The Best Way to Develop Your Watchlist

One of the most important things you can do to get started as a trader is to create good daily habits — including an unwavering dedication to a stock watchlist.

A stock watchlist is an essential part of your trading routine. Create the daily habit of updating the list. Use the tips in this article. Be part of an elite group of traders with the dedication to achieve financial freedom.

With that in mind, here’s a quick guide to help you develop your stock watchlist.

What is a Watchlist?

A watchlist is a list of stocks you watch to see if they fit a particular trading strategy. 

According to Investopedia, a watchlist is “a list of securities being monitored for potential trading or investing opportunities.”

Importance of Developing a Stock Watchlist

There are far too many stocks to keep track of without a watchlist. Around 4,000 stocks are actively traded on the NYSE and Nasdaq.

The number of stocks traded over the counter is even higher — more like 15,000.

It’s virtually impossible to keep up with that many stocks. I believe in trading with as much information and education as possible. You have to be prepared. Your watchlist can help you identify potential trades that meet your trading criteria.

A watchlist is an essential part of your trading strategy, regardless of which strategy you use. How else will you know what stock play to make — and when — if you don’t have a watchlist?

Tip for newbies: Never trade a stock solely on what you read on a message board or in a promotion. The reason why a majority of traders lose money is because they’re not prepared.

Do your research so you don’t get scammed!

How to Develop a Stock Trading Watchlist

You’re looking for stocks that meet certain criteria: your trading strategy. Know what to look for.

Also, make use of the great tools available.

The tools available today are amazing compared to what I had when I got started two decades ago. Back then I used to hog three computers in the school library to study stock charts and news.   

Now, you can get everything in one place, set screens for your trading strategy and — BOOM! — you’re on your way. I’ll give you some recommendations (top watchlists and trading tools on the market) later in this post.

But first, let’s get you a solid foundation…

4 Things to Look Out For

When you evaluate a stock, both before you add it to your watchlist and after you’ve added it, there are several things to keep in mind. 

1. Company Details

Trading is different from traditional ‘buy and hold’ stock investing. One big difference is when you invest in stocks you’re buying a part of the company. Your investment should reflect your belief in the company’s fundamentals.

Trading is different. But there’s still something to be said for understanding and even using traditional stock analysis.

2. Stock Analysis

The two best known types of stock analysis are technical analysis and fundamental analysis. You can get tons of this kind of information from the television pundits. In fact, you can get TOO MUCH of this kind of information.

What they WON’T give you is an idea of the few truly profitable opportunities for the day. So, while you need to understand traditional stock analysis, let’s keep it simple for now.

Fundamental analysis is when you ‘get to the fundamentals’ of the business. You research how the business works, from top to bottom. Fundamentals include cash flow, balance sheets, income statements and Securities and Exchange Commission (SEC) filings.

While it might seem boring or irrelevant for a penny stock day trader, you might be surprised the role fundamental analysis plays. Especially when it comes to the story behind a stock promotion or pump-and-dump scenario. 

Technical analysis focuses more on historical price movement, the current price trend, and recognizable patterns. 

Want some specific criteria my top students use regularly to help them chase big profits?**

Every single day, you should look for the stocks with the biggest percent gains from the previous day. Then, you should look for stocks with good news or chart breakouts.

Why? In my experience, the best stocks keep going.

Stocks with good news keep going. Stocks with chart breakouts keep going. The biggest percent gainers from yesterday are a good place to start.

But it doesn’t always work that way — sometimes stock news doesn’t have legs. In other words, the news doesn’t last past one or two days. So you have to look for stocks with news that lasts three days … or five days … you get the idea.

One type of news to look for is earnings winners. You don’t even have to understand complex financial statements when it comes to earnings. A stock spike from good earnings news has been one of the most reliable patterns over the last 10 years.

But be aware, if a stock doesn’t have a meaningful spike then the ‘good news’ was likely priced in already. In that case, it’s NOT an earnings winner for your purposes.

Another thing to look for is contract winners. If a small company signs a deal with a big company, they do a press release. If it’s legit, this often leads to a spike in the stock price.

You should look at trading volume. If there’s not enough trading volume I tend to stay away from trading a stock. But trading volume can pick up with a catalyst like a new contract or a positive earnings report.

One other important note: If a stock falls — say, 50% — in one day, that stock is usually off my watchlist.

Yes, I might just buy the dip if there’s price support and reason to expect a bounce. But in general, unless it looks like it will keep falling and give me a short-selling play, I get it off the list.

For the final two, stick around for tomorrow’s issue along with some tips on how you can use screens to filter data.


— Tim Sykes
Editor, Penny Stock Millionaires

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