Making money with Swing Trading
To make money in the stock market it is necessary to have a disciplined approach to trading. 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.
When determining if conditions are proper for swing trading, take into consideration whether the overall market is trending or not. This observation alone can be helpful when deciding if stocks are likely to see follow-through for multi-day moves or if they will instead reverse course and not trend at all.
What can you expect ?
First, – only a portion of your trades will be executed. Swing trading is designed to only trade stocks that initially move in the anticipated direction. If the price moves in the opposite direction (continues pulling back or pulling up), the trade is not placed.
Second, – you will be holding positions for a limited amount of time. While swing trading is not day trading, you are only holding positions until targets are met.
Third, – some of your trades will result in losses, however losses are minimized by trailing stops which raises the stops as the stock price rises; this is known as trailing stops. Being disciplined, and following a plan will insure that profits exceed losses which means you will make money.
The Basic Setup
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 an order to buy (uptrend) or sell short (downtrend) the stock. You buy above the high of he previous day, and sell below the low.
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. (Ideally, these two orders are placed together. Ensure that both orders should never be triggered.
STEP 5 – At the end of each day, adjust the stop loss prices based on the price movement.
