Here we go again! A stock makes a big move and you missed it. It’s not that you saw the initial move forming and decided not to take the trade, its that you were in the dark the whole time. That is a frustrating feeling; we’ve all been there. Here are a couple tips that should help to reduce those occurrences.
Sorting for Stocks
Regardless of whether you are a busy professional or a full-time trader like myself, it is critical that one works efficiently. Creating a watchlist that contains 250 charts is counter-productive and frustrating. Stocks on your watchlist should be as close to being an Actionable Trade as possible. This makes time spent studying the watchlist stocks much more meaningful and productive.
Regardless of whether you are a busy professional or a full-time trader like myself, it is critical that one works efficiently. Creating a watchlist that contains 250 charts is counter-productive and frustrating. Stocks on your watchlist should be as close to being an Actionable Trade as possible. This makes time spent studying the watchlist stocks much more meaningful and productive.
Most platforms / charting packages have tools you can use to sort the entire universe of stocks into the bite-sized segments that interest you. The more you refine your sort criteria, the more crystallized your results will be. For example, I am interested in daily volume, optionality, share price, and various technical set ups. Hint: If you are a busy professional that works on trading during the weekends, use WEEKLY prices for your sort and trade off the Weekly Chart. Using Daily data to trade weekly will result in frustration and missed opportunities.
Setting Alarms are the Key
After your initial sort is completed you’ll, of course, proceed to review your results. As you review each chart answer this question. “In terms of price levels, when do I want to revisit this stock / chart?” When will this stock be at an actionable level?At this point I set alarms for both the topside AND downside in my platform. When / if those price targets are hit, I get a heads up. The alarm prompts a more detailed review of the chart. It may mean a trade is initiated or more often, it means moving the stock to my watchlist. My watchlist therefore consists of stocks that are primed and ready for actionable moves instead of simply a laundry list of names.
Working your Watchlist
By creating a watchlist of quality set-ups you should be motivated to review it on a regular basis. The term “regular” means daily if you are trading the daily time frame or weekly if you are trading the weekly time frame. If in your regular reviews you become dis-interested in a particular chart, simply delete it to reduce clutter.
Sift through your watchlist and compare those set ups / opportunities to whatever existing trades you may already have on. Limit your open trades to only those you can actively manage. Set a practical limit for yourself on open trades both in terms of quantity and capital at risk. Trade what you can manage well and no more. If there is a sweet set up you like, it may mean you need to close another trade before you can add a new one.
Still Missing Quality Set -ups?
Look, everybody misses set ups. Don’t expect to catch everything every time, but if you feel like you’re not dialed in, here are some action activities you can do.
1. Are your sorts returning a lot of junk? Investigate fine tuning your sort routines or create alternative sorts with different criteria. Look at some stocks you missed. Should your sort have captured them? If not, why not?
2. Are you diligently setting alarms and then doing something with the information? An alarm should be an exciting moment that prompts action and further action. If that alarm is perceived by you as noise, then they are not set correctly. Revisit your alarm criteria.
3. Are you reviewing your watchlist religiously on a daily or weekly basis? If your aim is to trade the daily time frame and you review your watchlist every two weeks, much will be lost or be irrelevant by the time you notice it.
The most important aspect to all of this is consistency. Set up a process that works for you; then consistently execute!
Good Luck and hope it helps!
Chris
