How does a trader or investor find something to put their money into?
That is a key question. There are different layers to the question, and we need to address them one step at a time.
The first one, is about productivity and efficiency. If you can have just as good of a trading system, with simple methods, would you prefer those methods over more complex ones? Of course you would. The simplest way to find stocks and products to invest in is to consider what companies you buy products and services from and build a list from there. It’s called a Watch List and it’s the first technique that you should use as a new trader trying to find something to trade. Let’s take some examples, from a typical consumer, on a monthly basis and use that as a way to generate ideas.
If you use social media to connect with your friends, family and or do business, then you should put those companies on your list. Write down all of the social medias that you use, and then do a web search for [Company Name] [Ticker] [Symbol]. For example, Facebook Ticker Symbol will give you a result of NASDAQ:FB. Simple enough, write down FB on a piece of paper and then you go onto the second company. What is a typical day like? What do you do every day, week or month that has you using a product or service from a publically traded company? The list will be long, so just start with your daily routine.
If you own your own home, whether you built it or not, you could start with the basic principle that Real Estate is something you can buy. There are Exchange Traded Fund Products that you can track, that allow you to invest directly in Real Estate. Search: Real Estate ETF Ticker Symbol. You will find a list of symbols. If you drive a car, consider writing down all of the car manufacturers you can think of. You can write down the ones you buy from, and the ones you want to buy from, and build the list of symbols. Who makes your food? Your clothes? Your shoes? The physical products you use in your life, those are likely to be made from a public company. You can trade those.
What about the services? If you have a loan with a large bank, or use a credit card. Write the names of those companies down. If you use online services, shop online, consume entertainment online and such, write those companies down. This is the first, and simplest way to find companies to start watching. What I’ve found as a mentor is that you tend to do better with things you understand as a new trader. There are enough things to learn, that you don’t understand, lets eliminate one of the steps in the learning curve and start your first watch list with your favorite companies. Once you have your list, you are not done yet, you need to check in an options chain to make sure the company does trade options. The most important rule in building a watch list is to only invest in things you can protect. You can’t protect a stock investment if you don’t have the ability to play options with it.
As you go through each company one step at a time, look at the options. Find the average daily volume for the stock shares as well. These are steps to ensure that you have the necessary liquidity to trade the stock you have written down. If the stock doesn’t trade about a million shares of stock or more per day, you can probably just take it off your list. If the stock doesn’t have options, then you absolutely should take it off your list.
After you’ve developed your first watch list, then you can start to build more of them. There’s a big difference between traders who keep organized lists of tradeable opportunities and those who are unorganized. You should probably have a software tool – that allows you to archive and save these lists. I would also recommend that you save them in a spreadsheet file and keep them in a separate folder somewhere in your file storage.
A very common type of Watch List is one that is paid for, or that you get from someone else. These can be effective, if you have good resources and connections, but you still need to evaluate each company that is picked for you in your own way and on your own terms. If you don’t do that, you’re simply following the lead of another investor without your own plan. That’s not what you want to do. It’s smart to use the tips and advice from others that you trust and know, but you are the solely responsible person for your actions. You need to make your own choices about whether those symbols qualify for your personal trading plan.
Trading software and scanning tools are very interesting as well. If you know how to build screens, scans and run the software, you can use technology to improve your efficiency as a trader. What I’ve found, is that if you have a plan on how you’re going to approach the market, and you start with a watch list and a few hand-picked services, then scanning is the tool you’ll use to supplement your investment plan without making it too complicated. There are countless tools out there, before you go shopping for software, start with education and learn how to trade the basics. You can run an effective trading business with the biggest, most liquid and recognizable companies there are. Take it one step at a time.