Swing Trading Rules Review

About the Basics of Swing Trading for Beginners

paperwork with bar chart on top - technitrader
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.

Watch the TechniTrader 
swing trading training webinar - technitrader

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.

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 SAM.   

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.

Watch the TechniTrader.com
"How to Use Stock Scans Webinar"

how to use stock scans webinar - technitrader

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.

I invite you to visit the Learning Center on my TechniTrader.com website, below is the link: 
 Go to the TechniTrader.com
"Learning Center Webinars"
 
learning center webinars - technitrader

Followers of this blog may request a specific article topic by emailing: info@technitrader.com

Trade Wisely,
Martha Stokes CMT

Chartered Market Technician
Instructor and Developer of TechniTrader® Stock and Option Courses
TechniTrader DVDS with every course.

©2016-2017 Decisions Unlimited, Inc. All Rights Reserved.
TechniTrader is the Registered Trademark of Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor, it is strictly an educational service.

The Short Side Of The Market

The Differences Between Buying Long and Selling Short


Stocks move upward in fairly typical patterns that occasionally alternate and shift from Stairstep to Peaks and Valleys Candlestick Patterns for instance. But the sell side of the market can often drop like a dead weight. An uptrend looks like a gentle slope upward until the peak which is often more steep, but the downside frequently looks like a sheer cliff. Stocks will plummet far faster than they rise. This makes Selling Short more profitable in the short run, but also much riskier because of the momentum behind the runs.

hourglass with money in replace of sand - technitrader
It usually takes a novice trader about twice as long to learn to Sell Short, as it does to learn how to buy long. For Long-Term Investors who have been taught that Selling Short is “bad” for the market, the length of time can be even longer. 

Selling Short is not bad for the market. It is actually a good thing. If you were to look at a stock chart of the Dow 30 Industrial Average since it began over 100 years ago, you would see that during all that time the trend has been up. Intermittently, there have been brief periods where the market moved down, but it always returns to moving up. The periods where it moves down are correction phases that are necessary to sustain the long term uptrend. These corrections adjust the Angle of Ascent™ of the market uptrend keeping it stable and sustainable. Without them, the market could not sustain a very long upward move. 

Selling Short has been around since the earliest days of the Stock Market. It is not something new but something that is an integral part of the Stock Market, and it provides a means of making money during the normal and necessary Market Corrections.
Watch the TechniTrader
beginners how to trade the stock market webinar - technitrader

The market corrects because prices become speculative, and no longer represent the true value of the stock in relation to its company’s growth potential. As the price falls, the value of the company and the value of the stock come back into sync or harmony. 

Many traders enjoy the fast paced atmosphere of Selling Short, but some of the basic rules of trading are different for the sell side of the market. One thing that has changed recently is that there is no longer an Uptick Rule. This rule had been enacted after the market collapse of 1929 as a means of controlling Selling Short, to keep it from causing market collapses. In recent years with the advent of computer programs that initiate curbs, trading is halted on a stock that is too speculative. The Securities and Exchange Commission SEC deemed the Uptick Rule no longer necessary, and after two years of testing it was eliminated. 

Some of the differences between Buying Long and Selling Short are the following:

1. You will see more stocks dropping on lower Volume, and stocks dropping day after day in a momentum run down. If you look at charts you will see that the upside is gradual and that the down side is much steeper. This is one of the reasons Downtrending markets last a short period of time, while Uptrending markets last for long periods of time. Most traders are simply more comfortable with the long side and holding as a stock moves up, and to them Selling Short may seem weird and confusing.
Go to TechniTrader 
2. What makes markets surge or move upward is energy, enthusiasm, and buyers. What makes stocks drop is uncertainty, indifference, despair, and panic. Stocks run up because of energy. Stocks can drop due to lack of energy. a dull market is at risk of dropping from its own weight of indifference. Stocks do not always need bad news to drop. They can drop because of a lack of interest.

3. Weak support will collapse without much effort. Moderate support will buckle if the stock has bad fundamentals or is in a weaker sector. Strong support will hold for the most part when the market is not in a Great Bear Market.

Summary

Corrections in the market adjust to overextended patterns in sectors, which have been over heated and running too long on the overbought side.

Followers may request a specific article topic for this blog by emailing: info@technitrader.com

Trade Wisely,
Martha Stokes CMT

Chartered Market Technician
Instructor and Developer of TechniTrader® Stock and Option Courses
TechniTrader DVDS with every course.

©2016 Decisions Unlimited, Inc. All Rights Reserved.
TechniTrader is the Registered Trademark of Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor, it is strictly an educational service.

Trading And Investing Styles

Types Of Styles With Descriptions

A trading or investing style will dictate which financial trading instrument should be used. Most traders do not have a well-defined investing or trading style OR they are attempting to use a style that is unsuitable to their personalities, goals, capital base, education, and experience. The primary Trading and Investing Styles are the following:

spider chart of core market knowledge™ showing trading and investing styles - technitrader
Intraday Trading
This the fastest paced trading style that requires the highest skill level in terms of chart analysis, Technical Analysis, risk assessment, order calculation and execution, money management, and self-discipline. Professional level education and extensive experience over many years and thousands of trades, is necessary for consistent success with intraday trading. It is not for beginners or intermediate level traders because this trading style is the most demanding in time and commitment. It also requires professional grade computer equipment, execution software, and a large capital base. Intraday is the highest risk trading style. Typical lot sizes are 5000-50,000. This trading style group also includes High Frequency Traders.

Beginners should start with the basics. 

Go to TechniTrader 
the basic of the stock market for new investors and beginning traders - technitrader

Day Trading
This is very fast paced trading style requires high skill levels in chart analysis, Technical Analysis, risk assessment, order calculation and execution, money management, and self-discipline. This trading style requires advanced level education, many years of experience with hundreds to thousands of trades. It is not recommended for beginners or limited experience traders. Day trading requires near professional grade computer equipment and execution software, a moderate to large capital base, and is a high risk trading style. Typical lot sizes are 1000-10,000.

Velocity aka Momentum Trading
This fast paced style requires moderate to high skill levels in chart analysis, Technical Analysis, risk assessment, order calculation and execution, money management, and self-discipline. With sufficient simulator trading experience, intermediate to novice level traders can succeed with this trading style. A minimum of 2-3 monitor computer system linked to a fast reliable execution system is sufficient, a moderate capital base is also sufficient. It is a moderately high risk trading style. Typical lot sizes are 1000-10,000.

Swing Trading
This is a moderately fast trading style which requires moderately high skill levels in chart analysis, Technical Analysis, risk assessment, order calculation and execution, money management, and self-discipline. With sufficient simulator trading experience, intermediate to novice level traders can succeed with this trading style. A minimum of 2 monitor computer system linked to a reliable execution system is sufficient. Swing requires sufficient capital to swing 500-5000 shares at a time.

Watch the TechniTrader 
swing trading training webinar - technitrader 
   
Position Trading
This is the lowest risk and easiest short term trading style to learn. It is suited for beginners to advanced traders, and to traders with limited time or time constraints. A moderate skill level of chart analysis, Technical Analysis, financial analysis, Institutional holdings analysis, growth analysis, risk assessment, order calculation and execution, money management, and self-discipline is adequate for this trading style. It requires a low to moderate capital base with average lots ranging from 100-5000 shares. This is a low risk trading style.

Intermediate Term Trading
This style is a longer version of the position trade which extends to less than 1 year hold time. It is suited for long term investors who are just learning to short term trade. A low skill level of chart analysis, financial analysis, Institutional holdings analysis, growth analysis, Technical Analysis, risk assessment, order calculation and execution, money management, and self-discipline is adequate for this trading style. A low capital base will suffice. Lots range from 100-1000 shares average. Beginners will find this trading style lower risk with good Return On Investment ROI.

Long-Term or Retirement Investing
This is the lowest of all risk so long as Technical Analysis is used in conjunction with Fundamental Analysis, and cyclical trend patterns are applied. Financial, product cycle, business cycle, and Technical Analysis are important for long hold investments. A low capital base will suffice. Lots range from 100-1000 shares average. Beginners will find this investing style lower risk with good Return On Investment ROI.

 Watch the TechniTrader 
Note
Although most traders are concerned only with making monthly income from financial markets, everyone needs a retirement account. Therefore knowing how to properly invest for the long-term is necessary in addition to your short-term trading style.

Choosing Your Trading Style
Before selecting a financial trading instrument you must first choose a trading or investing style. Selecting your style must be based not on dreams of great wealth, or on what you perceive to be the most popular instrument, nor should it be based upon what you believe friends and family will admire.

A trading or investing style is based upon risk tolerance, time available to trade, amount of capital, level of financial education, experience in trading, and individual personality.For example just because you may want to Day Trade, does not mean Day Trading is right for you.

Followers may request a specific article topic for this blog by emailing: info@technitrader.com

Trade Wisely,
Martha Stokes CMT

Chartered Market Technician
Instructor and Developer of TechniTrader® Stock and Option Courses
TechniTrader DVDS with every course.

©2016 Decisions Unlimited, Inc. All Rights Reserved.
TechniTrader is the Registered Trademark of Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor, it is strictly an educational service.