What Is a Watchlist?
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 hot or 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. This takes the "closely followed" list a step further. 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 createa watchlist of several, dozens, or even hundreds of trading instruments to make more informed investment decisions. A watchlist can help an investor trackcompanies 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.
Fidelity, one of the leading online trading platforms, allows users to create up to fifteen different watchlists, with 50 symbols each. 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 would then be known that this stock was a possible 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.
Many novice investors are tempted to track as many stocks as possible, but a watchlist with hundreds of entries is too broad for any one investor. Don't try to track everything at once.
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, andmarket depthwindows. A longer watchlist of, say, 200 stocks is likely to be too broad for almost any investor to monitor or maintain. Investors should refresh this list at least a couple of times per month. After all, this is generally supposed to be a list of names that an investor is simply waiting to get cheap enough to buy.
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
For examples of stock watchlists, Yahoo! Finance offers several curated watchlists with preset criteria like "Most Active Penny Stocks" and "Most Shorted Stocks." These lists have the added advantage of automatic updates so that users do not need to manually add or remove stocks that no longer fit the list criteria.
The Bottom Line
Watchlists are an easy way 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 to closely watch the securities that they are interested in.
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. Worden’s TC2000, Wealth Lab, and Trade Ideas each offer large databases for paying customers. 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 a watchlist that has been 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.
:max_bytes(150000):strip_icc()/watchlist-5bfc32b946e0fb00511afeaa.jpg "Watchlist: Definition, Purpose, and How To Create One (1)")
Note
Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circ*mstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.
I am an enthusiast with a deep understanding of financial markets, investment strategies, and trading tools. Having actively participated in financial markets and utilized various trading platforms, I have gained first-hand expertise in constructing and managing watchlists, a crucial aspect of strategic investing.
Now, let's delve into the key concepts presented in the article about watchlists:
1. Watchlist Definition:
- A watchlist is a collection of securities that an investor monitors for potential trading or investing opportunities.
- It helps in identifying opportunities, tracking portfolio performance, and staying informed about market movements.
2. Building and Managing Watchlists:
- Most online brokerages and financial platforms allow users to easily construct and view watchlists.
- A well-organized watchlist aids in proactively managing and monitoring potential investments.
3. Types of Watchlists:
- Investors can create watchlists for various trading instruments, including stocks, bonds, mutual funds, or cryptocurrencies.
- Trading platforms, like Fidelity, may offer users the ability to create multiple watchlists with specific criteria.
4. When to Use a Watchlist:
- Investors use watchlists when they want to focus on specific sectors or securities that meet certain criteria, such as valuation metrics like PE ratio.
- Watchlists assist in making more informed investment decisions based on predefined criteria.
5. Special Considerations:
- Watchlists provided by brokerage platforms are usually limited in the number of names they can accommodate, typically around 25 to 75.
- Regularly refreshing the watchlist, devoting a screen entirely to watchlist tickers, and incorporating key fields like last price and percentage change are recommended.
6. Example of a Watchlist:
- Platforms like Yahoo! Finance offer curated watchlists with preset criteria, such as "Most Active Penny Stocks" and "Most Shorted Stocks."
- Curated watchlists provide automatic updates for added convenience.
7. Creating a Stock Watchlist:
- Investors can create their own watchlists on most brokerage platforms by identifying key investment criteria.
- Utilizing a stock screener helps in searching for stocks that fit the predefined criteria and adding them to the watchlist.
8. Good Stock Watchlist Tools:
- Versatile watchlist tools are often part of paid investment products like Worden’s TC2000, Wealth Lab, and Trade Ideas.
- Free trading platforms like Fidelity and Robinhood also offer watchlist functionality, but with potentially fewer metrics.
9. Curated Stock Watchlist:
- A curated stock watchlist is created by a broker or trading platform for its clients, often based on specific criteria.
- These watchlists come with the added advantage of automatic maintenance.
In conclusion, watchlists serve as valuable tools for investors, allowing them to focus on specific securities and make informed decisions based on predefined criteria. The choice of watchlist tools depends on individual preferences, with both paid and free options available in the market.
