A watchlist is a set of securities that an investor monitors for potential trading or investing opportunities. Many brokerage and financial platforms allow for easy construction and viewing of watchlists. A well-organized watchlist can help identify trading opportunities, track portfolio performance, or monitor popular stocks.
Key Takeaways
- A watchlist is an inventory of ticker symbols that are monitored for potential opportunities or to track their performance.
- Most online brokerages and financial portals allow for easy watchlist construction.
- Some trading platforms may offer curated watchlists, according to criteria that experts believe may be important to the platform’s users.
- Using a stock screener, it is possible to create an automated watchlist focused on a specific metric, such as earnings or long-term performance.
- Watchlists can be proactively managed and monitored, or passively viewed over time.
Understanding Watchlists
A watchlist is basically what it sounds like—a list of stocks that an investor watches with an eye toward taking advantage of prices if they fall enough to create an interesting undervalued situation. These are names that an investor would be prepared to buy and own at the right price or with the right catalyst (a sign that growth has reignited, for instance).
An investor or trader may create a watchlist of several, dozens, or even hundreds of trading instruments to make more informed investment decisions. A watchlist can help an investor track companies and stay abreast of financial or other news that could impact these instruments.
Typically, the investor monitors the list, waiting for certain criteria to be met, such as trading over a certain volume, breaking out of a 52-week range, or moving above its 200-day moving average, before placing trade orders.
Types of Watchlists
Most trading platforms allow users to create their own watchlists for the securities that they are interested in.
Users can also configure their lists to alert them of any new trading signals, such as sudden price changes. A well-organized investor could use this functionality to create separate watchlists for stocks, bonds, mutual funds, or any other tradable assets.
Watchlists are also used in cryptocurrency trading, where sharp price swings can sometimes offer brief opportunities for high profits. In addition to trading metrics, a watchlist for cryptocurrencies might track tokens with an upcoming fork or mainnet launch.
When to Use a Watchlist
An investor, for example, may be interested in purchasing stocks in a particular sector. But if that sector is generally overvalued, it may offer few stocks that are attractively priced.
An investor could create a list of all the stocks in that sector that would track various valuation measures, including ratios like trailing price-to-earnings, price-to-sales, and price-to-book, among others. When a company on the list met a specified valuation criterion, such as a PE ratio less than 15, it can be considered a candidate for investment. Many investment-oriented websites and brokerage platforms allow visitors or customers to create watchlists online, often for free.
If you’re interested in keeping track of any securities, you can build your own watchlist on most brokerage platforms. It’s advisable to avoid tracking too many stocks at once to ensure effective monitoring.
Special Considerations
As a general rule, the watchlists provided by brokerage platforms can accommodate around 25 to 75 names, depending on space taken up by charts, scanners, news tickers, and market depth windows. A longer watchlist of 200 stocks is likely to be too broad for almost any investor to monitor effectively. Investors should refresh and review this list at least a couple of times per month.
It’s a good idea to devote at least one screen entirely to watchlist tickers, with each entry displaying just two or three fields, including last price, net change, and percentage change. Some traders add a single chart to this linking the tickers to allow a quick review of price patterns during the trading day.
Example of a Watchlist
Popular Watchlists: Several financial platforms offer curated watchlists with preset criteria, such as “Most Active Penny Stocks” and “Most Shorted Stocks.” These lists have the added advantage of automatic updates, eliminating the need to manually add or remove stocks that no longer fit the list criteria.
The Bottom Line
Watchlists are a powerful tool for investors to track the market for trading signals and opportunities. There are now many tools for investors to create their own watchlists, or follow curated watchlists by other parties. By narrowing the market down to a list of key securities, traders can focus their attention on monitoring the most promising opportunities.
How Do You Create a Stock Watchlist?
Most online trading platforms offer functionality for users to create their own watchlists, allowing them to easily track any security that catches their interest. To create a watchlist, you should first identify your key investment criteria and decide what kinds of investments you are looking for. Then, using a stock screener or similar tool, search for stocks that fit those criteria and add them to your watchlist.
What Is a Good Stock Watchlist Tool?
In terms of functionality, the most versatile watchlist tools come as part of a paid investment product. Software such as Worden’s TC2000, Wealth Lab, and Trade Ideas each offer extensive databases for subscribers. Free trading platforms, such as Fidelity or Robinhood, also come with the ability to create watchlists and follow stocks, although they may track fewer metrics than paid versions. Many online finance sites, such as Marketwatch and TradingView, also offer free watchlists and stock screeners.
What Is a Curated Stock Watchlist?
A curated stock watchlist is one created by a broker or trading platform for the benefit of its clients. These watchlists have the added convenience of automatic maintenance, so the end-user does not need to add or remove stocks that no longer fit the list criteria.
Note
The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor, and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.
Related Terms: stock market, trading software, portfolio management tools.
References
- Yahoo! Finance. “Watchlists”.
