Monday, December 5, 2011

MetaStock U - Watchlists are a Trader's Quick Stock Pick Resource

MetaStock SPRS Series - Week 45 - TechniTrader® Weekly Discussion for MetaStock Users: CONN "Watchlists are a Trader's Quick Stock Pick Resource" - December 5, 2011
By: Martha Stokes C.M.T.

Often times traders will ask me how to streamline their stock pick selection process. To many times I hear traders say they are spending many hours trying to find stocks to trade for the next day.

Trading shouldn’t consume your life, even if you are retired or doing it full time as a career. Remember that every hour you spend trying to trade or find stocks to trade is costing you money. Your time is money. Consider how much your hourly wage is or was, then think about how much time you spend on trading. Then think about the amount of money you put in your account as profits versus the hours you have spent. Are you really making money? Or are you doing this for a hobby?

Your profits should equal the same or better hourly rate as your prior profession. If not, you are doing several things incorrectly. You are making common mistakes that drag retail traders down into the trading bog without them even realizing it.

One thing you must learn to do is to make everything about trading efficient, time constructive, and cost effective. Trading as a career is a business so treat it like a business. If you are trading as a hobby and are not serious about making money, then you don’t need to read any further because I have nothing that can help you.

Let’s talk about WATCHLIST.

A watchlist is a SMALL list of stocks that you watch for an upcoming entry. Watchlists are critical for all trading styles: day trading, swing trading, momentum trading, position trading, and yes even long term investing.

Building a good watchlist requires understanding what you are doing in terms of your trading style. Often times traders are simply meandering about trying to find a stock to trade that will make money rather than being organized, structured, and have a complete process for trading step by step.

The watchlist we are going to discuss today is for very short term trading, either swing or momentum. Often times stocks will show up that are already moving in a run up or a run down and the entry is not ideal. The risk to reward ratio is not sufficient to net good profits.

Most traders get frustrated, irritated, or despondent as they see stocks running while they are not in the run. Instead of getting upset, put the stock on your swing trading watchlist.

Then wait for the retracement and enter at the better entry where the R/R is significantly higher.

By taking a few minutes to put a stock symbol on your watchlist, you are saving time. You now have a stock you know is moving, and you can watch for a better entry which lowers your overall risk.

During momentum and velocity market conditions, watchlists for short term trading are crucial as runs move so quickly you must have your stock picks ready to go before they start the run.

CONN is a good example of a stock that would be something to consider for a Swing style watchlist. It has accumulation going on, is moving in a peaks and valleys trendline pattern, and has plenty of upside run gain potential.

Right now it is overextended with a long wick and is near a bottoming resistance level. But this stock has clearly shown lively action of late. So it is a watchlist candidate.

Chart 1

Trade wisely,

Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
MetaStock Partner

©2011 Decisions Unlimited, Inc.

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