What is swing trading?
To make money in the stock market it is necessary to have a disciplined approach to
trading. We also believe that it is also important to keep things simple. While our
goal is to keep things simple, the trading rules might initially seem a bit complex.
However, once you learn the rules and you trade with discipline, you will make
money in the stock market.
Swing trading allows you to make money when the market is bullish, or bearish, or
just going sideways. That is why it has a distinct advantage over other approaches
to investing. The goal is to make money, not to rest one’s hopes on the future of a
stock, a sector, or the economy.
Everyone is familiar with waves. A wave alternates from positive to negative, then
to positive and negative, and so on. Waves are found in nature – you see waves
when you throw a rock into a lake. Sound is transmitted in waves. And when stock
prices change, they follow a wave-like pattern. The wave is rarely as orderly a sine
wave, but they are waves nevertheless, and we use these waves in Swing Trading.
Short "how to" steps in Swing Trading:
Restrict your selection to the universe of stocks that fulfill certain criteria.
Choose stocks that:
- Have a price of at least $7
- Have an average daily volume of at least 500,000 shares
Then:
STEP 1 - Identify a stock that is in an uptrend or a downtrend.
STEP 2 - For stocks in an uptrend, identify those that are experiencing a pull-back.
For stocks in a downtrend, identify those that are experiencing a pull-up.
STEP 3 - Once an appropriate candidate is identified, place a limit order to buy
(uptrend) or sell short (downtrend) the stock based on the Master Plan.
STEP 4 - Once a stock has been traded (a position opened), place a stop-loss order
to limit downside risk and place a limit order to identify the price at which
you will take profits. OCO(One Cancels Other) order; this is sometimes called an OCA (One
Cancels All) order.
STEP 5 - At the end of each day, adjust the stop loss prices based on the Master Plan.
