If you run the liquid gainers scan that we discussed in yesterday’s article, you will probably get 100 or more tickers coming up. Some traders think they are done here. They think that having a big watch list means they will be more likely to find a few big winners from that list since you have more options.
This is the opposite of what happens. A watch list this big will result in you getting overwhelmed. Every successful trader I know has a narrow, focused watchlist of usually just 5-10 names (sometimes less) going into the trading day.
Today we will talk about the most important step in creating a watch list: Narrowing down your watch list to the best opportunities.
Look Through Every Daily Chart On Your Scan
You cannot cut corners with your watch list. You have to go through EVERY chart from your scans. Look at their daily charts, and figure out if there is a play worth watching for the following trading day. On the names that have hot daily charts, pull up their intraday charts and see how they’ve been behaving recently. You have to do this in order to narrow down your watch list to the best opportunities.
Did the stock close strong yesterday? Did the stock close weak? Is the stock uptrending or downtrending? Are they trading above or below the daily chart’s moving averages? Is there a recent news catalyst? Are we near daily resistance or support? What’s the stock’s float?
These type of questions will allow you to rule out a lot of the names on your list. You only want to be watching high-quality setups. The best setups are obvious. If it takes you more than 10 seconds to figure if a stock’s daily chart is hot or not, it’s not a high-quality setup.
These stocks should be some of your go-to setups. It is crucial that you focus on stocks that are in your niche. Half of the battle of becoming a successful trader is knowing what tickers and setups to avoid because you have no edge(will discuss this more on Sunday’s webinar). Narrowing down your watch list to 10 names will give you a lot more focus and direction in your trading day. But your work is not done yet.
Rank Your Watch List
Now that you have your watch list down to 5-10 tickers, you need to rank them. Do this at 9 am, so it is less likely you will have to change up the order due to pre-market price action. If you have limited screen real estate, ranking them will tell you which ones to put up on your screens to focus on.
Knowing what the best opportunities are will give you even more focus. You will be watching these names like a hawk for a setup, and then hammer them if it happens. But don’t force trades if nothing on your watch list gives you a setup. There are some days (like today) where nothing on my watch list sets up, and I don’t make any trades. It is better to be flat on the day than to force trades and be red. Just because a stock is on your watch list does NOT mean you have to trade it.
The more focused you can make your watch list the better. You don’t want to miss an opportunity with your go-to setup. These are your best opportunities to make money, and you don’t want to miss them. A focused watch list = A successful watch list.
Now that you know how to narrow down your watch list, you need to know how to make trading plans so you have a plan actually make money from the names on your list. We will discuss this topic in tomorrow’s post stay tuned.
Free Live Workshop
We are doing a free webinar on Sunday, March 31st to show you step-by-step how to build your own trading watch list before every trading day. You will get see exactly the process I use to make my trading watch list every day, and get actionable advice about how to build a successful watch list yourself.