35 Swing Trading Rules You Should Know About
Here are some helpful swing trading rules to consider if you are a swing trader or if you are considering becoming one.
Swing trading is a great way to get into the stock market without being tied down to a trading desk. However, it is important that you develop your own swing trading rules in order to increase your odds of success at swing trading. In this article I will provide a list of popular swing trading rules that you may want to consider as you develop your own swing trading strategy.
Rule 1: Keep it simple. Pick a handful of strategies that most appeal to you. Don’t try to use hundreds of different technical indicators because you will end up over thinking things.
Rule 2: Use common sense. If you think a company is selling something that will never catch on don’t invest in it. If you believe it’s something that everybody could use and it’s affordable than consider learning more about it.
Rule 3: Timing is everything when swing trading. Learn when to get in and when to get out before you swing trade anything.
Rule 4: History often repeats itself. If you notice price action that follows a specific pattern pay attention to it.
Rule 5: Don’t let your emotions get the better of you. If you have the best trade of your life or the worst one don’t act on emotion. Try to trade by using logic.
Rule 6: Make your own swing trades. Don’t blindly follow some expert who promises to give you the best picks. This is a recipe for disaster.
Rule 7: Try to spot a trend before everybody else. If you get in after everybody else it’s usually too late to take profits.
Rule 8: Watch out for a stock that refuses to break through a new high because it usually means it’s about to drop.
Rule 9: Watch out for stocks that refuse to go below a new low because they often go back up from that point.
Rule 10: Avoid short selling if you are a swing trader. This is a tactic more suited for a trader who never takes their eyes off a specific stock because they can explode at any time.
Rule 11: Search for stocks with high volatility. It’s better to swing trade a stock that goes up and down than one that slowly declines. If you find a stock that’s a slow steady riser be careful as well because trends can and do reverse themselves more often than not.
Rule 12: Realize that stocks are relatively unpredictable at the days open and they can move a great deal real fast. If you plan on swing trading consider entering once things have calmed down in order to get the best entry price.
Rule 13: Pay attention to market crashes. If the market has been in a constant free-fall don’t pretend that your specific stock prospect is immune to the overall market.
Rule 14: If the overall market is on fire than its probably a good time to get in. Remember the 90’s? You could have done well with many different stocks.
Rule 15: If the market is uncertain consider using that time to save up money at your day job while you wait for market trends to emerge.
Rule 16: Only swing trade with money you are willing to lose. If you are attempting to trade with the last funds you have left on earth the odds of success are slim.
Rule 17: Research as much as you can about a company before you enter a swing trading position. Make sure you know the key fundamentals such as are they making a profit, are they going bankrupt, do they have pending lawsuits, pending patents, good management etc.
Rule 18: Consider learning as much as you can about trading software that might be able to assist you in trading.
Rule 19: Try out stock screening tools. These will help you sort through potential swing trade candidates.
Rule 20: Know the news on both a macro and micro level. News can impact price movement.
Rule 21: Understand your risk. For example, realize the risk of penny stocks versus blue chip stocks versus ETF’s and mutual funds.
Rule 22: I hate saying this because it’s a cliche but consider diversification when swing trading. This will help reduce risk.
Rule 23: Pay attention to stock twits and stock message boards on a given stock before you swing trade it. Pay especially close attention to warnings coming from the so called “short sellers” because sometimes their warnings are quite real.
Rule 24: When on stock message boards pay attention to investors who have been following a stock for decades. They tend to know some things!
Rule 25: Make sure you have stop losses in place in case a swing trade goes terribly wrong.
Rule 26: Make sure you have an exit strategy if your stock does well. Sometimes it’s best to cash out before a stock drops again.
Rule 27: Keep your eye on your investments. Just because you are swing trading doesn’t mean should should turn a blind eye to your positions. Crazy things can happen such as massive price spikes followed by a slow steady decline. Don’t miss out on opportunities simply because you forgot to check your position.
Rule 28: Pay attention to the 200 day moving average on stocks since many traders believe in them. They often become a self fulfilling prophecy.
Rule 29: Don’t fall victim to false hype. Be careful when reading articles that seem to be cheerleaders for a specific security because they may have ulterior motives.
Rule 30: Seek out strong stock sectors. Stocks within trending sectors tend to follow the trend.
Rule 31: Make sure you have the right online broker. The wrong ones can cost you.
Rule 32: Understand that swing trading has tax implications. Make sure you understand how they will impact you at tax time. Also, don’t forget about quarterly tax requirements.
Rule 33: Consider networking with other swing traders. It never hurts to get extra advice.
Rule 34: Remember that you and you alone are responsible for every trade. Don’t blame others if things go wrong. The ultimate decision to buy or sell must be yours and yours alone.
Rule 35: Never bet it all on one swing trade. It’s better to live to trade another day than to wipe out your portfolio with one mistake.
Do you have any swing trading rules you would like to add to this list? If so please do so below. The Trade Locker is a free online stock market community. Our goal is to help traders network with one another at no charge so they can learn from each other and become better traders. In order to do this we need your help so if you have not done so already please check out our stock market forum and our stock message boards and add any comments you feel would help our community grow! Also, it’s ok to network with our members, so if you are trying to get the word out about your website you are welcome here!
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