Trying to decide which stocks or ETFs to trade? First, create a plan. Screen for stocks that meet criteria in line with your personal financial goals. Then monitor those stocks and set up alerts to help determine when to enter and exit trades.
Screen for stock criteria that are in line with your personal goals
Keep watch lists of stocks you think are potential trade candidates
Set up alerts to notify you when you may want to enter or exit a trade
Every individual trader has different objectives, risk tolerance levels, time horizons, limitations, and assumptions. And there are many types of traders: swing traders, short-term traders, day traders, and investors who sometimes trade individual stocks, mutual funds, or exchange-traded funds (ETFs). With so many stocks, ETFs, mutual funds, and options to choose from, trying to figure out what to invest in can be like putting together pieces of an intricate puzzle.
Everyone wants a trading edge. That could mean buying a stock that breaks out from a long trading range; catching a trend in its early stages; buying when a stock is at the low end of its trading range; and exiting when it reaches the top of its range. Unfortunately, it’s not possible to find every opportunity and have a 100% hit rate. So instead of trying to chase those chances, consider developing a plan—one that can help you come up with your own trading “wish list.”
Think about all the stocks and ETFs traded every day. That’s a lot of data to wade through. So how do you separate the wheat from the chaff? You can screen stocks to identify the securities that meet your criteria. There are several ways to screen stocks, and navigating through those different variables can itself be a daunting task.
As a TD Ameritrade client, you have access to plenty of screening tools. First, log in to tdameritrade.com. Select the Research & Ideas tab, then Screeners. You’ll see four choices: Stock Screener, Options Screener, Mutual Fund Screener, and ETF Screener. You can either build your own screener or use a predefined one. Let’s suppose you want to create a stock screener. Select Create a Stock Screen, and you’ll see several categories listed at the left (see figure 1).
Each category offers several more choices. For example, under Basic, you could choose Sector, Industry & Sub-Industry. Under Price & Volume, you might screen for stocks that have positive On-Balance Volume (OBV) for the past 50 bars. Under Performance, you could look for stocks that have outperformed the S&P 500 Index by more than 50%. In figure 1, applying these criteria reduces the number of trading candidates to 77. Still too many to choose from? Apply additional screening criteria to reduce the list further.
Because there are so many choices when it comes to screening criteria, it may be best to take a step back and think about what’s important for you in terms of meeting your goals. You don’t want to select your screening criteria at random. A thoughtful approach will help you create a trading wish list that’s unique to your needs. It might require some additional research on your part, but it’s worth investing some time.
Consider things like cost, timing, and whether you prefer to consider fundamental indicators or specific sectors. For example, maybe there are some glamour stocks that you’d like to own, but they may have a high price tag. How many shares can you afford? You don’t want to risk everything on one stock, so think about how much investing capital you have and how much you want to allocate to each stock. That should give you an idea of the price range of stocks you’d like to add to your wish list.
There’s no need to stop at one screener. Create different screens for different types of stocks and market conditions, save them, and revisit them often. Keep in mind that the screening criteria for options, mutual funds, and ETFs will be different from those of stocks. Once you’ve come up with various screens, keep an eye on those stocks.
Use a stock screener to narrow selections based on sectors.
Log in to your account at tdameritrade.com > Research & Ideas > Screeners > Stocks.
You likely won’t be able to trade every single stock from your screening results. Select the stocks, options, mutual funds, or ETFs you consider to be good trading candidates, and select Add to watch list. You could create several watch lists of indices, mutual funds, ETFs, stocks (divided by sectors or asset classes), optionable stocks, and so on. You can add or delete individual symbols in an existing watch list or create a new one.
There’s no right way to trade the markets. It’s really a matter of personal preference. Sometimes one sector may be outperforming, and at other times, it could be underperforming. And remember that any changes you make to your watch lists will be updated in your account, which means you can view them on any platform or device.
Once you have your watch lists set up and organized, you’re on your way to identifying stocks to trade. Let’s go back to the Screener. Select the results from one of the stock screens you created. To further narrow your choices, select the green arrow on the right and look at either the detailed quote, option chain, or charts (see figure 2).
FIGURE 2: NARROW DOWN YOUR CHOICES. You can go through your screening results, do more research on the individual stocks that made it to the list, and narrow your choices down to focus on a shorter list of stocks. Image source: tdameritrade.com. For illustrative purposes only. Past performance does not guarantee future results.
If everything looks good, select Set Alert, and that’ll take you to the Securities tab, where you can choose to set an alert for specific variables (see figure 3). For example, you might set an alert for when price reaches a certain level; if a certain technical level has been hit; or if there’s a volume spike. It’s worth checking out the many choices you have for the alerts feature.
FIGURE 3: SET YOUR ALERTS. Alerts can be set up either through your stock screens or from the Research & Ideas tab. There are quite a few choices when it comes to setting alerts. Each tab has different alert criteria. Image source: tdameritrade.com. For illustrative purposes only. Past performance does not guarantee future results.
You can also access the alerts feature from Research & Ideas. Select Alerts from the left menu, and you’ll see different tabs—Portfolios, Securities, Indices, Markets, Watch Lists, Bonds, Fixed-Income New Issues, and Equity New Issues. Select the Watch Lists tab. All your watch lists should be listed here, so select Edit Alerts for a specific list.
After setting your alerts, you’ll have to decide how you want them delivered—via email or text. When an alert is triggered, you’ll receive a notification. But that doesn’t necessarily mean you’ll automatically place the trade.
Before taking any action, consider whether the stock meets your objectives, risk tolerance, time horizon, limitations, and assumptions. And remember, things change, so be open to modifying your screeners, watch lists, and alerts on a regular basis.
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Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
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