I've made my living off the markets since 2005.
Here are 12 Lessons for #SwingTrading Stocks, including:
-capital needed
-strategies
-position sizing
-when to avoid trading
-scanning for stocks
-And Much More...
A thread ππ· π
Here are 12 Lessons for #SwingTrading Stocks, including:
-capital needed
-strategies
-position sizing
-when to avoid trading
-scanning for stocks
-And Much More...
A thread ππ· π
1. How Much Capital to Swing Trade #Stocks
If you pay commissions, start with $5,000+. Need bigger profits to compensate for commissions (often a flat fee).
If you don't pay commissions, can start with $1000 or less.
To earn a decent side income, you'll need more.
If you pay commissions, start with $5,000+. Need bigger profits to compensate for commissions (often a flat fee).
If you don't pay commissions, can start with $1000 or less.
To earn a decent side income, you'll need more.
2. Leverage:
Open a "margin" stock trading account to access leverage.
For swing trading, you can often access 2x leverage AKA 50% margin.
This means you can buy positions worth twice your capital. $10K deposit, trade up to $20K.
Bigger potential profits...and losses.
Open a "margin" stock trading account to access leverage.
For swing trading, you can often access 2x leverage AKA 50% margin.
This means you can buy positions worth twice your capital. $10K deposit, trade up to $20K.
Bigger potential profits...and losses.
You don't need to use leverage, it is just an option.
And I recommend NOT using it until you have at least several years of profitable trading under your belt.
I was swing trading stocks almost a decade before using leverage...and I still use it sparingly.
And I recommend NOT using it until you have at least several years of profitable trading under your belt.
I was swing trading stocks almost a decade before using leverage...and I still use it sparingly.
3. Earnings Announcements:
For swing trades lasting days to a few months, don't hold trades through earnings.
It's a gamble whether the market will react favorably.
The price may gap through a stop loss, which means bigger losses than expected.
Exit the day before earnings.
For swing trades lasting days to a few months, don't hold trades through earnings.
It's a gamble whether the market will react favorably.
The price may gap through a stop loss, which means bigger losses than expected.
Exit the day before earnings.
4. Have a #Trading Plan Before trading
At minimum, the plan defines:
-How, why, & when you enter
-How, why, & when you exit
-Position Sizing
-How you determine when to trade and when not to (conditions assessment)
-How you find trades (scanning etc)
(all discussed below)
More:
At minimum, the plan defines:
-How, why, & when you enter
-How, why, & when you exit
-Position Sizing
-How you determine when to trade and when not to (conditions assessment)
-How you find trades (scanning etc)
(all discussed below)
More:
5. Position Sizing
Choose your max number of positions (me: 5-7)
Divide your capital by this.
Put that amount into each stock assuming risk is only about 5% or less.
If risk is more, put less capital.
If risk is less, put a bit more capital.
Example...
Choose your max number of positions (me: 5-7)
Divide your capital by this.
Put that amount into each stock assuming risk is only about 5% or less.
If risk is more, put less capital.
If risk is less, put a bit more capital.
Example...
$100K account, 5 positions.
$20K goes to each stock.
If the difference between the entry and stop loss is 5% (Trade Risk) put $20K to that trade. Because $20K x 5% = $1000 which is only 1% of the account.
Keep risk on the account to about 1% or less per trade.
$20K goes to each stock.
If the difference between the entry and stop loss is 5% (Trade Risk) put $20K to that trade. Because $20K x 5% = $1000 which is only 1% of the account.
Keep risk on the account to about 1% or less per trade.
If Trade Risk is 10%, only put $10K into that trade.
If you lose 10% of $10k ($1000), that is again 1% of your total $100K account, which is acceptable risk.
More on position sizing methods:
If you lose 10% of $10k ($1000), that is again 1% of your total $100K account, which is acceptable risk.
More on position sizing methods:
6. Strength
It's easier to swim downstream.
Trade stocks that are stronger than average (indexes are average).
I typically look for stocks with double+ the returns of the S&P 500.
This alone boosts swing trading performance.
They carry you along while they remain strong...
It's easier to swim downstream.
Trade stocks that are stronger than average (indexes are average).
I typically look for stocks with double+ the returns of the S&P 500.
This alone boosts swing trading performance.
They carry you along while they remain strong...
7. Trade in Good Market Conditions
Only trade when momentum is in a strategy's favor.
For me, good conditions are:
-50%+ of stocks above their 50-day MA
-NYSE AD Line holding up well or better than S&P 500
-Small daily moves on S&P500; 2% daily drops = warning
-Index uptrends
Only trade when momentum is in a strategy's favor.
For me, good conditions are:
-50%+ of stocks above their 50-day MA
-NYSE AD Line holding up well or better than S&P 500
-Small daily moves on S&P500; 2% daily drops = warning
-Index uptrends
8. Strategy: Contractions/Triangles
One of my favorite patterns is triangles in strong uptrends. I trade them in a specific way.
I use the same triangle method to trade breakouts from handles in Cup and Handle patterns.
Details:
One of my favorite patterns is triangles in strong uptrends. I trade them in a specific way.
I use the same triangle method to trade breakouts from handles in Cup and Handle patterns.
Details:
9. Scanning
I buy during uptrends. I trade strong stocks. I thus scan for strong stocks.
-Look for strong stocks compared to the S&P 500.
-Look for stocks within 30% of their highs (no bargain hunting).
Here's my current scan (adjust as S&P 500 performance changes):
I buy during uptrends. I trade strong stocks. I thus scan for strong stocks.
-Look for strong stocks compared to the S&P 500.
-Look for stocks within 30% of their highs (no bargain hunting).
Here's my current scan (adjust as S&P 500 performance changes):
10. Profit Targets
Keep targets grounded in reality, not hope.
For most strong stocks, 20%-30% targets work well. This is usually followed by a sideways period or pullback.
Look at prior price moves in the stock to assess how far it typically moves before pulling back/ranging.
Keep targets grounded in reality, not hope.
For most strong stocks, 20%-30% targets work well. This is usually followed by a sideways period or pullback.
Look at prior price moves in the stock to assess how far it typically moves before pulling back/ranging.
11. Reward: Risk
Based on my assessment of the profit target, I only take a trade if the profit potential is 3x my risk, or more.
For example, if I'm entering at $100 with SL at $95. The price must reasonably be able to move to $115 or higher in order to take the trade.
Based on my assessment of the profit target, I only take a trade if the profit potential is 3x my risk, or more.
For example, if I'm entering at $100 with SL at $95. The price must reasonably be able to move to $115 or higher in order to take the trade.
12. Monitor & Track
Screenshot trades to track slight variations. Details matter. You may notice commonalities between your winners/losers.
Track your win rate & reward:risk on closed trades. Many trading problems can be linked back to these.
Trade log: tradethatswing.com
Screenshot trades to track slight variations. Details matter. You may notice commonalities between your winners/losers.
Track your win rate & reward:risk on closed trades. Many trading problems can be linked back to these.
Trade log: tradethatswing.com
If you enjoyed this thread and want more like this, follow along: @corymitc
Please share or retweet the first tweet in the thread.
This thread is based on my Complete Method Stock Swing Trading Course: tradethatswing.com
Please share or retweet the first tweet in the thread.
This thread is based on my Complete Method Stock Swing Trading Course: tradethatswing.com
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