Swing trading: simple rules to success

Swing trading: simple rules to success

learn how to read the markets. Knowing the indicators that help you stay in the loop regarding market conditions will have justified swing trading.

Swing trading is involved with stock traders holding an asset for one or more days, aiming to profit from price changes or swings. Swing trading definitely ought to be something you could enjoy. It is, however, a business, and certain rules have to be adhered to so that the bucking horse doesn’t throw you off. No dough, no show. You can keep to your trading plan and be successful, provided you observe simple rules.

Trading plan: Swing trading blueprint

The trading plan is your guide. It shows you which questions to ask:

  • What goals do you have in trading?;
  • What’s your time horizon?;
  • What will you trade?;
  • What tools will you use to trade?;
  • Give your entry signals;
  • When is a position exit profitable?;
  • When is a position exit a loss?

Your trading plan will have to be thoroughly thought thru. It is recommended that you compose your plan in the form of a questionnaire. That way, there’s every likelihood you will be more responsive to your own needs in every trade situation.

Do not oppose the current: Swing trading implies following the market leaders

In case you are trading stocks, you would like the wind to be blowing into your sails. Your trades will have to be in the direction of the overall market. If there is a strong bull market, you will have to be close to fully invested.

In the event of the market being in bear mode, you have to be holding cash. Markets might well be stuck in trading ranges. Then you could make a killing by buying strong setups even as you sidestep too much risk, there being a lack of market direction.

Nonetheless, trading with the overall market is only the trailer. The swing trader sees that industry groups impact a security’s return. When an industry group is at the top of a pack, other stocks in the group are in all likelihood going to follow.

Also , when an industry group is at the bottom of a pack, the stocks in the group will follow suit.

The industry group which is the focus of your trade is more crucial to your success or failure than the company you choose in the said industry group. Therefore, as a swing trader, focus buys on the top 20% of industry groups.

You could earmark potential candidates in industry groups accessing strength. You could do this either by scrutinising the industry group chart or examining groups with appreciating group strength.

Do not permit emotions access to your trading

It’s all too human to get emotional now and then. However, just like we cannot think of emotional responses to work in a hard sciences lab, so too in the market, we do not expect to assess situations by being emotional. Trading is an objective activity, and swing trading is no different.

There is no overflow of sorrow at loss or joy at profit. Also, past performance is no guarantee of future performance. The markets are inherently unpredictable. Hence, feeling poker-faced is no sin. It may make you feel robotic and no worse.

Swing trading: diversification in tandem with moderation

Being a swing trader, you must be holding a diversified positions portfolio. It is okay to have a minimum of ten varying positions. They all ought to be in various sectors.

If you can manage it, incorporate other asset classes in your swing trading. For instance, include tech stock, emerging market equities, developed market equities, physical gold ETFs. We are assuming that said securities meet strategy criteria.

If you are holding 30 or more positions, that’s diversifying to excess. Let InvestBy manage your diversified portfolio!

Risk management: Swing trading

Setting your risk level goes together with setting a stop loss level. Entering a stop loss level is an order entry step. However, setting a risk level is an analytical part of the process. Therefore, your stop-loss order will frequently be at the risk level you identify.

Your risk level stands for the price that, if attained, compels you to admit that your original assumption for reading the security is incorrect. You may set your risk level on the basis of some percent level from your entry order. However, that’s just a projection without any basis in reality.

Setting a profit target/technical exit: Can you make consistent money swing trading?

Your profit target is frequently founded on a preceding support/resistance level. There are some that set predetermined profit targets of selling 50 percent of a position, following its achieving a 5 percent gain from entry, and selling the remainder following a 10 percent gain attainment.

You could also take profit with the aid of a technical indicator signal. For example, when you are aware of securities trending very long, you will exit following security breaking below an indicator.


To round off the picture, do not forget limit orders and stop-loss orders. Keeping a Trading journal is not naive. Swing trading is always in the company of risk management and portfolio enhancement.

Cover the fundamentals. Picking and assessing candidates for swing trading has to come naturally to you. Read the InvestBy review! Total portfolio losses can be limited to 7 percent. When your stop-loss is hit, just cut losses.