How To Build a Stock Watchlist
The Nasdaq and the New York Stock Exchange are the two major stock exchanges in the United States. According to Statista, the NYSE lists the shares of 1,980 U.S.-based publicly traded companies. The Nasdaq lists 2,911 domestic stocks. Combined, both exchanges list more than 1,400 international companies, too.
The point is that it’s a big stock market out there, which is part of why so many financial advisors counsel their clients not to try to pick individual stocks. It’s likely that many of those advisors caution against stock-picking because they assume their clients are not going to base their picks on strategically curated watchlists.
However, those who do take the time to build and monitor a stock watchlist can increase their chances of picking winners and avoiding losers while taking the guesswork out of equity investing.
What Is a Stock Watchlist?
A stock watchlist is a collection of securities that investors create and monitor to help them make successful investment decisions. They’re not necessarily buying the stocks on the watchlist, although they might. They’re just segregating them from the larger pack to keep an eye on their performance.
A stock watchlist can help you pare down the thousands of securities that clutter up the market to a manageable list of potential investments that meet the criteria of your specific investment strategy. You can also use a stock watchlist to monitor the performance of certain stocks you already own in your investment portfolio.
What Stocks Should I Put on My Watchlist?
Investors build watchlists based on their own investment styles, goals and game plans.
For example, some people invest only in the so-called Dividend Aristocrats, which are a collection of stocks on the S&P 500 that have raised their dividends every year for at least 25 consecutive years. They’re attractive because they’re large, well-established and highly stable companies with enormous liquidity and a record of weathering market downturns and economic turmoil.
There are currently 64 companies in the S&P 500 Dividend Aristocrats Index.
An aristocrat investor might create a stock watchlist that contains only the 64 Dividend Aristocrats to isolate them from the 4,000-plus available options. But 64 is still too broad a pool for investors looking for just a few select stocks that match their criteria.
Here are a few examples of how aristocrat investors might use a watchlist to identify the one or two right choices out of 64 potential picks:
- A value investor might monitor the 64 stocks on the watchlist and wait for the price of one to drop, maybe during a temporary fall in the wake of a bad earnings report.
- An income investor might watch the 64 Aristocrats and pounce on one when it increases its dividend.
- A partial-share investor might own slices of all 64 and observe the watchlist to know when to sell one that slashes its dividend.
That’s just one example of how three different investors interested in the same group of stocks might create three different watchlists based on three different strategies.
What Does It Mean When a Stock Is on a Watchlist?
When a stock makes it onto an investor’s watchlist, it means that the investor has decided that the stock is worth keeping an eye on because it looks like one that might fit into their plan. Investors set stocks aside on their lists because they think that they have the potential to become worthwhile investments if they react to some catalyst.
The following is a look at what some of those catalysts are and what some of those reactions might be in different watchlists.
How Do I Create a Stock Watchlist?
When you’re deciding how you’ll create your stock market watchlist, you want to find a balance between too many and too few. If your watchlist contains too many stocks, your list will be too broad and cluttered to be effective. If there are too few, you’ll exclude stocks that might match your criteria.
Your criteria might include:
- Stocks with the highest percent change from the previous day, the previous five days or the previous month.
- Stocks with the most dramatic shifts in trading volume.
- Alarm signals like stocks that experience accelerated average daily volume without much of a price change.
- Trend patterns like common breakout and breakdown indicators.
- Bullish indicators like hammer candlesticks or transitional indicators like doji candlesticks.
- Stocks that have upcoming earnings calls or quarterly reports.
- Stocks exhibiting continuous upward momentum or, for short-sellers, downward momentum.
- Changes in analyst ratings.
How Do I Get a Watchlist?
If you already have an investment account, your brokerage probably has its own native tools that let you build watchlists right on the same platform. This is a convenient way to get started because if you do decide to make a move based on the behavior of a stock you’re watching, you can do so quickly without having to move between apps.
In the end, however, the best watchlist is the one that has the tools, features, look and feel that suit your needs, preferences and strategy.
There are many platforms that let you build watchlists for free, like Google Finance and MarketWatch Watchlist. Free platforms typically offer scaled-back versions with simple features like price-change trackers.
Other, more sophisticated platforms offer tiered plans that give you higher-level features with each new price package. For example, Stock Rover offers three plans: Essentials, Premium and Premium Plus. The most expensive option is for serious traders. It offers more than 650 metrics, more than 10 years of historical data and advanced features like ranked screening and valuation charts.
Other stock watchlist platforms include:
- Delta Investment Tracker
- Mint Investment Tracker
- Finviz Stock Screener
- Personal Capital Investment Checkup
- EquityStat
- Yahoo Finance My Portfolio
Don’t Be Afraid To Build More Than Just One
While you shouldn’t clog up one watchlist with too many stocks, you can spread out many stocks grouped into several different watchlists — most platforms let you create more than one.
For example, some investors might use different watchlists to monitor stocks that interest them in different sectors, like energy, manufacturing and tech. Others might use multiple lists to monitor stocks with different market caps — maybe one for small-cap stocks, one for mid-cap stocks and another for large-cap stocks. For another investor, one watchlist might be for domestic stocks and another for international stocks, or one for their short-sale prospects and another for stocks they plan to buy and hold.
How To Scan the Market
One way to build your watchlists is to scan the market for stocks that meet your investing criteria. Stock scanners are similar to screeners in that they let you search stocks based on specific criteria you select based on your investing goals and preferences. But whereas screeners filter stocks according to various ratios and metrics and display a list of those that meet your criteria, scanners let you create a “setup,” or set of fundamental and technical search criteria, that digs deeper in real time to identify trading opportunities. You can scan both data and news, and then refine the results over time. It’s best to start with a broader set of criteria and then drill down to narrow the picks for your watchlist.
Scanners come in many shapes and sizes. For example, Fidelity’s market scanner is accessible on the Fidelity platform and lets investors select a pre-built scan or customize their own. Other web-based scanners include:
- Trade Ideas
- Benzinga Pro
- Stock Rover
- MetaStock
Alternatively, you can install a stand-alone scanner on your computer. Separate scanners can require programming and are geared more toward advanced investors.
You’ll have to pay a fee to use most scanners, so evaluate your results frequently to ensure that your investment returns justify the cost.
Final Take
A stock watchlist is not a magic bullet that makes investing easy, but it can help investors of all experience and skill levels to whittle down thousands of available investments to a few that stand out from the bunch. No matter how sophisticated the platform or app you use, stock watchlists only work if you check in with them regularly, monitor their status and know which changes you will and won’t act on.
If you’re new to the game, start with the native watchlist tools your brokerage offers, then learn as much as you can about other charts, graphs, metrics and analytical tools that might be worth paying for as you advance.
If you’ve outgrown your current watchlist and you’re ready to pay for a more premium product, start with one that offers a free trial.
Daria Uhlig contributed to the reporting for this article.
Information is accurate as of Dec. 1, 2022.
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