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Friday, December 05, 2008

Equity Watchlist - Q&A

If ever a sponsor set about advertising on my blog the right way, it is the guys at the Equity Watchlist (referred to as "the EW" throughout the rest of this post).

After I started blogging again in September, David (no relation to David from "The T.A.D. Principle") approached me and asked if I would evaluate their service for a few months to see if I found it useful. If I did, he wanted to advertise on my site. If I didn't, "no harm no foul".

Most readers know by now that I build my watchlist from stocks that gap. Even so, the problem people tend to grapple with most often is how to come up with a daily watchlist. The EW solves this problem for you - they give you a list of stocks every morning that seem to have an uncanny knack for making good moves.

During my evaluation, what I noticed first is many of the stocks on the EW gapped - so I was getting a lot of the gappers that would appear on MY watchlist from the EW before the market actually opened. What I noticed next was that many of the stocks moved a substantial amount and provided some great trade opportunities. After a few months of using the service, I can attest that they deliver on their value proposition. Almost every day I found several stocks on their list that I traded for profits. And I only looked at their list on a "limited" basis...reason being because old habits die hard. I think I have perfected building my watchlist every morning, so I could not break away from my process fully. But that is not a reflection on the EW - to the contrary, I think I could actually abandon my watchlist and use theirs and not miss a beat.

One more impressive thing that showed me these guys know how to analyze stocks - several times over the past few months David would send me an email saying keep an eye on this or that stock because there is a huge move coming. And remarkably, every one of those emails proved true. I documented one such call on the NQ in real-time in the comments of this post back in November.

So that is my quick and dirty review. David and I decided to do some Q&A to help readers understand who they are and what they do over at the EW:

Q.) How long have you been trading?

A.) I have been trading since 1993, and full-time since mid-2003. By full-time, I mean I have relied on my trading as my entire income since then.

Q.) Tell me about your trading style.

A.) It is similar to yours, but not exactly the same. I took your advice to heart which was to take what you do and tweak it and make it "my own".

I trade a lot based on Pivot Points and Fibonacci applied intraday. I use faster charts than you - mostly 2-minute (with some 5 and 6-minute charts mixed in). I tend to use the 34SMA which I pulled off your blog last year.

I try to keep it very simple - you rely on the previous day's action but I rarely look at it for intraday trading. I am just looking for simple pullbacks or breakouts at support and resistance.

I have a trading partner who is also my partner in the Equity Watchlist. Every night we analyze the universe of NYSE and NASDAQ stocks and prepare the EW. That is all I focus on for my daily trades.

Q.) How do you prepare the list? What kind of analysis do you do?

A.) Our analysis is based entirely on technicals. The technical indicators we use are not proprietary - in other words, they are all commonly available indicators and methods. But the blend of technical analysis - how we use, apply, and combine the various indicators and methods - is proprietary. So I will never fully disclose it.

In general we are looking for stocks at pivotal levels that are poised to make a move - either up or down. If we find a stock that meets our technical parameters, we know there is a high probability it will make a move we can trade the next day.

Q.) One thing I noticed in evaluating the service is you don't give a long or short bias - you just say here is a stock and it is likely to move. Explain to everyone why you don't indicate that it is a long or short candidate.

A.) Simple - some of the best short trades occur after failed breakouts on what looks to be a classic long setup. And vice-versa for some of the best long trades. This is because everyone is piling into the "great" setup, and when it does not follow through and reverses they exit forcing a lot of momentum in the other direction.

Here is an example - if RIMM meets the criteria and turns up on the EW and we indicate it has a short bias, you may be watching for a short-entry that never comes. In the meantime, you pass up a perfect long-entry because we noted a short bias, and you would miss a great trade.

This gets back to our core principle - we are simply providing a list of candidates that have the potential to make substantial moves. You make the trades based on your own methods - long or short.

edit - the RIMM example occurred on 12/03/2008. It appeared on the EW the night before, and the next morning RIMM lowered guidance before the market open. Here is the chart and a trade I made.

Q.) Another thing I noticed is that many of your candidates make multi-day moves. Have you ever thought about providing a swing-trade list?

A.) No, but several of our subscribers use the EW for swing trades because our analysis often yields some big moves that last several days. It depends on your trading style and risk tolerance. I only trade intraday because I think it presents the least risk. I go for consistent, steady profits and I don't like losing sleep overnight because I am holding positions. Other people don't mind that - and as a result they get some VERY big winners but at the cost of less consistency.

I don't think there is a right or wrong way to trade, just the way that works for you.

Q.) You place emphasis on experienced traders using your service - tell me what you mean.

A.) We don't teach people how to trade. They can read books, or better yet read your blog or Trader Jamie or Alan Farley or any number of other educational resources available. So, you need to know how to trade. You need to have a strategy that works for you. Once you have that strategy or method, you use the EW for candidates that have a high probability of making substantial moves; you can then trade the setups based on your methods.

Q.) Explain the pricing for the EW?

A.) On average, we do about four hours of analysis per night. That's two people doing two hours each per night (on a side note, one thing my partner and I do is conduct our analysis apart from one another, and then compare lists afterward and cull them down to the EW. We know we have gold when 75% of our lists already match).

So basically you are paying $25 a week for two experienced traders to do 20 hours worth of work for you. At $1.25 per hour we are working cheap!!! We know we provide tremendous value, and since we are already doing the work we didn't want to price it substantially higher. The bottom-line is you are getting quality analysis cheap, and if you aren't able to make trades based on candidates from the EW that yield at least 50X what we charge, you should probably not be subscribing. But again, you need to bring your own experience and methods to the show.

As far as logistics - all payments are processed through PayPal. You pay a month in advance, and we bill you every month thereafter. If the service is not valuable to you, you can cancel anytime before the next month's charge by going to PayPal...you don't even have to contact us or give us a reason.

Thanks David. My closing comments - I think the guys at the EW are providing a unique and valuable service. I have used it and have made substantial profits, and I will continue to use it. If you are experienced and have your own methodology, try using the EW as your daily source of candidates to trade. I think you will make good money and do less work.

The Equity Watchlist



Anonymous said...

Cool concept. I'll give it a try.


Brian said...

Interesting. Since you stress it is for experienced traders with a working methodology, you are ruling out 90% of the people out there (no offense to anyone). But kudos for stating that and not trying to come off as a guru trying to suck newbies in and steal their money. You are simply giving people a list of stocks that are likely to move and if they can trade, they will probably make money.

For that alone, I will check out your service.

Todd said...

I have actually been looking for something like this. I may be an anomoly (sp?) but I hate spending three hours a night trying to find stuff to trade. And I try to grab the gappers when the market opens, but things are so hectic I miss more than I get.

Ted said...


Do you use Pivot points also or strictly fib levels and PDH/PDL?

Trader-X said...

Ted - I monitor Pivot Points but I usually don't make my trading decisions solely based on them...I just like to be aware of where they are.

But I know many people who use PP exclusively and are very successful. If I am not mistaken, Jamie features some PP trades on his blog too.

TonyB said...

Ok X, I signed up. $25 bucks a week is slippage on one trade (if you're lucky)or 2 1/2 cents on a 1000 shares. One of the costs of this business (aside from slippage and commissions) is the cost of good info. Thanks for the referral.


Ted said...

Hey again,

This has been something I have been wondering. Since you switched over to 5 min charts, do you constantly scroll through each chart 1 at a time every few minutes on your watch list, or do you have like 10 monitors with 5 stocks on each monitor to glance at a time?

I am curious how you setup your trading monitor(s), since I don't think you've ever mention that in the past.

Trader-X said...

TonyB - I hope it works out for you.

I will just say one thing to you guys...HIG was on the list for Friday. Take a look at the HIG chart.

I did not trade it, but it was beautiful. You don't see moves like that often.

Trader-X said...

Ted - I've talked about it, but not sure where.

My setup is quite simple - I use one monitor. My watchlist in RealTick allows me to scroll through the charts quickly, and I spend most of the day scrolling through charts. So much for the exciting life of a trader, huh?

The only thing that is different now that I focus on 5-minute charts more is I don't get as deep in the watchlist as I did when I was focusing on 15-minute charts. My watchlist may have 40-50 stocks on it, but I only get down 15-20 deep a lot of times. It just depends on how many trades I have on, because I need to watch them closely...and how hectic the morning is. And if anything funny is on Howard Stern.


I sort my wl by volume, so the highest volume candidates are always at the top and it updates/changes dynamically.

Trader-X said...

Note - I don't have anything against multiple monitors...I just never got into it. I found what works for me and I don't want to screw with it. I have been doing [pretty much] the same thing for a decade and a half, so I am somewhat set in my ways.

I am sure 90% of the guys trading out there have a more sophisticated setup than me, so more power to them. Whatever works for you.

But there is something to be said about being able to trade from my laptop in the lobby of the Waldorf in NYC, or at Starbucks in downtown Seattle!

John said...

TonyB is right, $25 a week is nothing for good information. I'll give it a shot. If I had done it a day earlier I would probably have paid for a few year's worth of subscribing with HIG. I missed it altogether. Impressive.

TonyB said...

X, I looked at HIG. Wow!!! That's one I didn't see and I was watching the market until noon on Friday. That really is impressive.

You said, "But there is something to be said about being able to trade from my laptop in the lobby of the Waldorf in NYC, or at Starbucks in downtown Seattle!"

There is a lot to be said about that statement. I trade with 2 monitors myself, but I've also traded on my laptop from tons of different places. One thing I love about this crazy job is it's mobility. You can yake it anywhere. Sometimes, that's not a good thing, but most of the time it is. Strictly speaking for me folks. I know everyone's experience is individual and independent.


Terry said...

Hey X, so far so good on equitywatchlist.com. I didn't catch HIG on Friday, but I did catch MET. And today they made a great call on energy and I killed on APA both long and short and a few others.

I have already made enough to pay for a few years of the service. No doubt they will have some days that I don't get anything from their list, but the first two days are great!

Anonymous said...

I agree with Terry. There were some HUGE movers off the list today both long and short. I give these guys an A+ so far.