How to Pick a Stock Watch List for Trading
Many investors like to watch stocks in their portfolio, or stocks they are considering buying. By understanding how a stock trades in terms of volatility, trading range and other behaviors, the investor can get a sense of when he might want to buy or sell that security. In order to watch these stocks, you want to set up an effective watch list.
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Instructions
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Determine the types of stocks that you would like to watch. When it comes to creating this list, there are many ways of doing it. For instance, you can create a list based on stocks in one sector. A sector would be something like technology, health care, defense or consumer goods. Or perhaps you could create a list of stocks that are "undervalued." This would mean that the price-to-earnings ratio (written as P/E) is lower than that of its competitors. (The P/E is calculated by the current price of the stock, divided by the amount of earnings for that company.) Whatever you choose, you want to create a consistent thread for your stock watch list.
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Select the companies based on your criteria. While each stock watch list program will be slightly different, they will all have similar features. For example, the watch list will allow you to add companies together on one screen. When viewing that screen, you will be able to see the stock ticker symbol, price of the stock, volume of the stock being traded and if the stock is up or down for the day. More advanced stock screeners will also provide charts and graphs that detail the movement of the stock.
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Use the stock screener to make trades. As you follow the information over time, let the stock watch list that you created inform your investment decisions. For instance, if you notice that a stock always has a pullback toward the end of the week, you might want to wait to purchase the stock on the dip. Conversely, if you own that same stock, you would want to sell before that dip occurred if you happened to be a short-term investor.
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Create multiple lists. When you are creating stock watch lists, you want to compare "apples to apples." So if you are watching several stocks in the health care sector, for instance, but are curious about defense, create a second watch list that is focused solely on defense stocks. This will allow you to compartmentalize the different sectors of the market to enhance your trading skills.
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Tips & Warnings
Many stock watch lists will also let you set alerts for various stocks. An alert will send you a message via text or email when a stock crosses a certain price point that you have determined. This will allow you to buy or sell when that moment arrives.
References
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