Sunday, November 17, 2013

Week - 1 Swing trading - Basics

I am taking a different approach for my blog, rather than discussing indicators, I want to give a basic insight of Swing trading, and those who are not interested can close and walk away, just like you leave money on the table right now. I will try to add weekly articles on swing trading. Once I complete the basic lessons I will also start adding my weekly watch lists for Swing trading the following week.

Swing trading securities could be a challenge for those who ignore the technical analysis.
First thing you need to understand is technical indicators vs Market Sentiment.
Secondly, the market is going to challenge you, no matter how good you are. I lost money in the first year. But now I constantly make 10-20% a week. Add those up over an year (1.10 ^ 52 = 140) if you start with just $1000 and swing trade for 10% every week, will add up to $140,000 ideally. Now the question to you is how are you going to do it?
Three Simple disciplines (get a tattoo if you have bad memory)
1) Plan your trade over the weekend (Scan and analyze)
2) Trade the Plan (Take positions)
3) Exit when you mess up (Have set mental stop losses)

If you cannot perform the first step, you cannot execute the next two steps. So scanning for stocks is a vital step.

Before we get further into strategy scanning, let me try to define what “I” mean by swing trading?
A trading strategy for securities to capture short term moves in the stock market. I typically hold a stock for 2 to 5 days, unless I get stopped out on day one. This to me is a perfect time frame for non-day traders and to capture explosive moves in a stock in a very short period of time. (This explosive moves happen over and over again, you will love it when you learn all my tricks and tactics)

As a swing trader I am not worried
  • About the fundamentals of a company. (I run it through very quickly at times if I am playing a reversal play, catching a falling knife is tough)
  • What kind of products they sell. (I look for their Price to Sales ratio, and yearly sales % increase, market sector, and projected EPS and etc...... if any, just to decide if its going in for a trade bucket list *)
  • What the name of the company is. (Of course, I will look at it if it has to hit my trade bucket *)
(* note: doesn't apply for my swing trading strategies)
The decision I make solely from Technical scanning, Analysis and Plan the trade.
  • I scan with RSI, MFI, ADX, MACD, PPO, SMA, EMA, and sometimes Stochastics.
  • I look for price pattern, short interest on a security depending on what I am interested in the stocks, Bottom bouncer or Breakouts

I pick the stocks with just two criteria,
  • Is the stock getting money? (Increasing volume)
  • How much is the Risk/Reward ratio is.  (This varies with strategies)

That’s about it, if you can follow these, swing trading can be easy.

Lets start with a technical analysis, (Stage Analysis)
It is a classic method by Stan Weinstein’s, described in his book from 1988 “Secrets for Profiting in Bull and Bear Markets
Definitions of the Stages 

Stage 1 - Bottom Phase. Or Accumulation Zone.
Stage 2 - Advancing Stage
Stage 3 - Top Area
Stage 4 - Declining stage

I will try to do an in-depth lesson on stage analysis (each stage will be a weekly lesson), showing some examples later. But this should give you an idea of what is stage analysis.

Hindsight shows us, this method is beautiful. It’s not as easy as it appears when making a decision. Therefore, we need more confirmations.

-      Leave any questions in comments section; I moderate the comments, so I will post those comments, if it is helpful.

1 comment:

Unknown said...

Very good post. something i was looking for in a long time. will be doing more research on it and look fwd for future posts.
good work again !!