November 18th, 2008 by admin
The swing trader is not looking to turn a profit in a day. He will hold a stock anywhere from three days to three or four weeks.
This trading technique is most suitable for people who do not have the time to dedicate to sitting in front of a computer to monitor the markets when they are open. Many traders who are novices find swing trading to be the style that they are best suited for.
Swing traders tend to pick stocks that are traded on the big three exchanges which are the NYSE, AMEX and NASDAQ. The reason that they stick with stocks traded on these markets is because they are the most actively traded markets so these stocks have the greatest chance of going very high or low in a given day. This means that the swing traders won’t have to hold onto stocks too long before making a profit.
Swing traders prefer to trade when the market is not in full bull market or in full bear market. Swing traders are poised to make the most profits when the market is relatively static. The swing traders will make money with short-term movements in the market.
As a swing trader, you will not make a lot of money with one trade. The profits will be aggregated from making multiple trades over a period of time. Swing traders will only buy and sell once the stock has reached its baseline, so that they could make their trade at the best possible moment to get the most bang for their buck.
A swing trader will attempt to earn a 10-15% gain on his investment, which makes it a viable strategy for beginners, but would also have enough profit potential to interest intermediate traders too. To make the most gains, swing traders try to sell their stocks as close to the upper or lower margins without jeopardizing their chance at missing the large gains. If a swing trader waits too long he runs the risk of the market turning around and he’ll wind up losing money instead of gaining.
With practice, a swing trader can learn to read the market indicators and avoid this from happening often.
The great thing about swing trading is that beginners find out pretty quickly whether their decisions to buy or sell have paid off, which can be an enormous incentive to continue. Swing trading isn’t as quick as day trading to see a return on your investment, but it also doesn’t require the attention to market conditions and details that is necessary for day trading to be successful.
In addition, swing trading is also a lot less stressful than day trading. Day traders often find themselves stressing over all of the stock trades they have to make in a day and hope that they have made the correct decision.
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January 4th, 2008 by admin
1) Stocks that reach $10.00 are more likely to run to $15.00 than pull back. Traders will run the stock up to $15.00, presumably because many mutual funds start buying at $15.00.
2) Formula for big gains: buy early, sit tight, sell right.
3) Put stops on the day of purchase. If you can’t figure out where to put your stops, you may not have bought right.
4) Follow MANY stocks to spot unusual strength.
5) Some industry groups are too large and diverse to move in sync.
6) Conversely, some investment themes may pull in stocks from different groups (for example, alternative energy: solar, ethanol, fuel cells, batteries, silicon makers, capital equipment, biodiesel, energy saving devices, etc.).
7) The more attempts at support/resistance, the more valid the penetration.
Do not get frustrated over a failed breakout and throw out the stock. The market may be weak or the stock may need more time to complete the base.
9) Sometimes if you can’t figure out the base - give it more time, and things will become clear.
10) Beware of things that are too obvious - it may be a trap.
11) The steeper the trendline, the less meaningful the penetration of support. It’s more likely moderating of the curve rather than the end of a trend.
12) Conversely, the closer a trendline is to being horizontal, the more significant the penetration.
13) The best runs never touch the 50 DMA.
14) A BAD break is usually followed by more selling - don’t be fooled into a quick or quiet pullback.
15) On the other hand, if a stock sells off hard one day but fully regains the lost ground and moves higher the next day, it is a sign of strength. Sellers are less likely to have the firepower to repeat the trip.
16) Thinsters are less likely to go down in a weak market as insiders are not selling and traders have not yet gotten into the stock.
17) Most people have similar pain thresholds. If you wait to sell until the pain becomes unbearable, you will most likely sell at the bottom.
18) Do not short on the first break through the 200 DMA. That’s where many professional shorts are likely to cover, and value funds step in to buy.
19) A big one day jump in a declining stock indicates short covering - not a change of direction. Unless you play short squeezes, wait for the quality of buying to improve before entering.
20) The MARKET cannot make you rich - but will provide enough opportunities for you to build wealth. All you need to do is find and act on them.
21) The market is an equal opportunity provider. Sometimes it favors longs while running in the shorts, other times it frustrates the longs by handing the shorts a quick and substantial reward.
22) Only the unexpected happens in the market.
23) Major turns will not occur when everyone is calling them.
24) Institutions have NEVER called major tops, much less the beginning of MAJOR uptrends.
25) Everyone has access to the same information - it’s what you do with it that makes the difference.
26) Investors tend to act on their most recent memories first. Look to the most recent pattern for a replay. A differing pattern indicates a change in market behavior and should be taken seriously.
27) Market direction does not change overnight as it takes time to get the crowd into a particular mood and then get it out of it.
28) People take time to form an opinion. If something contrary happens, it tends to be ignored until it either sinks in or subsequent events confirm the change. This delayed reaction is sometimes reflected in the stock action: the event suggests “B” but the market continues with “A”, seemingly oblivious to the new contrary signal.
29) No one on Wall Street EVER opens their mouth without benefiting themselves. Remember that the next time you decide to follow somebody’s advice.
30) On option expiration, the market is likely to move against the retail option buyers: if the majority of retail buyers hold calls - the market is likely to drop in puts - the market is likely to rise. A simple strategy by institutional option sellers to ensure that as many options as possible expire worthless.
Slav Fedorov is a full time stock trader and founder and managing member of TradingZoom, LLC - a provider of proprietary trading data that swing traders can put to work right away. http://www.tradingzoom.com/
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