Watch-list Building
Jan 07, 2022“You are only as good as the stocks that you trade” is a phrase common to traders when building a watchlist. Watchlist is the lists of stocks that traders watch at the open. These stocks have enough volatility, reasonable BID/ASK spread and ATR that is capable of making the moves to the long or short side. A watchlist is very important since stocks that does not move or does not have enough volume will not make a trader profitable. Stocks that does not move will only chopped up or get traders to stopped out. Aside from the stocks that can potentially move, traders also need to look at a stock that they are able to read the moves. This movements are all probabilistic ones but has the potential to give a good risk to reward ratio.
Before the market opens 09:30 EST or during premarket from 8:30-09:30. I will be looking for stocks in play that I will be watching at the open. These stocks have the following criteria.
A stock with a good catalyst like fresh news, analysts downgrade/upgrade
A stock that is above or below 2.5% in the pre-market
A stock that has an unusual pre-market trading activity in the form of large volume in premarket
A stock that respects levels (moving averages, VWAP, pivot points)
And the most important thing is the stock with high relative volume. These are stocks that are trading with above average volume for that specific stock.
Once the stock meets these criteria then I will do my pre market levels and my “if then” statements, stop loss, entry and target move.
One of my favorite strategy when I am marking my pre market levels is the ORB (opening range breakout/breakdown). If a stock is gapping down >2.5% and breaks the support line then I will enter short. If a stock is gapping up >2.5% and breaks the resistance line then I will enter short.
Today's 6/8 charts shows the power of pre market level. If the stock breaks the red line or the pre market low then I will go short. If the stock breaks the green line or the pre market high then I will go long, only if there’s volume that supports the market direction with conviction.
Today’s trade was a straight forward trade by following the trade setup on ORB.
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