A “Swing Trader” falls somewhere between the day traders and the long term traders. They usually sell in a matter of days or weeks based on fluctuations in the market. Swing trading is more about pattern recognition and short term trends than who’s going to be on top in ten years.
Here are my simple rules for Swing Traders (revised):
1. Don’t Panic. Panic when appropriate. Before 2008 the “Don’t Panic” rule made perfect sense, now I’m wishing I had panicked in January of 2008. Cashing out when things are good but a little sketchy is OK. However, if you are short term, stick to your plan and rely on your safety net.
2. Always place conditional limit trades. Use a conditional order that will automatically sell at a set price above what you bought at, or sell at a set “trailing percent”. This is your safety net in case you’re scuba diving in the Bahamas when your stock tanks. (be careful to give the stock enough room for normal fluctuations so you don’t accidentally dump a stock on a dip)
3. Turn your TV off. The people commenting on CNBC don’t care about you. They’re entertainers filling the gaps between commercials. Do your own homework and have your own strategy. TV is just monkey chatter.
4. Never look back. Don’t regret taking a loss, just move on.
5. Evolve a strategy. Let your mistakes and successes guide you. Keep track of what went wrong and why. Leave emotions in your therapy session.
6. Take profits without mercy. Remember what you’re in this for. Set a minimum percentage that you can live with and cash out. If you’re doing well, don’t forget to send yourself a check to cover the bills.
7. Always do your homework. The Internet gives you so much information. Use it to your advantage and know the facts before investing. Use Bollinger bands and other averages to help you in short term investments. Stock screeners are great tools to help you find strong companies.
8. Don’t get too technical. If you can’t explain what your doing to your non-trader friend in a couple of sentences, then you probably shouldn’t be doing it. Don’t miss a good trade because you were inflexible on price.
9. Don’t wait for a bad stock to improve before selling, just get out. It will make more money elsewhere.
10. Get your affairs in order. Do some basic personal finance before risking money in the market. Pay off debt and make sure you have enough to support your family for several years no matter what happens. Create a stable platform before you do anything risky, and never risk more than you can afford to loose.
Matt
See my trades for free at www.tickermonkey.com
The good, the bad, and the stupid.
