will make the difference in your trading trajectory.

Think of trading as a business. The market doesn’t owe you anything; and you are responsible for your own success. You can grow your account by incredible margins by honoring your trading technique and continuously improving your skill set. Here’s where a solid strategy can focus your trading, accelerate the learning curve, and keep you making money reliably.

What is a trading strategy?

A trading strategy is your personal guide for how you’re making decisions on when to buy and sell in the market. It provides clarity on why you’re trading, your goals and rules of engagement.

Do you prefer to trade in the morning, mid-day or late afternoon? The time of day you trade will impact the types of trades you take and indicators you’ll use.

Will you swing trade or day trade? Holding stocks overnight greatly increases your overall risk. You need a plan for getting in and getting out.

Are you a pre-market or after-hours trader? Will you go long, short or both? Brokers have various rules and regulations that dictate when, how and how often you trade.

Will you trade cryptocurrencies, forex, futures or penny stocks? Each stock exchange varies in lliquidity, volatility, cost and risk.

The most important component of a trading strategy is your risk management plan. By clearly defining how you will manage your trades, you can easily spot points of weakness in your routine and make adjustments along the way to improve your risk-reward ratio.

Why a trading strategy?

Trades in high-volatility stocks require quick thinking on-the-go. You can lose money within minutes by getting stuck in a loop of analysis paralysis. A trading strategy can supercharge your execution by doing the hard work up-front. Maximize your risk and minimize losses by creating a consistent approach that reduces the amount of time it takes to get in and out of trades.

At some point along your journey, you may hit a plateau in your growth. By benchmarking your goals and keeping track of your progress, you’ll have a historical record of what is working well and where you can improve.

Having a clear formula for your trading also boosts your confidence so you can rely on your own gut instincts without following the crowd or falling victim to bad trading habits.

What goes into a trading strategy?

Consider these components when building your trading strategy:

Set your intentions: Take a moment to reflect on why you’re trading. Think about what attracts you to the stock market and what personal qualities make you a good candidate for success as a trader. Evaluate your lifestyle and how trading blends into your daily routine. Imagine the lifestyle you aspire to achieve and how trading can help you get there.

Objectives: Think about what you want to get out of trading, whether it’s personal development, financial stability, professional growth or sheer enjoyment.

Goals: Benchmark your progress by defining measurable milestones — what you will do and by when. Set short-term (a few months to a year), mid-term (2-5 years) and long-term (5+ years) goals. Your goals should be specific, time-bound, actionable and rewarding.

Begin with your current account size. How much will you grow your account and by what date? It may be helpful to set quarterly targets that coincide with market earnings seasons, in addition to a year-end goal.

Don’t forget to set goals for your learning. Define exactly what you want to learn and how you will get there. How many charts will you study each day? How many books will you read and by when?

Approach: Now that you have clearly defined goals, outline the actions you’ll take to achieve them. For each goal, explain how you will get there. For example, if your goal is to read 12 books by the end-of-year, start by identifying the best trading books to read. Then, purchase one book. You may decide to purchase 12 books right away! There is no right or wrong answer. The point is to be intentional about your goals and specific about how you will achieve them.

Learning: Make a plan for how you will continue to invest in your learning, whether it’s joining a bootcamp, finding a mentor or listening to your favorite podcasts.

Aspects directly related to your PnL

Trading style: Here, you’ll define your unique trading style. There are f our main styles to choose from:

  1. Scalping: quick trading happens within seconds and requires fast decision making.
  2. Day trading: momentum trading takes advantage of uptrends and down trends to make quick profits. You may hold a stock for a few minutes to a few hours.
  3. Swing trading: mid-term trading with positions over days or months. This type of trading requires patience since you’ll be holding over night.
  4. Position trading: long-term investments that move over the course of several years. Think: “Warren Buffet method.” This option foregoes short-term profit for long-term wealth.

You may choose one or more of these trading styles depending on your personality, risk tolerance and financial goals.

Risk management: The most important part of your strategy. Start by determining how much of your account you will risk per trade. It may be helpful to pick a range of stock prices you will target and a set number of shares you’ll execute with each trade. Identify how many trades you’ll take per day, per week, per month and per year. Then, detail how you will manage getting in and out of trades; your target risk-to-reward ratio; how much you’re willing to lose; and how you will use stop losses to stay accountable.

Trading rules: Create a set of rules or a checklist to guide your trades. Consistency in your trading routine can help you spot weaknesses early on; course correct; and create new, winning habits. Your rules may include: 1) use stop losses on every trade; 2) always buy (x) amount of shares; 3) never purchase shares below (x) price point; and 4) never trade on an empty stomach.

Your rules will be unique to your goals and trading style.

Trading routine: Now that your rules are defined, it’s time to create a routine around how you’ll execute your trades. Organize the day to accommodate your trading cycle. When will you do research and scan for stocks? At what times will you begin and end your trading? How often will you journal and review your trades?

Be disciplined!

Trading community: List the names of people you know who can serve as mentors and study partners. Identify close friends and allies who are supportive and can provide encouragement when you encounter challenges. How will you ask for help? Who will you reach out to for help? Sometimes, you just need one or two people you can safely vent to about your performance.

Evaluation: Detail how you’ll evaluate your trades. Set dates for how often you’ll revisit your goals; and make a plan for how you’ll adjust when you get off track.

Where to go from here?

Choose your medium. Journaling platforms like Tradervue allow you to track, analyze and share your progress with others. Google Docs or Sheets is a free and simple way to outline your trading plan.

The bottom-line

Your trading strategy offers clear guidelines for how you engage with the market. It will be unique to you and evolve over time as you learn and grow. Building a strategy takes time, but it’s an important first step toward winning results.

Get out there and crush it!

For real-time insight follow me on Twitter! @Mv3Trader

Comment below with your opinions and questions.