10 keys to profitable swing trading
Trades come at you fast.
That’s just the nature of the beast. One minute you’re watching for a signal… then you’re seeing it… then you’re acting on it.
Rinse and repeat.
And that’s just part of it. Short-term traders also know that, several times a month, a specific, highly effective trade kicks into gear. It’s the kind of thing that you don’t want to miss out on. Like 800% gains over very short periods of time kind of gains.
But, like I said, even those trades can be very fast.
That’s what short-term techniques like swing trading can be so valuable to traders, especially when you’re just starting out. If you’re interested in shortening your trading time periods and really want to zero in on these opportunities, then swing trading is a great way to do that.
But it’s not easy.
Here are my 10 rules for successful short-term trading, no matter what asset you’re trading:
- Keep it simple: Complex strategies can be too overwhelming and confusing when you’re just starting out. Trade a simple strategy, especially when beginning.
- Don’t try to do it all: Many traders start too fast by trading too many markets and different patterns. Stick to one sector or type of assets (stocks, ETFs, etc).
- Always use stop losses: Getting caught in a bad trade is the single biggest reason why novice traders go under. Don’t make the same mistake. Use stop orders at all times.
- Trade both directions: The best opportunities come from trading both sides of the market. If you trade only the long side you miss 50% of all trading opportunities. This is why we created a treasure chest full of active opportunities that are non-correlated to the stock market.
- Make sure your risk to reward ratio is at least 1 to 3: Short-term produces less profit, make sure your profits are reasonable. This ratio will keep your trading profitable and produce positive expectancy.
- Don’t trade in a vacuum: One of the biggest problems that beginners face is only looking at the chart and forgetting the rest of the world. Look at the news, watch other markets, look at government reports and announcements. Dig into what is making your trades move. At the same time, make sure you avoid big trades prior to any important announcements that might swing the market away from you and destroy your positions. If you want to save yourself time and energy, we’ll keep you updated and throw investment opportunities your way. All you have to do is reap the harvest that we’ve spent the energy planting. If you’re interested, join us here to cash in.
- Use general market indicators: This goes along with the previous tip about not trading in a vacuum, this also applies to technical indicators. It’s one thing to avoid multiple technical indicators that do the same thing, but general market indicators such as TRIN and TICK are very important indicators and should never be overlooked. Always remember the big picture.
- Go with the main trend: Another huge mistake is avoiding analysis tools that provide great indicators of the long-term market direction. Even when trading against the short-term trend, always trade in the direction of the long-term trend. Just look at the 20-day exponential moving average. If the market is trading above it you should be moving in that direction. Below? Stay on the short side. Let us show you how it’s done.
- Don’t impose your will on the market: The markets cannot be controlled by you or anyone else. Don’t think that you can change the direction of the market by getting upset or adding to your position. The markets do not care about you, they have no feelings. Your job is to agree with the market as much as possible, you achieve this goal by staying in the market when the position is moving your way, getting out when it doesn’t. There’s not much more for you to do so don’t try.
- Be careful with the paper trading: Paper trading — aka practice trading — can be great. The hardest part of trading is the emotional side. When you are paper trading, you do not have to deal with that aspect.
You will make money paper trading as a result. I rarely see anyone losing money when they are paper trading.
But the purpose of paper trading is to get comfortable executing trades and learning about markets. Paper trading will not help you profit in markets. Don’t assume that since you’re killing it on paper, that will actually translate to real profits.
Remember: There are riches hiding in short-term trades, but it takes skill and experience to spot and act on those opportunities at just the right time. I know of one way to make sure, but getting comfortable with swing trading and short-term trends is critical too. Consider these 10 rules to be the first steps in a long journey toward trading success.
And then there’s the long-term… If you ever took any business or economics classes, you probably remember at least a little something about the business cycle. It’s the natural fluctuation of the economy between periods of expansion (growth, yay!) and contraction (recession, boo!). And, fact is, this cycle is the single biggest catalyst for the U.S. stock market. But what can we do with that information as traders? Well, each stage of the business cycle impacts a different part of the market.