Swing trading involves the holding of an asset by stock traders for one or more days, hoping to profit from price "swings" or changes.
Swing trading is enjoyable but is still a business, so you should stick to certain rules to stay in the game. In swing trading, the most vital tip is the rule of survival. But survival is not just about managing risks but also following your plan and rules. It takes considerable effort and time to master the techniques of swing trading. Here are some important rules to help you get started and eventually master the swing trading game.
Trends depend on the time cycle
Ensure that your trade fits the clock. All the price movements align with specific time cycles, and your success relies on trading the right ones.
Follow the lead of industry groups and the overall market
If you are trading stocks, your trades should be directed towards the overall market. If the market is a strong bull market, then you should try to be close to fully invested. But if the market is in bear mode, you need to hold cash.
Do not diversify too much
As a swing trader, it is best if you hold a diversified portfolio. You must have at least ten different positions in various sectors. If possible, you may also incorporate other asset classes in your swing trading. For instance, you may include developed market equities, technology stocks, emerging market equities, and ETFs Physical Gold.
Manage risks by setting up a risk level
Setting up a risk level goes hand in hand with setting up a stop loss level. Deciding on a stop loss level is an order entry step, but setting up a risk level is an analytical part of the process. You will often find your stop-loss order at the risk level that you identify in this step.
Always stand apart from the crowd
Trade contrary, ahead, or behind the crowd. Try to be the first one in and out of the profit door. Your task should be to take their money before they can take yours. Be prepared to pounce on poor judgments, ill-advised decisions, and bad timings of others. Your success relies on the misfortune of others.
You will find swing trading to be a rewarding experience, not just financially but also otherwise. Have fun!
