Stillkicking's Rules for Swing Trading

Dec 4, 2018
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#1
I will be updating this from time to time. Enjoy!

- know the business you are buying or do not buy it

- wait for your opportunity to buy... you do not need to trade every day

- only buy at the perceived normal price and not any higher
(apply a TPO* profile to a five day chart and take your entry point at the lower price mark from that study)

- add in batches, not all at once

- stick with thinly traded, highly liquid stocks or the price will never move.

- plan to exit your position within 3 to 5 days or you might get stuck

- take your profits like you buy... in batches... and try hard to avoid the greed factor

- never tie up all your cash in trades (I do not have or want a margin account) or T+2 will hang you up

- the average return on a mutual fund is 12% annually so if you cannot do much better than that, give up trading


*Time Price Opportunity

Updated: 12/26/18

Attached is my Excel spreadsheet layout. I use this to keep track of my stock purchases, sales and profits. Helps me greatly to have this information. Feel free to download and modify to meet your needs.
 

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Dec 4, 2018
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#4
Here is a sample TPO profile for a stock I follow.

The bottom price in yellow ($5.12) is the entry point. That point or lower is a safe price to buy this stock at this point in time. Remember, this is a five day chart. The price you see in red ($6.20) is called the POC or Point of Control. This is the price where 70% of the trading took place, again, over the past five trading days. Finally, that top yellow price ($6.44) is the highest price traded during the same time period.

So, assuming you can get in at that $5.12 price on the day after this period you have a fairly certain (if there is such a thing with trading) opportunity to take some profit before the price reaches that 70% trading level of $6.20 in the next two to three days. After that, all bets are off and you will need to create a new TOP profile going back five days from there.

TPO chart.jpg

This profile (this is the one generated by ThinkorSwim) can be applied to any stock you wish to trade. Not all of them will have such a wide spread and in that case you need to decide if there is enough movement to warrant entering a trade. In other words, will there be enough up side* to justify tying up your capital for only a small potential gain. Either way, the TPO profile is a great way to see what the potential is before going any further.

With TOS, I can set up multiple five day charts each running a TPO price profile. They will each advance automatically on the next day so I always have the most current five day profile to read. From those screens I can select one to place in a larger screen (I use Alt + 1, Alt + 2 to switch between screens as I have only one monitor) running as a one day, one minute chart. This one has the Level II and Time and Sales running, as well. I use this as my trading (buy/sell) screen. The TPO will not show up there (unless I want it) so I can expand the chart to make it easier to see the candlesticks.

I'm sure some of you more experienced traders will think this is just too simplistic of a system to actually work. All I can say is try it. You may be surprised. For the new traders coming in to the market, this is a great way to test your paper trading ability before paying hundreds of $$ for the many get-rich-quick systems out there.

*up side: I do not short stocks. I feel it is anti-American to bet against a business. All my trades are positive.

NOTE: The stocks I trade I have been watching for several weeks so I know them fairly well. I use this method for swing (multi-day) trading. I would not suggest using this technique for a day trade on a stock that may be gapping up or is showing increased volume unless you know that stock's price history.
 
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Dec 4, 2018
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#5
The two hour widow of opportunity:

Most of the movement for the stocks I seem to follow happens in the first two hours of the morning between 9:30 am, when the market opens, and 11:30 am. After that the stocks tend to trade sideways. Since I do not try to day trade, the rest of the day offers me little real opportunity.

I will place multiple price alerts on TOS and have them sent to my phone just in case.
 
Aug 15, 2018
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#6
Sometimes there are interesting mid-day opportunities.
If it is the first day the news/earnings released, the perfect entry point would be in the morning, but there could be some low-risk entry points in the middle of the second or the third day (near the support level).
 
Dec 4, 2018
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#8
Sometimes there are interesting mid-day opportunities...
I agree completely. For me, though, it comes down to the best use of my time. I run a business from my home (not trading related) so spending all day staring at my screen takes me away from my other work. I also found that the longer I sit here the more chance I will trade out of boredom and buy a stock I have not researched.

I have a few of those I'm sitting on now : (
 
Dec 4, 2018
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#9
I found a financial news agregator site the other day that I like very much. It is made specifically for us traders by a trader in the UK. Has a ton of news sources that they pull in via their RSS feeds. You put in your stock watch list and instantly you get back all the news coverage for those equities in order of the time they were released. Certainly much easier than having to go to each site on your own.

The program updates automatilcally so no need to keep hitting the page. The best part is, it's free.

http://www.cityfalcon.com

For the record, I have nothing to do with this web site.