A common question posed by many new and experienced traders and investors is, ‘What stocks should I trade?’ There is never a quick and easy answer because the answer will be dependent on what your goals and risk tolerance are. Traders should start to answer this question by creating a watch list.

 

Why Have a Stock Watch List?

Traders should have a stock watch list simply to make trading and investing much easier.  There are over 5000 stocks available to invest or trade in making it impossible for a person to try and scan through manually in order to find opportunities. Instead, narrowing the focus to a smaller group of stocks makes the task more manageable. A stock watch list allows traders to focus their attention on stocks they are particularly interested in.

There are two types of watch lists that a trader should create, a general watch list and an active watch list. The general stock watch list is used to identify what stocks are in their financial universe. This general watch list should contain all the stocks that they would consider investing or trading in. If the company isn’t on a trader’s general stock watch list, it doesn’t exist in their financial world.

The second list is the active stock watch list. These stocks are exhibiting conditions and patterns that would lead a trader to soon enter a position on them. Stocks move from the general watch list to the active watch list when the stock price is nearing an entry level or a good opportunity is identified on that stock. The active stock watch list contains stocks that are about to be traded.

Most trading platforms have a stock watch list function so traders can create their own watch list and even customize the columns for the characteristics they are looking for in a stock. If a stock watch list feature is not available on brokerage’s platform, there are plenty of free ones.

Chart

 

Criteria for a Good Stock Watch List

Not all stocks are the same. They all have different characteristics which lead to them trading in different manners. A stock with low volume could have gaps that form on the chart intraday, not just overnight. This adds unnecessary risk for someone buying or shorting the stock.

Other stocks may be too expensive or too cheap. Expensive stocks are difficult to profit from because traders cannot buy as many shares. Small position size means small profits. Cheap stocks can also offer problems. While it is possible to afford to buy a large number of penny stocks, everyone else can afford them too. Large purchases can lead to large, unpredictable price swings.

This is where the general stock watch list comes into play. Traders can scan the entire universe of tradable stocks to narrow down their watch list to those that have enough liquidity, volume, and a decent price level.  Those stocks are then added to the general watch list and should be the only stocks they focus on.

 

How to Scan for Stocks to Trade

Once again, this feature is usually available on brokerage trading platforms. Though every platform is slightly different, the layout is similar.

If a scanner is not available, Finviz, Yahoo Finance as well as other sites offer free stock scanners. Traders will have to determine what specific criteria they want to search for and input that information. In the Core Strategy course at Online Trading Academy, we teach our students minimum liquidity (average volume) levels to look for and also the price range (minimums and maximums) that are recommended. We encourage students to disregard penny stocks (those priced under five dollars) and those that would require a large account to buy any meaningful number of shares. The goal is to be safe while having the opportunity to realize positive results.

 

Conclusion

Trading and investing can seem difficult and cumbersome but if done correctly, it really isn’t.  Narrow your stock universe by scanning and creating a stock watch list. Simplification of the process is a key element to trading and investing consistency.

Read the original article here - Creating a Personalized Stock Watch Lists

This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms

Education feed

Editors’ Picks

EUR/USD trims Williams-related gains, nears 1.1200 figure

The shared currency retreated sharply vs. its American rival after testing the 1.1280 price zone, as Fed’s representative rushed to counter Williams’ dovish words. EUR/USD at daily lows ahead of Michigan Consumer Confidence Index.

EUR/USD News

GBP/USD trading marginally lower daily basis but above 1.2500

The Pound gave back some of its Thursday’s gain on dollar’s relief. The GBP/USD pair broke a daily descendant trend line coming from June’s high and holds above it, leaving little room for sellers to act.

GBP/USD News

USD/JPY: bears pausing, still in control

Japanese National Inflation steady at 0.7%YoY in June. US Michigan Consumer Sentiment Index expected at 98.5 in July. USD/JPY corrective advance falling short of signaling an interim bottom in place.

USD/JPY News

Editors’ Picks

EUR/USD trims Williams-related gains, nears 1.1200 figure

The shared currency retreated sharply vs. its American rival after testing the 1.1280 price zone, as Fed’s representative rushed to counter Williams’ dovish words. EUR/USD at daily lows ahead of Michigan Consumer Confidence Index.

EUR/USD News

GBP/USD trading marginally lower daily basis but above 1.2500

The Pound gave back some of its Thursday’s gain on dollar’s relief. The GBP/USD pair broke a daily descendant trend line coming from June’s high and holds above it, leaving little room for sellers to act.

GBP/USD News

USD/JPY: bears pausing, still in control

Japanese National Inflation steady at 0.7%YoY in June. US Michigan Consumer Sentiment Index expected at 98.5 in July. USD/JPY corrective advance falling short of signaling an interim bottom in place.

USD/JPY News

Michigan Consumer Sentiment survey preview: The pool of happiness spreads

The University of Michigan will issue its preliminary Survey of Consumers for July on Friday July 18th at 12:30 pm GMT. Consumer sentiment expected to gain modestly in July. Optimism should be supported by strong June jobs report.

Read more

Gold consolidates around $ 1440, eyes US data for fresh direction

Gold (futures on Comex) extends its side-trend around the 1440 mark into the mid-European session, having stalled its retreat from 2019 highs of 1454 near 1437 region.

Gold News

RECOMMENDED LESSONS

7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

Strategy

Money Management

Psychology