What Is a Watchlist?

A watchlist is a list of securities that are being monitored for potential trading or investing opportunities.

Key Takeaways

  • A watchlist is a list of securities monitored for potential trading or investing opportunities.
  • Investors track the list to analyze price movements and spot trading opportunities.
  • Most online brokerages and financial portals allow for easy watchlist construction.

Understanding Watchlists

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, 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.

When to Use a 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 like trailing price-to-earnings, price-to-sales, and price-to-book, among others. When a company on the list met a specified valuation criterion, such as a PE ratio less than 15, it would then be known that this stock was a possible candidate for investment. Many investment-oriented websites and brokerage platforms allow visitors or customers to create watchlists online, often for free.

If you're interested in keeping track of any securities, you can build your own watchlist on most brokerage platforms.