Ten Rules For Swing Trading
trading is a method of trading trying to capture
short-term gains in markets. We identify markets
that have the potential to make an immediate move, entering
those markets and using strict money management to help protect
against major losses and lock in profits. Trades are normally
held for one to five days, but there really is no specific time
limit. What we are interested in is recent trend whether that's
two days or two weeks and we want to ride or "swing" from one
price level to a previously shown price level. We want to trade
with the trend.
there are many, many rules to trading, not just ten. That's what
training sessions are for, because the fact is whether there
are 20 or 200 rules, until you're in the market you won't know
which is more significant and at what point is it significant. As
mentioned, trading is an art and a science.
You will use a stop loss upon entering your position depending
on the time chart you're trading and its support and resistance
levels. Different time views will show differing
support/resistance. Don't day trade using weekly
support/resistance levels. Use the S/R showing on your time
chart... whether that's a 5 minute chart, 30 minute chart or
Support and Resistance must be honored.
Swing trading involves identifying short-term support and
resistance and where a market will likely re-assert
itself. Therefore, wait for follow through
before attempting to enter a trade. For longs, this
means waiting for the market to turn back up, and for shorts, it
means waiting for the market to turn back down. Using Fibonacci
retracements can be helpful for this but like everything else is
not the ONLY thing you should be watching.
3. Take Partial Profits
This is tricky for most traders. Do you let things
ride and risk you current profit? Do you sell some holdings as
price moves in your favor? You need to make hard rules of
engagement without risking your current profit. For day and
swing traders, learn to take some profits especially as price
approaches resistance... the more meaningful the resistance the
more likely a rollover.
Take Fast Money Profits Quicly
You will learn quickly enough that the market can give you a
huge gain in minutes and just as quickly take it back. Trailing
stop-losses can help here, but generally if you're not in front
of your machine you could miss those quick moves.
Trade Active Markets
By staying on top of current market action for the week you will
be able to identify where the crowd wants to play. The crowd
brings money and interest, liquidity and volume, to individual
stocks and industries.
Are The Odds In Your Favor
Maybe it's momentum or technical patterns or relentless
positive or negative headlines driving the action. See
chart checklist and
Money Management and Position Size ....
You can add to your position if you didn't go "all
in" according to your trade size as price moves in your
direction, all other things being equal. See
Get a Routine Together
Find an approach that works
for you and apply it in a consistent manner. The approach that
works is the one that allows you to be profitable while
minimizing losses. By learning to keep losses small you will
always have money to get back in. Carelessness will blow up your
account and keep you out of the game. It's about making money,
not being right, thus when you're losing admit you're wrong and
stop holding a loser.