The last thing you want to do as an investor is to spend your whole day watching the market. All it’s going to do is give you anxiety.
However, it’s still important to keep an eye on your investments, especially when you’re planning to rebalance your portfolio.
One great solution is stock alerts. These are automatic messages that tell you exactly what you need to know about what’s going on in the market.
There’s more information out there than what you could consume and analyze in a thousand lifetimes – even if you are a trader by profession. The real challenge is sorting through the data to find the key pieces of information you need to support your investing goals.
We’ll walk you through some of the common types of alerts and how to set them up. Along with reasons why you should or should not use stock alerts, and how to incorporate alerts into your overall trading and investment strategy.
Learn More About Stock Alerts
Overview of Stock Alerts
While it would be nice to get messages from the universe telling you when to buy and sell, it doesn’t quite work that way. The best we can do is set up automated systems to let us know when certain events occur in the market, which we call “alerts.”
Remember, we don’t need to know everything that happens. We only need to know the key events that affect our individual approach and strategy.
Use Alerts for Decision-Making
As a general rule, alerts should require you to make a decision. If you set up many “nice to know” alerts, you may become numb to their appearance and end up missing the ones that really matter.
Make sure your alerts are set up so that when they appear, you take notice.
You can receive alerts in a variety of different ways, including push notifications from apps, text messages, or emails. Most alert systems are flexible, so you can set up your alerts to be sent where you’re most likely to see them.
❌ What Stock Alerts Are Not
Don’t confuse stock alerts with limit orders. Stock alerts are set up with an information source to focus your attention on a specific event. Limit orders are set up with your broker to automatically submit a trade to the market when a target price is hit.
As an analogy, consider the difference between a smoke detector and a sprinkler system. If the sprinkler system detects a fire, it automatically floods the room – no permission is required. In fact, the situation might be over before you even knew it started.
In contrast, the smoke detector lets you know that a situation has emerged that might require your attention. Maybe there is an electrical fire or maybe someone just burnt some toast. It’s up to you to decide if you need to call 911 or just open a window.
The stock alert is like a smoke alarm. The limit order is like an automatic sprinkler system.
Types of Alerts You Can Use
Alerts can focus on everything from individual stocks to portfolios, to the entire market. There are literally hundreds of stock indicators – and alerts related to those indicators – so only you can know exactly what information you need for your strategy.
Here are some of the most common types of alerts:
This is probably the most common alert and the one you likely thought about when you first heard the idea. Basically, this alert lets you know a price threshold has been reached for a specific stock.
Again, if you were sure you wanted to take action at this price, you could just use a limit order. But the point here is that perhaps you might want to take action at this price, but only if other factors (e.g., trading volume) meet your criteria. The alert lets you know it’s time to check it out and make a decision.
This alert lets you know that a stock is trading at higher or lower volume than the baseline threshold you set up. While trading volume alone doesn’t usually indicate a decision point, it’s important to be aware of. When volume is particularly high, it means something is going on with that stock and you probably want to know about it.
This alert will show up if a stock price shoots up or goes down outside the parameters you established for the alert. Large percent changes in stock price almost always mean the stock requires attention and often indicates an opportunity to buy or sell.
This alert lets us know if the stock reaches an extreme in the context of the previous year, which can indicate an opportunity. If you’re noticing a pattern here, it’s that any time a stock is outside of what’s “normal,” it often signifies an opportunity – and justifies an alert.
The price-to-earnings ratio (P/E) is an important indicator for determining stock value. Simply put, P/E is the price of the stock divided by how much money the company earns. If this number is too high, the company might be overvalued. If it’s too low, it might be a bargain.
This number is a ratio of two inputs, and it can be affected by changes in either one. The interesting part is that the price changes many times a second while earnings are released just four times per year. For this reason, P/E ratios can change gradually or suddenly, so it might be a good idea to receive alerts about it – especially if you’re a value investor.
This is an entire article in itself as there are numerous technical indicators that can be derived from a stock. Some technical indicators can be important for long-term investors, but generally, these alerts belong in the realm of the day trader.
With the right software, you can also receive alerts about the performance of your portfolio, including percent changes or price changes. If the value of your portfolio suddenly changes, you probably want to know why. Alerts make sure you find out as soon as possible.
Portfolio Events & Actions
You can also receive alerts when an event has occurred related to your portfolios, such as the completion of a trade, the deposit of a dividend, or a withdrawal from your account. Most of this information doesn’t require a decision, but it helps reduce anxiety to know you’ll get a message when an action is completed.
Most prepared investors have a watchlist of stocks they keep an eye on. You can receive alerts on individual stocks or entire watchlist portfolios. Be careful not to overwhelm yourself with theoretical portfolios, but tracking a few potential stocks is usually a wise move.
This is particularly valuable if you are a long-term investor who wants to begin short-term trading. Watchlists and watchlist portfolios can be a great way to test your methods and strategies before you put real money on the line.
Economic reports can focus on everything from individual stocks to the entire market. These include quarterly reports, stock splits, trade deals, changes in economic policy, and many more. Any of these can have a significant effect on the market – and your portfolio.
Reports are important because these are indicators that might precede price changes, so if you receive alerts and act quickly, you might be able to win big or avoid losses.
Economic alerts can also help you avoid panic. Like boats in a harbor, stocks can rise and fall with the tides of macroeconomic forces. If you saw your stock drop suddenly but then saw that all stocks dropped that day on economic news, it might not be anything to worry about.
With a focus on quantitative data, it’s easy to forget the effect of news and other qualitative information on stock prices. This is another indicator that can precede major price changes. A recent case with Google saw $100 billion in market share wiped out due to an underwhelming tech demo. Getting this news as soon as possible might create an opportunity for a trader.
Setting Up Stock Alerts
There are a wide variety of systems and platforms – some free, some paid – that can be set up to give you any kind of alert you want. Your trading app, your broker, your favorite finance website, and your portfolio tracking software all include customizable alert systems.
Here are a few examples of how to set up alerts, just to give you an idea of how the process works. This will vary with different systems, but the general idea is the same.
Mobile Finance App
Most financial apps include systems for setting up stock alerts. Usually, you just need to create a free account; then you can set up whatever alerts you want to see.
Example: Set Up Stock Alerts on the Yahoo Finance App
Download and log in to the Yahoo Finance app on your mobile device.
Now, let’s say we want to receive an alert when Tesla (TSLA) hits $250 per share.
- Type TSLA in the lookup text box.
- In the summary tab, you will see the alerts icon. Tap it.
- Tap on create new price alert.
- Enter $250 in the text box.
- Tap on done.
You’re all set. If TSLA hits $250, you’ll receive a push notification from the app letting you know. You can then decide what action you want to take.
News Service Website
Another option is to use a news delivery service to be kept up to date on events related to your portfolio based on keywords you provide.
This is a good companion to the stock alerts described above. Instead of telling us about prices, these alerts filter and deliver specific news about the company. You need both types of data to stay fully informed.
Example: Set Up News Alerts on Google
Let’s say we want to track TSLA news using Google Alerts.
- Go to https://www.google.com/alerts
- Type TSLA in the search box.
- Click show options.
- Choose the options that are most suitable for you.
- Click Create Alert.
Now you’ll receive alerts from Google any time TSLA is mentioned in a news article or report. However, it’s easy to see how this can quickly become overwhelming so fine-tuning the options is important.
Practically speaking, this will require trial and error. Set up the system how you want, see what happens for a few days, then come back and make adjustments. Over time, you will figure out which options best fit your goals and strategies.
Stock Tracking Software
Most tracking systems have alerts built-in and provide a combined, all-inclusive solution. This is a one-stop shop to get all the info you need from one trusted source. Something an effective stock alert software can help you with.
Setting Up a Stock Alert with StockMarketEye
Let’s look at how to easily set up stock alerts on StockMarketEye.
- Download StockMarketEye – try it for 30 days for free.
- Use one of the Watchlists or import a Portfolio with the stocks you want to track.
- Once added, click on the stock ticker you want to create the alert for.
- Click on the Alert icon and add a new alert.
- You can choose from among multiple alert options.
- After you enter all alert details, simply create the alert.
- You can double-check to see if the alert is created by hovering over the stock.
Tips on Using Alerts for Your Trading Strategy
Here are a few things to keep in mind when using stock alerts:
Management & Review
To remain useful, you need to regularly review and reset your stock alerts. If you have too many irrelevant alerts, you might start to ignore them. Try to be sure that any stock alert you set forces you to make a decision. Otherwise, you don’t need it.
The whole idea here is that we’re trying to take this firehose of information and reduce it down to a trickle we can actually use to help us make decisions. More information is not better. Filtering information to get the right data is best.
Not the Whole Picture
Stock alerts are only part of the whole picture. They’re not telling us what to do. Rather, they’re telling us that something is happening, and it’s up to us to use that information to make a decision based on other factors and our overall trading strategy.
Don’t rely exclusively on stock alerts (or any single indicator) to inform your trades. Use stock alerts as part of a complete process for evaluating investments and timing entries and exits.
For Long-Term Investors
For long-term investors, alerts have limited value. As you’re not making daily trading decisions, there’s no point in having your phone going off all the time with alerts about intraday price fluctuations or irrelevant news.
The exception here is when you plan to rebalance your portfolio. At this time, you might want to set up alerts for stocks you plan to buy or sell and use the data to find more favorable entry and exit points. While the benefits may be small, the money can add up over a lifetime.
For Short-Term Investors
For short-term investors, alerts are critical. You might need to make rapid decisions and the sooner you have reliable data, the better off you will be. In this sense, you are the opposite of the long-term investor as you’re receiving alerts constantly.
The challenge here is to make sure your alerts are carefully fine-tuned so that you’re only receiving the information you need.
Pros and Cons of Stock Alerts
Of course, we think stock alerts are great, but there are a few drawbacks to watch out for, too. Here are some pros and cons:
✔️ Spot opportunities. When it comes to stock trading, time is often a factor. The major value of stock alerts is that you get the information as soon as possible, so you can make an immediate decision to capture opportunities before they disappear.
✔️ Save time. Alerts help you save time by delivering information to you rather than forcing you to dig it up on your own. If you check your portfolio once a month, this might not matter. If you check it several times per day, the saved time can add up.
✔️ Only what you need. There is an endless amount of data out there, which can be overwhelming. Alerts help you filter that information to just what you need to make decisions about your portfolio.
✔️ Customizable and adaptable. Alerts can be customized and adapted to meet the requirements of almost any strategy. Get alerts immediately or once per day. Track a hundred stocks or just one. Whatever your goals, you can set up alerts to match.
✔️ Alternative to limit orders. Alerts are an effective alternative to relying on limit orders. Of course, you have some delay built into the process as you need to take actions manually, but this might be worth it to avoid trades that might not be correct.
❌ Can be overwhelming. As we warned above, it’s easy to set up alerts – maybe too easy. This means you can accidentally create a situation where you’re overwhelmed by constant alerts. Soon you’ll ignore them and miss the few that really matter.
❌ Can cause panic selling. We’re all looking at the same data. If everyone gets the same alert about a selloff, it could quickly become a self-fulfilling prophecy.
❌ Can cause overtrading. Sometimes, you can have too much information. With all these alerts coming in, you might end up trading more often than you otherwise would have. Even if your trades are perfect, you could lose money through excess brokerage fees and by creating a more complicated capital gains situation.
Start Setting Up Your Own Stock Alerts
We hope you have a better understanding of what stock alerts are and how they can fit into your long-term investing strategy. Remember, the point is not to have push notifications show up every 30 seconds on your phone. This defeats the purpose.
Instead, you want to be sure that when you see an alert, you know it’s time to take action. Most systems allow for highly specific settings to make sure you’re only seeing the information you need. This way, you can spend your time focused on the other things in your life that really matter.
If you want to give our alerts system a try, check out our StockMarketEye tracking software. We offer a 30-day free trial, so you can see if it fits your investing approach and goals.