Swing Trading Rules That Lead to Profit

The problem is that most of the buy and hold investors have never had to stick to any set of rules in their trading life. They either did their own research, got a tip from a friend or watched CNBC to get their stock picks. They then bought those stocks and held onto them for 10 years. During our extended bull market many were made to look smart, that is, until two years ago.

Many of the same people now realize it is better to trade in and out of stocks as opportunities present themselves. This is where swing trading comes in. However, in order to be successful at trading in this fashion you need to be extremely disciplined. There should be a set of swing trading rules that you follow. Here are four of the more important rules to live by.

1. Don’t make trading decisions based on emotion

Emotions are not your friend when stock trading. The two primary emotions that you must keep an eye out for are fear and greed. Fear will cause you to exit trades too early or not get in the trade when you should. Greed will keep you in too long and make you reckless in the trades you do enter.

2. Have an entry strategy for every trade you make.

Know why you are going to enter a trade. Swing trades are entered on the basis of technical analysis. There must be some trigger that causes you to want to take a new position. Determine beforehand what those signals will be and do not trade anything that doesn’t give that signal.

3. Know where your exits are before entering the trade.

Before you ever take a new position you must know what is going to get you out. How much profit are you looking for? How much of a loss are you willing to risk? What indicators will be utilized to let you know when it is time to close your position?

4. Journal, journal, journal.

I cannot stress the importance of this. If you want to improve you must journal. For every trade write down why you got in, why you got out, what you did right and what you could have done better. This will be of immeasurable value to you when you sit down to review it. It will improve your trading in great way.