About the Basics of Swing Trading for Beginners
Swing Trading
is the precise entry and exit of a stock based upon a single run up, or down
for selling short. This is typically 3-5 days, but it can be as short as 1 day
or as long as 10 days. The theory is based upon the fact that all stocks
rise, then retrace or consolidate, and then rise again.
Swing Trading requires
the ability to recognize early buy and exit signals. Swing Trading does
not rely upon profit stop losses for exits, but mostly depends upon selling “At
Market” or a very tight stop loss intraday. The Swing Trader exits prior to any
risk of retracement. Swing is most lucrative during strong Momentum Market
Conditions.
Go watch the Swing Trading Training Video and learn about precision entries and exits, and how to use leading indicators to enter a stock before price moves.
You must study prior runs to see how many points are
possible during a Swing Trade. I recommend that you select Swing picks only if
they have at least 3 points in a run on average, but 5-10 is more ideal however
this often only occurs in at least Moderately Trending Market Conditions. You
count a run by starting with the first candle that started the move up, and you
start at the low price.
Then you go to the highest candle, and take the high for
that day. That is the Run Gain. You should try to calculate at least
3 previous runs, to get the average run. You must also count the gain for
the day that the buy signal formed, and subtract it from the total run gain
points to get the remaining points left in that run. So if less than 3
points are remaining, the pick is not ideal for a Swing Trade REGARDLESS of
whether or not it moves up the next day.
Beginners go watch The Basics of the Stock Market for New
investors and Beginning Traders 12 Webinar Lessons.
Go to TechniTrader
12 Webinar Lessons
Do not expect to get all of the point potential out of a
single run. It will usually be less, given the entry and exit rules a
Swing Trader must adhere to for consistent success. If you want to be a
Swing Trader, you must adhere to strict rules for selection of stock picks and
trade executions.
Swing Trading Rules include
the following:
1. Must be patient and wait for ideal setups.
2. Have a rather high Risk Tolerance.
3. Trade in larger share lots than a Position Trade.
4. Must be able to ignore stocks that move which you did not
select.
5. Must use Swing Style stop losses.
6. Know exit signals for Swing Trading.
7. Be able to react quickly to exit signals, so you can Sell
At Market.
A typical run lasts anywhere from 2-10 days. A Swing
Trader will rely more heavily on Stock Scans than on Watchlists, but in some
Market Conditions you must use both to find adequate stocks to Swing Trade.
A Swing Trade has only a few days of Consolidation or a
steep Peaks and Valleys Formation, with weak support near price.
Lastly, a Swing Trader must be able to trust the charts and
what the charts are telling you implicitly. Swing Traders do not have the
time to second guess their tools. Do not check Fundamentals unless you are
using an Earnings Strategy.
You are in a Swing Trade for such a short period of time, that checking Fundamentals or News can actually harm your decision making process. So if you do not feel comfortable buying a stock unless you have checked Fundamentals and News, then you are not a Swing Trader. Also remember, that most News about a stock is published after it has begun to move.
You are in a Swing Trade for such a short period of time, that checking Fundamentals or News can actually harm your decision making process. So if you do not feel comfortable buying a stock unless you have checked Fundamentals and News, then you are not a Swing Trader. Also remember, that most News about a stock is published after it has begun to move.
Go to the Learning Center and watch a wide variety of
training webinars including Bollinger Bands, Improve MACD, Technical Analysis
and much more.
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Wisely,
Martha
Stokes CMT
Chartered Market Technician
Instructor and Developer of TechniTrader® Stock and Option Courses
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