Too Many Stocks | Podcast Episode #405

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Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance.

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Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

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You can succeed at the stock market, and I’m ready to show you how. Hey, everybody, this is Ryan Mallory.

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What? Swing Trading the Stock Market.

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And today’s episode we’re going to talk about too many stocks on the watch list. I know I’ve had this problem before.

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I am guessing that if you’ve been trading for any length of time that you’ve probably had it too, where you got the opening bell coming up and you’re like, what in the world am I going to be focusing on? What am I going to trade?

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There’s too many stocks in my watch list, so that is what we’re gonna be talking about today. Too many stocks on the watch list and what you can do about it.

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And today’s e-mail comes from a guy we’re gonna call him Ethel, Good Florida Redneck name. I had a few Ethel’s in my life growing up, but I always give people the Florida Redneck name ’cause

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I don’t want to use their real name. People might not mind me using their name right now, but they might have a problem with it down the

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road. So.

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And once it’s out there, it’s out there. So I always give a Florida Redneck name to the person.

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So Ethel writes Hi Ryan, I am 26 years old. Wonder how many 26 year olds we have out there that it’s actually named Ethel.

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Any case, probably not the best name for a 26 year old to cover up the identity, but whatever. I am 26 years old, full time engineer from the UK who has been learning to swing trade since August

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of last year. I trade US equities only at the end of each trading day.

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I go through my watch lists and a couple of screens I have on Finviz and then create my focus list based on what looks actionable, if it breaks through a price level and where I can manage the risk

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well. I only trade long and I like to trade continuation patterns following an earnings gap, VCPS and

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pretty much anything that’s a leader growth trade that is setting up nicely within the bright market.

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For those who don’t know what VCP is, that stands for volatility contraction patterns. That’s like your bull flags, your triangle patterns stuff where price is consolidating.

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So my question is that sometimes I feel I have too many stocks in my focus list, 12 or more, and I’m wondering how to determine what stocks to keep on it and which ones to take off.

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I’m not sure if this stems from me following multiple trading setups, but I feel they all have overlap and ultimately fall under the bullish continuation patterns.

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Thank you, Ethel. Good question, Ethel.

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So this particular person here, he’s been trading since August, so August, September and towards the end of October, he started off trading in a market that was fairly bearish.

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I mean we were in about a three month contraction there. And then October, November, December, January, February and March, but not so much here.

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So far in April, we’ve been in a very strong rally. And so the strong rally has created a lot of continuation patterns.

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And so as a result of a rally that has had no pull backs, there’s going to be plenty of consolidation that comes your way.

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And so at this particular point in time, there’s going to be a lot of continuation patterns that are popping up in your watch list.

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One of the patterns that are the most common that I keep popping up in My Portfolio or in my watch list right now are the bull flags and the continuation triangles.

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You also get some wedges, but wedges required to go down a little bit steeper. But I’m not getting as many of those.

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I’m getting a lot of continuation triangles and I’m getting a lot of bull flags. But what are you not seeing a lot of in the market bear flags, continuation triangles following a

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significant move lower. And why is that?

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Because the market’s not bearish right now. The market has been consistently bullish for the almost six months now.

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And so because of that, you’re going to see those consolidation patterns. The problem for Ethel here is that when the market does become a little bit more bearish or a little

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bit more uncertain, he’s not going to see as many bull flag patterns or continuation patterns show up.

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Or in his case the VCPS, the volatility contraction patterns, which encompasses pretty much all of those.

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So we’ll call them VCPS for this particular podcast. Haven’t used that expression in a long time actually, but it’s good.

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Well, he’s worried that he’s trading too many different patterns, but it’s good to have a variety of patterns for different markets that you can trade so for like bull markets, bull flags and

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continuation patterns and for bear markets that are just getting ready to start head and shoulders patterns or triple tops or double tops or topping patterns in general.

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And then when the market’s, you know, in a full-fledged bear market, then you have the bear flags and the continuation triangles that are going to pop up a lot more.

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And then when the bull bear market’s starting to end, you’re going to have more of your inverse head and shoulders, your cup and handles and those kind of patterns, double bottoms and triple bottoms,

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that tend to appear at the bottom of a market, just like triple tops and double tops appear at the top of a market.

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So being good at all sorts of different patterns is a good thing, actually, because depending on the market, there’s gonna be a plethora of one in the absence of the other.

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But there’s some things here that he’s doing good. He is trying to be very good at one particular pattern, especially considering that he’s only been

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trading since August. He’s not trying to jump into options and jump into a zero DTE and hey, let’s throw some crypto in

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there and let’s Yolo my life savings on NVIDIA out of out of the money he calls, no, he’s working a

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particular pattern. He’s getting better and better at it, and he’s becoming an expert at that. So that’s good.

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But there’s gonna be a time where those bull flags don’t show up as much anymore now, considering the fact that the market, over the course of its history, has been bullish from the beginning.

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Yes, there’s periods of volatility like 2008, two thousand, 22,022, and many others along the way. Yes, there’s bad moments in the market, but by and large it moves higher.

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So if you were gonna be an expert at one particular pattern, old flags aren’t bad continuation patterns.

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Not bad, VCPS. Not a bad thing.

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And why is that? It’s because they’re gonna be probably popping up the most over the course of history.

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If you only were good at trading bare flags, for instance, well, you might not always have a lot of opportunity to trade those, except for here and there when the markets start to pull back or

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contract. But when you get too many in your watch list and you and you get to that point where the market’s

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about to open, you’re thinking to yourself, what am I going to trade out of all of these? I don’t even know where to start, how to keep track of all of them for me on a given day.

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There’s probably about 6 to 8 stocks I’m really closely watching and maybe one the two of them that I’ll actually trade.

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And what I do is, First off, I have a master watch list of stocks that I’m following. This is the stock list that I curate every week for swing trading and stockmarket.com.

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And on the trading block, this is gonna be my list of stocks that I’m bullish on. Stocks that I’m bearish on may not have a pattern that’s actionable or it may have too much

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volatility. But by and large that you look at the chart, it looks bullish.

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The other ones look bearish. I keep a master watch list and then out of that I start to create my ongoing watch list.

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So I may add a couple of new stocks to it each day and then I’ll take some off. That might not meet the requirements of a quality trade set up anymore.

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Or it was such a good set up that it’s, you know, blown past the ideal entry price and it’s no longer offering a good reward risk for new entries.

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But what I’m looking for are stocks that could actually make a move that particular day. That’s what I’m gonna focus on.

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If the stocks like 5% of white, I’m not watching that, Not a chance. And here’s the reason why, because even if it has a great pattern to it, let’s say it’s got this

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unbelievable bull flag, but it’s about 5% away from triggering. I’m not gonna go get into a stock and chase after it after it’s already made a 5% move on the day.

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And then I got this wild stop loss that might be 6 or 7% away that which is more than what I’m typically comfortable with.

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So I know that that stock’s not going to play. I know it’s not.

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I know it’s not going to meet my reward risk requirements. So think about it that way.

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If the stock was to confirm and that’s saying that the stock isn’t so much one that I don’t think can confirm today, but it can confirm.

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But would it, if it did confirm, provide a quality entry price to get long on? If it’s not something that you can say to yourself, yeah, if this goes straight up and hits my

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trigger price breaks out of the bull flag for instance, would I be able to at the optimal place to get long at?

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Would I be able to justify the risk that I’m taking on the road? If it’s not, then it’s not even worth adding to your watch list.

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Why? Because you’re not going to trade it because it doesn’t meet your risk profile.

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So that that should be a huge focus when you’re having too many stocks in your watch list. And and honestly, even if he, if it’s not even a problem with having too many stocks on your watch

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list, you shouldn’t be including ones on there to to take up your time and your energy, your mental energy if there’s not really a chance to be trading it.

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And if you do all that and you still are getting just tons of them, consider tightening the parameters.

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What would make the parameters on your scans more favorable from a risk standpoint? Maybe it’s increasing the liquidity on the trade, maybe it’s decreasing the beta, or perhaps you’re

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wanting to focus more on stocks that have a little bit better volatility, so you increase the beta on the scans.

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Maybe if it’s continuation patterns that you’re looking for, you only want to look at charts that are trading above a certain moving average.

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Maybe you want continuation patterns that are trading above their twenty day moving average. For instance, the S&P right now has been bouncing off of their twenty day moving average all over

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the place. That has been consistently holding up actually until yesterday when the market had a late day sell off.

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But overall it’s held up to that 20 day moving average over the past few months.

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And as is the case with a lot of stocks, they can oftentimes pay attention to that 20 day moving average.

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So perhaps trading above the 20 day moving average isn’t a bad parameter down there. Maybe it’ll reduce some of the stocks that you’re having to pay close attention to.

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The other thing that I would say is when you’re looking at trade setups, think about the sectors as well.

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So for instance, let’s say that you have 17 stocks on your watch list, right, And four of them are in real estate sector, another three are in utilities and another four are in Staples.

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What does that make that? I forgot the numbers I just used.

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I think that’s like what? All right.

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We’ll just say like between the three sectors, there’s like 11 of them. Any case.

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Then you start to look at the sectors and you see that these three particular sectors are struggling.

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They’re not keeping up with the market. They’re lagging.

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So if they’re lagging, that’s not necessarily if you think the market’s going to go higher, But these three sectors are lagging and not keeping up with the market, that might not be the sectors

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that you want to be trading in. So you right there, you could take away like 11 stocks and all of a sudden you’re down to like 6

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stocks that you’re watching instead of 17. And so if the sector is not playing nice, or maybe you even look at it from an industry standpoint,

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if the industry isn’t playing nice, it’s not keeping up with the market, then maybe those set up, regardless of how good it is, might not be one worth watching.

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Try to find the same kind of setups that you like but in sectors that are leading and in industries that are leading.

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Another thing that you should do is sign up for swing trading the-stockmarket.com. That is the website that goes along side of this podcast in the process of becoming part of swing

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trading the-stockmarket.com. You’re gonna be supporting this podcast and going to be getting all of my stock market research each

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and every day. That’s going to include my daily watch list of stocks that I’m following, my bullish and bearish

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master watch list that I curate every week and send it out to everyone. Plus, I’m gonna be giving you videos on my watch list, reviews, going over the watch list each

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afternoon and telling you what I think, what I could have done better, whatever. Plus you’re going to be getting updates on all the big tech stocks and the stock market as a whole.

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So it’s a really good value and it’s definitely worth checking out swingtradingthestockmarket.com.

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So looking at Ethel’s questions here, it’s not bad to have a lot of opportunity. But I do get the fact that it can be very overwhelming.

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And if you go into the market with a lot of trade setups that could potentially trigger and it seems like a lot to you, well once the market opens start looking then which ones are leading, which ones

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are lagging and maybe you can reduce some even further right there. So what I would break it down to is sectors that are leading, that’s the ones that you wanna focus

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more on because those are the ones that are likely to give you the better returns. If it’s a consistent problem, maybe consider changing the parameters, make it a little bit tighter,

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make it a little bit more stringent in order to meet the the scan requirements and then making make sure that OK, if this is a stock that did trigger today, would it be something it and it doesn’t

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mean you have to take it off your watchlist permanently. But in terms of focus, maybe it’s something that if it triggered tomorrow it would actually work,

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but if it triggered today it would not work because it would require too much of A stop loss. Often times I’ll see a stock in right close to a breakout level and I’m like, man, if it triggers

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today, there’s no way I can take that because it would be too much of A risk that I have to be taking on on the trade.

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So I would like to see it trade sideways for a few days, maybe like three or four days. Give it a little consolidation below the breakout level that I can have a tighter stop loss on.

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And then if it breaks out then I can take the trade. But if it doesn’t today, then my stop loss would be in a different place and it would be too much of

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A spread between my entry price and my risk and therefore I wouldn’t be able to take it. So that’s some of the things that I would consider.

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Good question from Ethel here today, if you enjoyed this podcast, I would encourage you to leave me a five star review on whatever podcast platform you’re listening to.

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Those things do mean the world to me and send me your questions. ryan@shareplanner.com I do read them.

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Ethel just sent me this question the other day. I told him hey, I’m gonna make a podcast out of this.

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I got a couple more lined up that I’m gonna do as well, so keep sending them to me. Tell me your stories, tell me your background, tell me things that are giving you the biggest

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problems. And I’d love to share my thoughts on it.

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Check out swingtradingthestockmarket.com as well. Thank you guys and God bless.

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Thanks for listening to my podcast Swing Trading the Stock Market. I’d like to encourage you to join me in the Share Planner trading block where I navigate the stock

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