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My methodology

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  • My methodology

    As the owner of Wall Street Forum, I have experienced several market cycles and different conditions in the stock market over the years. With that being said I wanted to give you a deatiled breakdown of my trading style/methodology for swing trading.

    Rules for swing trading:
    1. Only trade stocks with over 500K daily average volume
    2. Only trade stocks with a LONG uptrend. The trend needs to be UP for at least 6 months
    3. Buy a stock that has dropped slightly and is now recovering
    4. Only buy stocks in the last 2 hours of the trading day.
    5. Set a 2% stop loss on each trade.
    Read below for a detailed breakdown of each rule.

    Only trade stocks with over 500K daily average volume. Stocks that trade under 500K shares a day on average are hard to get into and out of. Also, low volume stocks can be moved drastically to the downside on LIGHT volume so when panicked selling starts it's amplified by the low volume in the stock. In other words, low volume stocks can drop like a rock before you can even pull the trigger or make a decision.

    Only trade stocks with a LONG uptrend. The trend needs to be UP for at least 6 months. One of my biggest pet peeves is seeing traders trade downtrending stocks. There are droves of traders who do this and you may be one of them. Trading stocks in an uptrend is just common sense to me. You're putting your money in the direction of the stock. You aren't trying to force the stock to do something unnatural. If you want to find these types of stocks you can use any number of stock screeners provided by sites like FINVIZ or MarketWatch and scan for stocks trading above their 200-day moving average or 50-day moving average. I prefer the 200-day moving average.

    Buy a stock that has dropped slightly and is now recovering. A.K.A. buy on a pullback. Stocks don't go straight up or down. An uptrending stock will take "breaks" on the way up and that's where you can come in to buy.

    Only buy stocks in the last 2 hours of the trading day.

    You only want to enter positions on a green day. The only way you will know the stock is a truly green day is if you buy towards the end of the trading day. If you buy too early the stock could easily sell off for the rest of the trading day and end up closing red. I live on the east coast so the earliest I will buy a stock is 2:30 EST which is one hour and a half before the U.S. stock market closes.

    Set a 2% stop loss on each trade.

    More important than anything else mentioned in this article, you need to set a 2% stop on every trade you place. This gives you a small loss and protects your trading capital. In my years of trading, I have noticed that if a trade doesn't work out in the first day or two it's probably not worth your time. Professional traders are not professional because they succeed on most of their trades. Its quite the opposite in fact. Successful traders win because they don't let their winners get out of hand.

    Your ego is what makes you hold on to losing trades. Divorce your ego, cut your losses short.

    Mathematically speaking, you can't lose 5-10% on your losing trades and only gain 1-3% on winning trades and expect to survive.
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    "Step into the arena and hold on to your hat. Don't get discouraged if you don't make 8 trillion dollars in your first month. Trading is not a get rich quick scheme. Realize that trading is a skill and just like any other skill it takes time to learn. Have convictions in your decisions in life and trading. Ignore the comments and "advice" of those that have never traded a day in their life."

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    This website provides information about the stock market and other investments. This website does not provide investment advice and should not be used as a replacement for investment advice from a qualified professional. This website is for informational purposes only. The Author of this website is not a registered investment advisor and does not offer investment advice. You, the reader, bear responsibility for your own investment decisions and should seek the advice of a qualified securities professional before making any investment.

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