30 Useful Tips for Better Swing Trading
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/
Posted in Swing-Trading | No Comments »