How to swing trade is a masterpiece by a veteran trader of several decades.
He shares his own experiences and defines practical steps that one can immediately implement in trading.
So, what are you waiting for? Let’s see what’s in store for us in this book.
Basics That Tilt You Toward Swing Trading
Some basic concepts and aspects let a beginner decide if their personality and lifestyle will fit swing trading. It gives you that breathing space that day trading or scalping cannot give.
The book discusses some advantages of swing trading that a retail trader can exploit early on. This lets the novice trader be more open to continuing if this is his cup of tea.
Aspects like liquidity are not a disadvantage for a retail trader if he opts for swing trading. Institutional traders are on the back foot if you consider only the large positions they trade in.
High-frequency trading has little to no impact on swing trading for the retail trader when compared to a day trader.
Swing Trading Tools and Advantages
Like any other profession or type of trading, swing trading has advantages. One major advantage that immediately comes to mind is commissioned. Swing trading results in lesser commission compared to day trading, as you take fewer trades.
The author describes that many brokers give tools for technical analysis to help make trading decisions. They provide price and volume patterns that allow you to do further analysis based on your trading setup to take trades.
With the advent of discount brokers, many of them provide scanning tools and alerts that make life easy for a swing trader. All you have to do is analyze using scanning tools, place alerts and relax. You trade only when you get an alert, drastically reducing your screen time.
Risk Management
Brian, just like a seasoned trader, keeps it simple. He rightly says your capital is the most important tool in trading. Without capital, you cannot be an active swing trader, as it may involve you being in trades for longer periods.
Some basic and fundament aspects of trading, like embracing emotionless trading, honoring stop losses, and trading as per the plan, are discussed.
These might sound redundant if you have already read through books on swing trading or general trading.
The author stresses the need to constantly review open positions to ensure that you don’t miss out on adjustments when required to manage your trades.
Some tips are provided on how to maintain a log of your trades as well. All important aspects of a trade that will help effective analysis and take corrective actions if necessary.
Does Fundamental Analysis Help in Swing Trading?
The author introduces the analysis that can aid swing trading. He starts providing simple, commonly used aspects of fundamental analysis that can aid swing trading.
He says a fair bit of knowledge of PE ratios, earnings, and the study of returns of a company helps to create a view of short-term swing trading.
A more in-depth study of more aspects of a company's financials lets traders take long terms perspectives as well.
Aspects like hot sectors and short squeezes are explained in simple terms that may look like no-brainers for an experienced trader.
Let’s Get Technical
Brian explains the basics of charting and candlestick patterns that the reader can familiarise himself with. Introduction to gaps and how to trade them have also covered that aid swing trading.
He highlights the importance of technical analysis and the study of past price action that will aid swing trading; when price trades closer to major moving averages, support or resistances, and trend lines, they tend to act as self-fulfilling events.
Many traders and machines trade at such self-fulfilling events, which gives us enough reason not to avoid them.
Strategies for Beginners
The author discusses 3 basic strategies that a beginner can apply to the swing trade. These strategies range from short-term, an overnight position to long-term for a few weeks.
Regularly scanning for trades.
Short-term Gap trades.
Hot sector Manias
Short-term Swing Trading -Regular Scanning for Trades
Regular scanning for trades is for someone whose horizon is short-term. It can range from an overnight position to a few days.
Brian suggests the use of scanners that are either available for free or provided by some brokers as well. Scanning stocks by the patterns discussed in the book will filter out stocks based on bullish or bearish views.
Once you have stocks filtered in scanners, a trader can analyze chart patterns discussed in the book to form a view for the short-term swing trade. This strategy lets a trader skim down stocks to the best risk/reward to take a trade.
How to Trade Using GAPS?
Gaps provide opportunities for traders to take advantage of the trend and when the momentum is strong.
Gap trades work best when markets are trending. They are less reliable in choppy markets are phases of accumulation.
A trader should identify stocks that have a strong momentum towards the last 30 minutes of the trading day. Stocks identified can provide an opportunity for an overnight position as the momentum is expected to continue into the next day's opening as well.
Swing Trading Using Hot Sectors
This type of swing trading requires a lot of patience. If you are the type who can wait patiently for trades, the reward can be big. This type of swing trading lets you take fewer trades and wait for the right opportunities.
The author rightly says that swing trades for longer periods involve you to filter sectors that are going to be in play. You will be following big money with hot sector swing trading, and the results can be astounding if you get them right.
He stresses the importance of a good entry as it’s the first dot to get the trade right. A right entry allows things to flow, and a clear jotted-out plan on exit is all you require to make money in swing trading.
Conclusion
Swing trading lets you slow things down. This helps a beginner learn and refine the process as you gain experience.
If you are the type who cannot handle the rush hour type of trading, then the concepts discussed in this book will let you embrace swing trading strategies.
Grab your copy of the book if swing trading excites you.
(Amazon paid link)
Guest Post - Written by Mr. Lal Bajaj, Bangalore
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