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NOTE: The strategies discussed are for educational and informative purposes only. It is not intended to be investment advice.

In life there is no such thing as a guarantee. The same can be said of the stock market. Trading can be an form of income for many individuals. It can be an incredibly risky venture without a proper plan. However there are steps that you can take to manage your risk and increase your chances of profit when trading. Below are a couple of the strategies I’ve incorporated for myself that have helped me in my journey.

What is Swing Trading?

Swing trading is defined as a style of trading that attempts to capture short- to medium-term gains in a stock (or any financial instrument) over a period of a few days to several weeks. The biggest gains in the stock market are usually made via swing trading.

Tips to Increase your Trade Probability

  1. Balance the Budget. Control Your Risk. Maintain The Cash Balance.
    • DO NOT throw your entire cash balance into one play.
    • DO NOT throw more than 10 percent of your cash balance into one single play.
    • NEVER exceed more than 5 plays at once.
    • If you lose money it does not come back when you uninstall the application. It stays gone forever. As you start to build up a bigger portfolio you may be more inclined to take larger positions. This can lead to you blowing up your account if you’re not careful. The money is not yours until you close the position. Self control is key to maintaining consistent gains.
  2. Use a Stock Scanner to do pre-market scanning.
    • Use filters such as pre-market gainers, after-hours gainers, and top gainers to see potential plays.
    • Compare and filter scanner results to those on watch list. 
    • Personally, I use the built in scanner in the WeBull desktop application.
    • The one on Finviz – is also very solid as well.
  3. Create a watchlist
    • I highly recommend only trading only a set of individual companies or a specific sector. Creating a watchlist will help you get a feel of the charts, trends and movements of these companies. Also paying attention to how news cycles affects there price is a major key as a trader.
    • Only add a company to your watchlist after you’ve done research on said company. Know and understand what you’re investing in before pulling the trigger.
  4. At market open wait first 15-30 minutes for momentum confirmation.
    • This is normally the window where the market will chose a direction. Avoid bull traps and directional fake outs.
    • Market may go up first 15 minutes and then trend downwards the rest of the day. The inverse is possible as well so due diligence is necessary when entering a trade.
    • Occasionally companies with HIGH PREMARKET GAINS may pop off immediately at open. If the company is on your watchlist and there’s valid reason for the gain (earnings, new product release, etc) then it may be worth a shot to trade immediately at the opening bell to catch the momentum. If you don’t know anything about the company or do not know why they are gaining then I do not recommend blindly chasing that play.
  5. Use your day trades effectively.
    • Day trading is defined as the purchase and sale of a security within a single trading day.
    • The standard rule regarding day trades across brokerages is 3 day trades per 5 week period for an account under $25,000. That means if you are an account under $25,000 and you use 1 of your 3 day trades on a Tuesday. You will have 2 day trades left until the following Tuesday. If you use all of your day trades and make another day trade then you will get marked as a PDT (Pattern Day Trader) and your brokerage may ban you for trading for 90 days.
    • Day trades are great for flipping a potential trade on the same day. However you cannot abuse them. Ideally it is best to always have at least 1 available in case things go south in your trades.
  6. Enter a Trade with the mindset of swinging AT LEAST ONE DAY.
    • This is key to improve your decision making. If you don’t feel comfortable holding a trade at least one day then don’t make the trade. This will save you from burning a day trade and compel you to make better decisions.
    • If you are low on day trades and don’t feel comfortable holding a trade for at least one day, then DO NOT MAKE THE TRADE.
  7. Stay up to date on current events.
    • Understand how new events in the world unfold and can setup potential positions. affect your trades. The market is in a very volatile state. Events going on in the world have a direct correlation to the stock market. Stocks can be doing great one day, a negative news event occurs, and then stocks drop immediately. The inverse is also true as well.
    • For example just recently several companies announced they are pulling advertisements from Facebook. Facebook makes money via ad revenue. This caused a negative effect on the stock price of Facebook and caused it to drop over 8% in a single day. Facebook is also a social media company. Other social media companies(Twitter, Snapchat) dropped as well due to this and related news. These can be referred to as “Sympathy Plays”. Playing events like this can yield profit or pain depending on where you position yourself at.
    • CNBC, MarketWatch and even Twitter are great ways to get updates fast on the companies that you are looking at.

Going in blindly and just shooting at company XYZ is paramount to gambling and that doesn’t lead to success. Research, patience, and due diligence are the qualities that separate luck from skill when trading. Do not rush the process. There is always an opportunity for success in the market. Learning to recognize those opportunities is what makes separates the good traders from the lucky traders.
Make sure to stay posted for my next post. I’ll be covering some strategies I use to determine when to enter and exit a trade.