Valuing Your Watch List: Day After Day

08/13/2009 12:01 am EST


Ron Wagner

Principal Partner,

Each day, good traders prepare for the market day in an objective and methodical way, coming armed and eager with a winnowed list of the "best" long and short trade ideas. They might be aggressive continuation plays, guerrilla plays, failed patterns, morning daytrading longs into the reversal periods, or just other "watch" items that have not matured enough to warrant inclusion in our swing setup or trading style. But make no mistake about it: The fact that they are listed means something technically valuable exists. Write each one down every day. Watch them. Study them. Paper trade them. And don't give up on them unless the reason why you selected them no longer exists.

But how many of you have given up on that particular stock after an hour because you are bored or frustrated that it has not acted as intended in delivering a low risk, high-odds opportunity? Then, whether moments or even days later, you come across the stock again, only to see it perform handsomely as intended after you have already discarded it? We all have! Somehow, once we stop watching a stock, it's like the stock in question says, “Ok, all’s clear! He's not watching. Let’s get moving!” Instead of berating yourself for missing the trade, here are a few tips to help you learn more about technical analysis, and hopefully capture some of the explosive gains that your original skill suggested was possible.

The fact that a symbol made it to your watch list means that it had certain compelling technical validity, having met the "final cut" from your pre- and/or post-market trade setup search methodology. Separate them into long and short market minders. Mark the top one to three in each list. I put my top candidates in separate five-minute charts to watch their every move. Set alarms on the others. Review them again at the morning reversal periods, over lunch, and after the market closes.

A post-market review is needed for two main purposes, even if you did not trade it. First, so you can review how the pattern developed, which is great practice and will help you to gain confidence. Second, you want to see which stocks warrant immediately being transcribed on your watch list for the next trading day. Some patterns do take longer to develop, however. For example, I might still want to watch a stock where a simple buy setup failed to trigger, or even did trigger and stop out, but which still has potential as a possible shake out on major support and potent reversal bar. I might want to watch stocks with bullish or bearish wide range bars, but that have no follow through. I might watch large basing patterns, failed patterns, wide range bars on positive volume from a base or an extended buy setup, bullish or bearish guerrilla plays that are still valid day after day, etc.

Well, you get the picture! Do your own homework. Prepare watch lists daily, study them, and follow them. I scan before every day I trade and am always looking for the best of the best to consider trading the following day. It does not mean I trade them all, but I’m ready to! Are you? Do you have a plan ready for any possibility? The more you are prepared, the more you will produce results.

By Ron Wagner

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