What is a Watchlist?

A watchlist is a list of securities 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.

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, 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.

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