Monday, January 16th, 2012
A simple system to manage stockmarket picks
You look at thousands of charts and reams of fundamentals, but how do you keep track of which stock has real potential, which ones are slightly interesting, and which ones you actually want to trade?
I’ve developed a simple system that helps you monitor hot stocks that you’re about to trade, but also allows you to keep an eye on other stocks that have potential but that you aren’t yet ready to place orders on.
As you can see in the screen shot below, you simply divide stocks into three categories: targets, watchlist, and uptrend. You can do it for longs and shorts as I have.
Every time I do a complete market scan I filter stocks into these three categories
So how do I determine what goes where?
Uptrend stocks – They’re trading above their rising 50-week moving average. But they may be overextended or have slightly sloppy charts. Basically I want to monitor them because they’re strong, but I don’t think I’d be likely to place a trade in the next few weeks at least.
Watchlist stocks – These guys are more interesting. They usually fall into two categories: they’re forming a base/consolidation pattern that means they could be traded in the next few weeks; or a fundamental screen has shown them to have excellent fundamentals. Unlike uptrend stocks, there is potential for a trade in at least the next month. I want to keep a close eye on them.
Target stocks – These are the stocks I have decided to trade and where I have identified a point where I want to buy them. When they hit this category I fill out a spreadsheet with checklist of a series of technical and fundamental factors; I fill out a separate spreadsheet with a checklist of factors that indicate the strength of the market. Finally, before I actually place a trade, I fill out a spreadsheet with details including buy point, stop loss, amount of account I will risk, number of shares, etc.
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