How do I pick stocks to trade?

[Gaterz]

I'm new to trading. Been paper trading for just over 2 months with various "indicators/systems" trying to find what works for MY trading style. Not sure what my style is but I know what makes me feel comfortable and what doesn't.

My dilemma is figuring out what stocks to trade. Do I run scans everyday of stocks that fit my indicators for that day and continue to add them to my watchlist? I think that my list would continue to grow and become unmanageable. Ideally I'd like a list of about 50-75 stocks that I'd check everyday for my particular setups. I'd only end up trading from that list. Over time, I'd add and remove from that list but I'd have a core list of stocks to choose from. But where /how do I make that list? Do I start with a daily scan for my setups and that becomes my list? Do I randomly pick ones that I like from real life?

How do/did you guys come up with your master list? Any help or insight into this is greatly appreciated.

 

[timsk]

How do/did you guys come up with your master list? Any help or insight into this is greatly appreciated.

Hi Gaterz,
Welcome to T2W.

I don't trade stocks currently, but I used to day trade U.S. stocks, so I can tell you what I did at the time. The first thing to do is to define the ideal stock that is best suited to your methodology. This will vary from trader to trader. Once you have a clear idea of exactly what it is you're looking for - then finding it will be a whole lot easier. If you don't know what you're looking for - then you'll forever be going round in circles hoping, in vain, that 'the one' will magically jump out at you. Needless to say, it won't!

In my case, I was an intraday swing trader, so I wanted stocks which typically had good intraday moves. For this, I filtered stocks with an average daily range of > $2.00. I also wanted highly liquid stocks so I stood a reasonable chance of getting in and out at or near the price I wanted. For that, I further refined my search to stocks with a daily traded volume of > 1 million.

There were various other filters to help narrow down the size of my watchlist which would have included segregating the stocks into their sectors. I would then cross reference the sector with the Dow or S&P to see which to trade or avoid on the day. In other words, if the index was falling, I'd look to short the weakest stocks in the weakest sector and vice versa if it was rising.

There are any number of filters you can apply to find the best stocks for your particular trading methodology. Assuming you have a setup and know the type of stock you want to trade, work backwards to devise a scan that will find the stocks best suited to it. Of course, as I've mentioned already, if you don't yet have a setup, then this process will be a tad tricky!

Tim.