What is a 'Watchlist'

A watchlist is a list of securities being monitored for potential trading or investing opportunities. An investor or trader may create a watchlist of several, dozens or even hundreds of trading instruments to make more informed and opportune investment decisions. A watchlist can help an investor track companies and stay abreast of financial or other news that could impact these instruments. Typically, the investor monitors the list, waiting for certain criteria to be met &mdash such as trading over a certain volume, breaking out of a 52-week range, or moving above its 200-day moving average —before placing trade orders.

BREAKING DOWN 'Watchlist'

An investor, for example, may be interested in purchasing stocks in a particular sector. But if that sector is generally overvalued, it may offer few stocks that are attractively priced. An investor could create a list of all the stocks in that sector that would track various valuation measures, including ratios such as trailing price-to-earnings, price-to-sales, price-to-book, among others. When a company on the list met a specified valuation criterion, such as a PE ratio less than 15, he or she would then know that this stock was a possible candidate for investment.Many investment-oriented websites allow visitors to create watchlists online.

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