Building your watchlist

From eighteen to six

Every morning the desk screens the market down to a list. Your job is the second screening — the one only you can do, because it runs on facts about you. The Screened list knows nothing about your account size, your vehicle, your job, or your plan. Your watchlist is where the desk’s eighteen meet those facts and most of them leave. What survives is a small set of names you understand, can size, and can state the levels for without notes.

Small is not a concession; it is the design. A watchlist is a preparation instrument: every name on it has pre-measured levels (Lesson 19’s distance, ready before the opportunity), a known vehicle fit, and a place in the plan. Six names prepared beat thirty names vaguely recognized, the way six rehearsed songs beat a library you have hummed once.

The three filters

Vehicle fit (Lesson 17): the name must trade in the vehicle your plan chose. A stock-vehicle reader does not watch a name whose only honest expression is an option chain they have not studied; a futures reader watches the indexes, not single names at all. Plan fit (Lessons 19 and 22): the name must be sizeable inside your numbers. Plan fit is a distance test, not a price test: what must fit the budget is the gap between a name’s entry and its wrong-level. A $2,380 stock whose level sits $40 away sizes fine — one share risks $40 of the $250 budget — while the same stock with its level $280 away cannot be sized at all, because one share already risks more than the budget. Capital is a separate check, read separately: one share costs $2,380, inside this plan’s $6,250 maximum position, so a name can pass capital while failing risk. A high price alone decides nothing — a name fails this filter only when its distance does: when one share would risk more than the budget. The arithmetic in this lesson assumes whole shares — one share is the smallest unit you can buy. If your broker offers fractional shares, the same distance test applies to whatever fraction you hold; the capital needed changes, the risk logic does not.

Level clarity (Folder 3): you must be able to say, in one sentence, where this name is wrong. ‘It held the 748 shelf twice and breaks on a close under it’ is watchable. ‘It’s been going up and people like it’ is not a level; it is a mood with a ticker. If the one-sentence test fails, the name is a story you are following, and stories belong in the newspaper part of your read, not on the list your plan acts from.

Size, rotation, and the monthly review

Five to ten names is the working range, set by the real budget, which is attention. Each name costs its share of the fifteen-minute morning read (Lesson 24); a list of twenty silently converts the routine into skimming, and skimming is how levels get read wrong. The list is reviewed monthly, on the Sunday rhythm, and rotation is ruthless: a name leaves when its level breaks and does not reclaim, when its story fundamentally changes, or when a clearer name needs the chair. Leaving is not a verdict on the company; it is housekeeping on your attention.

New names enter the same way the originals did — through the three filters, usually off a Screened list where they appeared repeatedly. A name that screens once is news. A name that screens for a week, in your vehicle, with a level you can state, is a candidate. The watchlist rewards the repeat appearance, not the exciting debut.

A watchlist is not a portfolio

Most names on a good watchlist are never bought. That is not failure; that is the instrument working. Watching prepares the two things a live opportunity never gives you time for: the level, measured calmly in advance, and the size, computed from it. When a watched name finally reaches its shelf and holds, the plan lines write themselves in the morning’s last four minutes, because the thinking was done weeks earlier, at leisure.

Keep the two lists’ jobs separate in your mind. The portfolio is where your money is. The watchlist is where your preparation is. Confusing them — buying a name because it has sat on the list feeling familiar — is how watching curdles into owning by osmosis. Familiarity is not a filter. The three filters are the filters.

Practice

Work the worked example first. For rows B, C and D, write the exclusion reason in one line each, choosing from the lesson’s own four: wrong vehicle; distance too wide to size; no level you can state in one sentence; no chair free. Then check your lines against the table — B fails on distance, not price (its capital check passed), C fails the level test, and D is not a failure at all, only a wait. Then take the most recent Screened list, run your three filters over it, and write the same one-line reason for every name you drop. Keep the lines: they are the agenda for your monthly review, and the watchlist stays a research list precisely because its exclusions are written down.