How to Build a Watchlist
TG Watkins’ take on how to make a watchlist for day trading
I start building my daily stock watchlist by eliminating possible stocks that I don’t want to trade. For example, I am not going to be trading biotech stocks, because these are just not my preference, or utilities because this is usually not a sector with a lot of movement.
2. Look for the best-performing sectors
Another step I take to add stocks to my watchlist is by finding sectors that are popular at a time. Any time there are some sectors that are high and some that fall out of favor, I want to find the strongest sector and then start grinding the best and strongest stocks within those. I use relative strength as an indicator, look at the volume, and I do listen to the news, too. However, importantly, I learned that once I have picked these strong trending stocks within strong sectors I don’t trade them straight away – I add them to my watchlist and build an understanding of them; try to see patterns in how they move, to then pinpoint when to enter a trade.
3. Stock scanning
Once I have figured out which sectors and industries I am interested in and start adding stocks to your watchlist, I like to make sure that these stocks trade smoothly. That means I don’t focus on most volatile stocks, mostly because I trade using moving averages, and so I need a stock that respects them in order to be able to predict where they are going. That boils down to keeping in mind your trading strategies while scanning for stocks.
4. Find stocks with high volume
My approach is that I don’t trade stocks that no one else does – I want to make sure that a lot of people know about the stock and have it on their radar.
5. Look at historical stock charts
Another thing that I consider is how a stock behaved in the past.
- Is this a stock that just goes up and down, almost like in a pattern?
- Has it been moving in a repeated way for months or years?
- Is there any growth potential for the stock?
The whole point of trading stock is that you want to buy it and have it actually go up. If I find a stock that has been in a sideways trend for some time, I can assume that it is probably going to keep doing that. Hence, I make sure that a stock I’d add to my watchlist is an uptrending stock.
6. Stick to your technical analysis
When I consider adding stock to my watchlist, I remember to stick to my rules, watch what my indicators are telling me, and stay in sync with the market.
7. How to avoid a trading FOMO
Even though I mentioned I do try to find hot trending stocks and follow the news, it has to all fit my trading strategy. Once I have understood the stocks I’ve added to my watchlist, I stick to them. That way I don’t fall into the trap of always thinking what is the next best thing I am going to find, scan, and trade.