Tuesday, December 22, 2015

5 Steps That Will Save Time and Create the Perfect Swing Trading Watchlist

Every trader knows time is money
Beginning swing traders make trading way too complicated. The beauty of swing trading is that once you know what you are doing, it does not take much time to trade like a pro. This is why swing trading is great for part-time trading.

If you are spending more than an hour a day researching swing trading stocks, you are probably doing too much. Here are ways to save time without sacrificing quality setups.

Check out my 14 tips for handling market selloffs on Bullsonwallstreet.com

1. Run fewer scans

Many traders see scanning as the holy grail, and cutting down on scans seems counter to the idea of saving time since scanning is supposed to narrow the universe of stocks to trade. I disagree. There are a number of problems created by scanning.

When we scan, we often lose our "feel for the market" because we are focused on the "now" and haven't participated in the day to day of the stock.

Many traders don't actually understand how to trade what they scan. So you've got a list of 12 stocks that broke out 5 percent on heavy volume, breaking out over a key resistance level. Now how do you trade this stock on a down trending market? What about a range bound market?

When scanning and narrowly focusing on specific setups, we often lose many potential setups. Stocks go through cycles. A parabolic short often leads to a bounce, which may lead to a failed breakout, which leads to a first thrust short, which  leads to another bounce and finally developing a second thrust short. You will get a better feel for this if you have been watching the stock throughout the cycle.

The number one question I am asked is "what scans do I run". Most traders are shocked when I tell them I only scan 5% breakouts and breakdowns and a scan for overbought and oversold stocks. Every other stock in my watchlist comes from my weekly and daily sector analysis. 

Scanning for stocks to put in my watchlist takes 5 minutes per day.

2. Weed out your watchlist every day.

I keep to lists. A watchlist which consists of 50-200 stocks and a narrower focus list with actionable setups, which usually has 5-20 stocks. Every evening I review my lists and weed out stocks that are no longer setting up.

Why is weeding the watchlist important?

First, it is a time saver. You no longer are wasting time on what is no longer a strong setup. Second, I see many traders trade bad setups because that stock was still in their watchlist. Weeding out the stock makes sure you do not trade average or poor setups.

Weeding and reviewing the watchlist takes 10 minutes.

3. Review the top and bottom performing sectors weekly.

My weekly sector analysis is the biggest reason I don't need to run scans. I review the best and worst sectors every weekend for two reasons. First, it helps me develop a feel for the market and what is trending. Second, I know the best and worst stocks, along with the most volatile, are in my watchlist.

Sector review takes about 10 minutes per day.

4. Create a daily focus list.

Once I have run my two scans, weeded out my watchlist and analyzed the best and worst performing sectors, the final step is to create my focus list.

The focus list narrows the watchlist that has developed from setups 1 though 3 with actionable stocks that are setting up for possible trades over the next day or two. It's a lightening quick process. Once you have seen a setup hundreds and even thousands of time, you develop a sixth sense for pattern recognition.

Reviewing 100-200 charts to create my focus list takes me less than 5 minutes.

5. Create the plan

Now that you have a focus list, you need to know the entry trigger, stop and target placement. Having a plan leads to better decision making when it's time to enter.

Created a trading plan for each stock in the focus list takes 5 minutes.

My daily "process" for identifying the stocks I will trade is organic and builds on itself day after day. This process gives me an intuitive feel for the market, cuts down on waste, identifies the high quality setups I should be trading and keeps me focused. Best of all, it only takes 30-40 minutes per day to have a professional's understanding of the market.

If you would like to learn more about how I trade, receive my nightly focus list with market analysis, setups and trade alerts, sign up at BullsonWallStreet.com

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