Swing trading can be a great way to profit from market upswings and downswings, but as I’ve always said, it’s not easy. Mastering the swing-trading techniques takes time and effort. To help get you started, I am giving you 20 Rules to think about as you begin – and ultimately master – swing trading.
Rule 1: Price has memory.
What happened the last time a stock hit a certain level? Chances are it will happen again. Watch trades closely when price returns to a battleground. The prior action can predict the future. Reliance took Support at Weekly Support Level during Corona Crash.
Rule 2: Profit and discomfort stand side by side.
Find the setup that scares you the most. That’s the one you need to trade. Don’t expect it to feel good until you take your profit. If it did, everyone else would be trading it. As Old Adage goes What at first brings pleasure in the end gives only pain, but what at first causes pain ends up in great pleasure.
Rule 3: Stand apart from the crowd at all times.
Trade ahead, behind or contrary to the crowd. Be the first in and out of the profit door. Your job is to take their money before they take yours. Be ready to pounce on ill-advised decisions, poor judgment and bad timing. Your success depends on the misfortune of others.
Rule 4: Buy the first pullback from a new high.
Trends often test the last support/resistance before taking off. Trade with the crowd that missed the boat the first time around.
Rule 5: Sell the first pullback from a new low.
Rule 6: Short rallies, not selloffs.
Shorts profit when markets drop, so they start to cover. This makes it a terrible time to enter new short sales. Wait until they get squeezed and shaken out, then jump in while no one is watching.
Rule 7: See the exit door before the trade.
Assume the market will reverse the minute you get filled. You’re in very big trouble when it’s a long way to the door. Never toss a coin in the fountain and hope your dreams will come true
Rule 8: Trades that work in hot markets destroy accounts in cool ones.
Stocks trend only 15% to 20% of the time. Price ranges cause grief to momentum traders the rest of the time.
Rule 9: The best trades show major convergence.
Watch for the bull’s eye. Gann Price Time Trading give you an Edge in Swing Trading.
Rule 10: Control risk before seeking reward.
Wear your market chastity belt at all times. Attention to profit is a sign of immaturity, while attention to loss is a sign of experience. The markets have no intention of offering money to those who do not earn it.
Rule 11: Big losses rarely come without warning.
You have no one to blame but yourself. The chart told you to leave, the news told you to leave and your mother told you to leave. Learn to visualize trouble and head for safety with only a few bars of information.
Rule 12: Bulls live above the 200-day moving average, bears live below.
Are you flying with the birds or swimming with the fishes? The 200-day moving average divides the investing world in two. Bulls and greed live above the 200-day, while bears and fear live below. Sellers eat up rallies below this line and buyers come to the rescue above it.
Rule 13: Perfect patterns carry the greatest risk for failure.
Demand warts and bruises on your trade setups. Market mechanics work to defeat the majority when everyone sees the same thing at the same time. When perfection appears, look for the failure signal.