The first step to a profitable swing trading is the preparation. If one is to start
a journey, one will prepare oneself. One will check the departure or arrival times,
weather, connections and the cost. The same is true when one wants to swing
trade successfully. That preparation is the foundation of the trade, and one can
not bypass that.
How
to prepare for swing trading step one
The
first of the swing trading preparation is to check the market
environment.
One
will begin checking if the market is volatile, erratic,
bullish, bearish, trending
or too risky. Like a captain of a ship, one wants to check whether it is safe to set
sail or come back
another day.
In
this instance, one is checking the SP-500 (the market), and asking if
the market
is offering a reliable bullish or bearish trading opportunity. Sometimes, there is
nothing on offer, so one will stay one. Ask if there is good chance that one can get
something good out of the market or not. Though, many think that process is not
essential, failing to do so can force one to sweat as soon as one place the trade.
How
to prepare for swing trading step two
The
next step is to check the sector in which one wants to trade. Quite
often, a
swing trader will be busy trading bearish trading set-ups in a bullish sector, and
wonders why a trading method that was working wonders before is no more
delivering the goods. One should ride the sector's sentiment instead of fighting it.
If the sector is very bullish and is not yet overbought, or due for a correction, focus
only on bullish swing trading opportunities. In those circumstances, it makes sense
to stay away from bearish trading set-ups. A bullish sector is attracting money
inflows, and one will be better off selling financial instruments that belong to a sector
where there is an outflow of money. A sector where there is money outflow is usually
the one where many financial instruments are overbought or surpass multiple times
their true values.
How
to prepare for swing trading step three
The
third step consist of checking the sector's
market
leaders. Whatever you do, please
do not bypass the
step
three.
In
many instances, the market and sector can stay bullish but
the market leaders can
drag down the sector's components when they become bearish. In fact, a sector will
not rise if the leaders are bearish and vice versa. They are the engines of the sector. Do
not continue to place multiple bullish swing trades if you notice that the leaders are not
offering any bullish trading opportunities. Moreover, those who are trading indices should
always keep eyes on
the leaders of the indexes
at all times.
How
to prepare for swing trading step four
It
is almost impossible to catch home run stocks if one does not know
how to analyze
the trading volume.
One
of the advantages of analyzing the trading volume is to spot the
activities of the
most influential market participants such as the hedge funds and investment banks.
Usually, they are the first buyers or sellers. Their activities can cause a financial
instrument to
trend for weeks, months and years.
Those
trending securities provide reliable source of profit for both the
avid investors
and swing traders.
Therefore,
it is beneficial for a technical swing trader to analyze the trading
volume
during the swing trading preparation.
How
to prepare for swing trading step five
It
took me years to understand that a technical trader must combine the
technical and
fundamental analysis without disregarding the economy news. A swing trader will
minimize the risk and reduce losses from the get go if he or she is doing the following
before implementing
any swing trading strategy.
1/
Check the economic
news relating to the financial instrument.
2/
Also
check the economic
news relating to the peers of the financial instrument and
market
leaders.
3/
Perform Google acid test.
4/
Complete
a viable fundamental
analysis.
How
to prepare for swing trading step six
At
this stage, one wants to focus on the technical analysis of the
financial instrument
that one wants to trade. It is paramount that one does not just want to place a swing
trade, but to find a real reliable swing trading set-up that offers a nice risk-reward ratio.
Be a more composed
swing
trader. Be
ready to walk away from the set-up
if it is more likely to cause losses
than profit. Remember the last time, you enter a swing trade and wish you do not have
anything to do
with the ensuing stress or headache. It is not worthy.
One
will be more forgiving to oneself if at least one had been more
defensive or selective.
Note that there is always a better swing
trading signal right in the corner waiting for you.
Therefore,
one wants
to verify that one has truly found a high probability trading set-up
that one understands or masters.
How
to prepare for swing trading step seven
The
seventh step for the swing trading preparation is to set a suitable
time and date when
one can safely enter the trade without too much hassle or volatility. This step is not set in
a stone; so be flexible
and only follow through it is helpful to your swing
trade.
Personally,
I do not like to enter a swing trade on Mondays
or Fridays. I also avoid splashing
swing trades in January, December, or first eight days of a month.
How
to prepare for swing trading step eight
This
is the last step for a swing trader that do not want to leave
anything to chance.
One
of the problems that many swing traders are facing is the inability
to sell in the financial
markets. Generally, most common traders are
bullish market participants.
This
is normal because the natural progression of the market is up.
Financial markets go up
more than they fall, but there are always financial instruments that are overbought or distress
due to weak
fundamentals.
Moreover,
if the market is bearish, it is not reasonable for one to adopt a
bullish swing trading
strategy. For those reasons, it makes sense to get ready to sell or buy at any time. To do so, one
must have two
watch-lists.
One
ought to prepare both bullish and bearish watch-lists.
The bullish watch-list
regroups bullish
high probability financial instruments and the other is a compilation of bearish stocks, currencies,
commodities and
indices.
Quite often, a swing trader may be fixated in taking bullish swing trades, and end up losing just
because he or she does not know how to sell. It will be better for that swing trader to avoid placing
a bullish trade in those circumstances where the bearish traders become dominant in the financial
markets. One ought to bear in mind that the financial markets' cycle is formed of trending and
corrective phases. The market may stay bullish for years, but there will a harvest time when
securities surpass more than five times their book values. Even during the trending phase there are
minor corrections.
Without
doubt bullish and bearish swing trading watch-lists
will help a swing trader to get ready for
both bullish and bearish trading opportunities that may arise.
Conclusion:
A
smart swing trader is the one that has a plan. As Mr Warren Buffet
said, the first rule is not to lose,
but the second rule is not to forget the first rule. Indeed, the preparation for swing trading will assist
a swing trader to avoid or minimize swing trading losses.
For
a beginner swing trader or those that are still trying to polish
their swing trading, it is
recommendable that one does not overwhelm oneself by trying to master those swing trading
preparation steps in one day. One should try instead to master them one step at a time without taking
too much on at the same time.
Make
a decision to apply the swing trading preparation, but give yourself
enough time to achieve that
goal.
Preparation For Swing Trading Test
1/
How many steps are there for a thorough swing trading preparation?
2/
How much time should one give oneself for mastering the swing trading
preparation if one is a beginner
swing trader?
3/
Why will it be more detrimental to oneself to try to master the swing
trading preparation too fast and
too soon?
4/
What is a bullish swing trading watch-list?
5/
What is a bearish swing trading watch-list?
6/
What is the advantage of preparing both bullish and bearish
watch-lists?
7/
What are the reasons why it is beneficial for a swing trader to
analyze the trading volume in the stock
market?
8/
Name the market leaders for both NASDAQ-100 and Dow 30.
9/
Why should a swing trader avoid selling in a bullish sector?
10/
why should one avoid taking bullish swing in a bearish sector?
11/
What is a dominant force in the financial markets?
12/
What is the market?