How To Swing Trade: A Beginner’s Guide to Trading Tools, Money Management, Rules, Routines and Strategies of a Swing Trader

by Brian Pezim

Short-term Gap Trades Overnight gap trades are opportunities you can take advantage of under specific market conditions.

A good gap trade starts with strong or weak price movements during the trading day. Price movements that remain strong in the last 30 minutes of trading are also a good sign that the momentum will continue into the following trading day.

Hot Sector Manias Hot sector mania plays are a good example of the type of trade to take overnight or to hold for a longer period of time as market players and investors rush to get into a specific sector or stocks. Greed takes over and the normal fundamentals of stock and company valuation are mostly ignored.

Indicators like a 20-day SMA and other tools that I have discussed can be used to keep you in the position as the trend continues in your favor.

Once you have taken a position in a stock or security, enter another trade to exit your position at your first target price regardless of whether you decide to scale out or exit your entire position.

all trading platforms have a feature that allows you to enter a stop.

When taking an entry short or long, you have an option to either get an immediate fill by hitting the bid or ask, or you can set a limit price and hope to get a fill at a better price during the trading session.

When exiting a trade, you have an option to sell the whole position or sell a fraction and hold the remainder for more profit.

Use a trailing stop up or down (depending upon whether you are long or short) on a winning trade that is continuing to trend in a profitable direction to ensure you keep additional profits in case of a reversal.

Once you are in a position, you can enter an “either or” order. These are 2 orders that are linked together so that when 1 is executed, the other order is cancelled. This type of order can be used to protect your capital by honoring your stop-loss price while locking in profits if the stock moves in your favor.

Your journal should contain the following information: date market internals (bullish, bearish or neutral market condition based on your review of market internals outlined above) stock symbol source of idea reason for consideration of trade (double bottom, dragonfly doji, bear flag, etc.) sector performance confirmation RSI confirmation MACD confirmation check for coming events like earnings reports entry price (desired) stop out price target price reward/risk actual entry price actual exit price profit/loss comments (scan used, what did and didn’t work, improvements for future)

goals in your business are important to spell out so you know why you are trading and what specifically you hope to achieve.

decide what markets and securities you will initially focus on.

Another decision you need to make is in regard to the trading strategies and setups that you will use to enter and exit trades.

You may also want to consider the time frames of a trade. Do you want to be in a trade for days or for weeks?

build a routine you will need to consider the following.

how much time you want to dedicate to your business and when you are going to fit it into your day.

Always stay in touch with market conditions by reviewing the internals, such as the percentage of new highs versus new lows and the percentage of stocks above the 50 and 200-day SMAs versus stocks below those SMAs.

use a trade journal

As a new trader, you can do what is called “paper trading”, where you go through the process of scanning for trades, identify opportunities and pretend to enter the trade. Start with an imaginary account size that is the same as you intend to begin with if you do take the next step and trade with real money. Try to keep your simulation as realistic as possible in every respect.