Having a stock market watch list is the secret to success when you trade at home for a living. In this lesson you will learn a proven, money making system for using watch lists.
Stock Market Watch List Software
The best free stock market watch list software to use is Finviz. Go here to sign up for a free account if you don’t already have one.
If you have your own brokerage account with Etrade Pro or Scottrade, you don’t need to use Finviz. You can find equivalent stock screens inside your brokerage software; however, many people want to paper trade before opening a brokerage account or they want to try this stock market watch list system without impacting their brokerage account until they know it works. In these cases, using Finviz as your stock market watch list software is perfect.
Building the Master Stock Watch List
Once you sign up for a Finviz account, log in and click on “Screener” in the top left corner. Click on “All” on the Filters tab and set all your screener options like the screenshot below (click on image below to enlarge):
For “Market Cap” we want “Micro+” which are stocks with a market cap of $50 million or higher. Stocks with a lower market cap are the ones that can have explosive moves.
For “Beta” I want to experiment between greater than 0.5, and greater than 1. Sometimes during low market volatility, beta will drop and you’ll get very few stocks showing. Preferably we want a beta of 1 or greater but the higher the better.
For “Price” we want under $10. The reason is that lower priced stocks have a tendency to make greater moves than higher priced stocks.
For “Debt/Equity” we want “Low (
On the next screen you will be prompted if you want to create a portfolio evenly divided with a hypothetical $100K, click Ok. Now on the far right enter the portfolio name as Master Watch list:
Scroll all the way down to the bottom of the screen and click on “Save Changes”:
Now we need to filter out the stocks that are not near key support or that have just formed a candle over candle. Any stock that is up too much or in the middle of its range, I delete because I do not want to chase stocks (click the image below to enlarge).
The next thing I do is filter out sectors that are not doing well or that I know I’m not good at swing trading in. At the time of doing this lesson, the two sectors I want to filter out are “Basic Materials” (gold and silver mining stocks), “Biotechnology” and “Drug Makers”. To do this quickly from my Master Watch List, click on “Portfolio” at the top of Finviz, then select the Master Watch List you created, and then click “open in screener”:
Now my Master Watch List is opened up in the screener which shows me the sector and industry of each stock on my watch list:
I now go through and delete any “Basic Materials” (gold and silver mining stocks), “Biotechnology” and “Drug Makers”. Keep in mind that depending on when you study this lesson, there will be other sectors that are not performing well that you can remove.
You can create a Master Watch List (portfolio) in Yahoo Finance or your online brokerage account. Using our stock watch list software Finviz, click on “Portfolio” and then “create new” (if you do not see the option “Portfolio” at the top of your Finviz screen then you need a paid account on Finviz to create and store portfolios):
Etrade Watch List
You can enter this watch list into Etrade by clicking on Tools, then selecting “Watch List”:
You can then “Link” the Watch List to your charting and news tools so that when you click on any stock in your Watch List, the chart and news will automatically change too:
To link other tools to your Etrade Watch List click on “Link” in the right hand corner of the Watch List tool. The “Symbol Link Groups Manager” tool will pop up with the available “Link Groups” you can set, as well as the available tools you can add to that link group:
Stock Watch List Google
The final filter that we apply to the Master Watch List is the catalyst. This is the most time consuming step in this stock trading system. You will need to spend about 2 hours a day adding or deleting stocks from your Master Watch List.
Using Google Finance, Yahoo Finance, the Wall Street Journal, Forbes, and Seeking Alpha, you need to ask yourself what is the “story” of the company on your Master Watch List. What is the catalyst that is going to cause buyers to come into the stock and power it higher? I did a lesson on determining the catalyst here.
If you can’t find a catalyst for the stock, delete it from your Master Watch List.
Master Watch List Final Thoughts
The Master Watch List is not a buy list. It is a list of stocks that you are stalking. The next step is to create my Daily Watch List from my Master Watch List.
Create Stock Watch List
It is time to create the stock watch list that you will be buying stocks from: the daily stock watch list.
Now we are going to build the Daily Watch List from the Master Watch List. The Daily Watch List are the stocks from the Master Watch List that look like the best entries and trades for the day ahead. Every day, after market close, we will re-build the Daily Watch List from the Master Watch List. The reason we do this is so that we can be logical and not chase. Spontaneously buying a stock because of something you just saw on CNBC or read over Yahoo Finance is usually a bad idea. Think of it like trying to stay within a budget when you do your weekly grocery shopping but darn it, you keep making spontaneous buys from those little corner stands that are at the end of each aisle. You are never going to stay within your weekly grocery shopping budget by doing that. The same is true when buying stocks. The spontaneous purchasing of stocks during the trading day is usually a bad idea unless you are a full-time day trader who scalps breaking news stories.
You can think of stocks on the Master Watch List as both fundamental and technical setups and stocks on the Daily Watch List as purely technical setups. The Daily Watch List is all about your entry and timing the next swing move up out of an oversold chart setup.
Quite often the best stock to buy from your Master Watch List is going to be the stock that is most oversold on the RSI. Therefore when you create your Daily Stock Watch List, you want to take the stocks from your Master Watch List with the best RSI readings.
Using Finviz as our stock watch list software, click on “Portfolio”, select your “Master Watch List”, then click “open in screener”:
Now you are looking at your Master Watch List in the screener. Click on the “Technical” tab to see the RSI for each stock on your Master Watch List:
On the next screen you will now see the RSI for all stocks on your Master Watch List. Click the “RSI” header on the top row of the table to sort the RSI by ascending value:
This means that the most oversold stocks (with the lowest RSI) are going to be at the top of your list.
My Stock Watch List
Now hover your mouse over the ticker symbols on the far left of your screen to see a little pop up chart. You are looking for a stock coming out of oversold, off a major support level with a history of bouncing off that level, with a “candle over candle” reversal. At the time of doing this lesson, the stock MEET looked like a good set up:
IDTI looks like a good setup too:
What also makes these stocks good setups is that they have easily definable stop loss levels. If you want to know more about what a stop order is and how to set them in Etrade Pro, I did a lesson on stop loss orders here. In the case of MEET, the stop loss is here:
The idea is to go for a 5% to 10% pop and then get out quickly. MEET could run back up to $2. That would be a gain of $0.17 per share from its current price of $1.83. If I am wrong about the trade and I get stopped out for a loss, I would lose $0.13 per share. The risk versus reward is that I’m risking $0.13 per share to make $0.17 per share.
In the case of IDTI, the stop loss is here:
IDTI, it could run back up to $10.15. That would be a gain of $0.52 per share from its current price of $9.63. If I am wrong about the trade and my stop is hit, I would lose $0.28 per share. The risk versus reward is that I’m risking $0.28 per share to make $0.52 per share.
If these stop losses, price targets, and risk to reward metrics are good for me, I add the stock to my Daily Watch List.
Repeat the steps above with each stock from your Master Watch List until you finish building your Daily Watch List.
Trading From My Stock Watch List
During trading the next day, my total focus is on trade execution and buying or selling the stocks from my Daily Watch List. I’ll pop over to my Master Watch List occasionally to see if any big news is out that’s making the stock rip higher but as a general rule, I stay disciplined and only buy stocks from my Daily Watch List. This makes me a very disciplined trader that does not buy stocks spontaneously. I patiently stalk the stocks from my Master Watch List and only add them to my Daily Watch List when I think they might be a good setup. For the stocks I am able to time the swings on, I keep them on my Master Watch List. For the stocks that I seem to always be wrong about and I have trouble timing the pops, I remove them from my Master Watch List.
Frequently Asked Questions about Stock Market Watch List Is the Secret To Success
What is a stock watch list?
A stock watch list is part of a disciplined trading system that involves using a stock screener to find stocks to watch so as to time the best possible entry.
Many traders mistakenly think that a stock watch list is simply a list of stocks to buy.
A proper stock watch list system involves having two watch lists: a master watch list, and a daily watch list.
The four stages of how a stock is found and ultimately purchased are:
– Stock screener is used to find stocks that meet a certain criteria.
– Master watch list is used to put stocks on from the stock screener stage above.
– Daily watch list is used for stocks that have been on the master watch list that have now retraced and would make for an excellent entry for the next trading day.
– Trade execution where the stock is actually bought from the daily watch list using an online brokerage account.
What are story stocks?
Story stocks are stocks whose current price is based on its future potential from a powerful, “story” catalyst, rather than its fundamentals.
I did a lesson on how to find story stocks here.
What is a debt to equity ratio?
A debt to equity ratio is the measure of how much a company is financing its growth with debt.
The debt to equity ratio is calculated as follows:
Traders that use the debt/equity ratio in their stock screener understand that cash is king. Traders look for a low debt to equity ratio when going long, or a high debt to equity ratio when short selling.
Small cap companies with a very low debt/equity ratio (less that 0.1), often means they are sitting on a pile of cash with little or no debt. This means that they are able to sustain growth by executing on their current business model. As a result, small cap companies with a low debt to equity ratio are often buyout candidates.
Sainvestinganswers posted the excellent video below called Debt-to-Equity.
Preston Pysh posted the awesome video below called Warren Buffett’s 1st Rule – What is the Current Ratio and the Debt to Equity Ratio.
What is beta in stocks?
Beta in stock trading is the measure of volatility of a stock compared to the market (usually the S&P 500) as a whole.
A beta of 1 means that a stock will move almost perfectly with the S&P 500. A beta of less than 1 means the stock will be less volatile than the S&P 500, both to the upside and to the downside. A beta of greater than 1 means that a stock will be more volatile, both to the upside and to the downside, than the S&P 500.
Day traders and swing traders need volatility and so they usually trade stocks with a volatility of greater than 1 but preferably 2 or greater. Higher volatility implies higher risk, but higher reward. The higher risk is that your entry has to be almost perfect in a fast moving stock that darts around like a hot potato. The higher reward is that if you do time a good entry and the S&P 500 takes a big swing move up, the higher beta stock is going to payout big time.
MoneyWeekVideos posted the fantastic video below called What is Beta?
Zecco posted the great video below called Stock Trading Education – Beta.
Stock Watch List Video Lesson
In the video lesson below, you will see how one of the most popular traders on Wall Street uses watch lists.
A watch list is not just a list of stocks that you like, that you write down on a piece of paper. You know, that piece of paper you find 3 months later pushed into the corner of your desk that’s all dusty that you end up throwing away.
A watch list system used correctly will make you a disciplined trader and it will improve your entry level 10x over.
Think of a trade as a movement from one-side of a funnel to the other. It is a set of stages that you move through before ultimately getting to the buy or sell order.
The first phase is the stock screener. I have done a number of lessons on how to set up your stock screener and what parameters to use. Check out this lesson on using a stock screener here.
The second phase is the master watch list. Stocks move from your screener to your master watch list. Just because a stock is on your master watch list, it doesn’t mean that it’s a buy. Think of your master watch list as your “stalking” list. These are stocks that you are watching only.
The third phase is to build the daily watch list. Everyday after market close, you want to go through the stocks on your master watch list that are oversold, bouncing off a previous support area, and have formed a candle over candle pattern. Take your best looking stocks that meet these criteria and add them to your daily watch list. These are stocks that you are looking to buy the next trading day.
The final phase is to buy or sell a stock from your daily watch list. In summary, stock screener –> master watch list –> daily watch list –> trade.