Enter your email address:

Monday, March 9, 2009

SWING TRADING

An effective trading method that can be adopted by using technical analysis is swing trading. The time span of swing trades is between one-five days i.e. a trading week. The trader must be in touch with markets, news and their portfolio. Follow the steps given below:

Step 1: Identify the stock

Watch some stocks with decent volumes, activity, fundamental quality and the pick of your pocket. The stock that you are selecting must be having appreciable points in Index also. Say for example. NTPC
Try to find certain technical indicators like moving averages, oscillators, trend lines, trend channels and patterns. Watching a long term chart in yahoo finance charts will be much useful in analyzing the price movement of the stock with the index movement. You must identify the 5, 10 180 days moving averages also. Long term charts will help you to identify the breakout levels, and price range in which the stock is trading.

Step 2: Watch the Index movement

Watch the movement of index. Always try to identify possible strong resistance and strong support levels. Also watch the foreign markets like Dow, NASDAQ and their support/resistance levels. You can depend on websites, and channels to get sufficient knowledge about the levels. Watch the volatility index of Nifty also. If the volatility is higher then wild movements of Nifty stocks will happen. Other wise movements mostly behave in line with technical analysis.
Never try to take a position when the market hovers around the resistance levels and vice versa

Step 3: Make a Swing trade strategy

After finding out a trading range, enter to the stock at the possible lowest point. Then put a stop loss well below the support level. It is always better if you can find an oversold territory. Every day you should keep stop loss and follow the stock with stop loss when you reach profit.
Very important point is that the exit level needs to be identified before initiating the trade. If the target is achieved in single day, you should book profit. Never hold the position for another few days thinking that sky is the limit.
Sometimes you will see that price movement happens in either side more than our expectation. Never worry about it. If you see the stock price went up your target price after profit booking, then you should console yourself that you got some profit. Similarly, if the price of the stock went down to trigger your stop loss and later it went to profit zone then you should be practical enough to console yourself.

But remember; never forget to book your profit.

Never try to hedge your position also

Here are some trends that a swing trader must know:


1. Results

You should carefully approach the earning season as it may change the trends of particular stocks. Watch the advance tax payment by Indian Companies and judge which company is going to make exceptional profits. The first result of a particular sector will trigger a movement in either side on all active stocks in the category.

2. Policy push and pull

Government policies will affect the stocks very quickly. When Government hikes the prices of Petrol and Diesel, then all Oil Marketing Companies will be benefited. But FMCG companies will get hurt because of their increase in transportation cost. Similarly any change in REPO, Reveres repo rates by RBI will take the Banking and non banking stocks to either side.
The RBI's Annual Credit Policy is announced in April. The Mid-Term Review of the Policy is in January, July, and October
So watch, study and be careful in investing in any Policy announcement days.

3. Budget rallies

One of the most dangerous occasions is 14 days from budget and up to 7 days after budget. Never let your money destroyed by Post and pre budget rallies.

4. FII data

Always watch the daily FII data for one or two week time. Watch the F&O movement of index. Be careful when there is huge shorts are build in indices.

5. Seasonal effects:

Summer vacation:May is the month when most fund managers go for a break and it is well proved by the crashes in May 2004, 2006 etc
Winter vacation:
Another month of fear is October because of the great stock market crashes of 1929, 1987, 2008 etc

X’mas outing:
A rally is expected nearing the X’mas which is called Santa Claus rally. But recent years are not well following.

Diwali crackers:
Diwali is an occasion in which more new investments come to market. Invest on dips nearing Diwali and book on Diwali or post Diwali sessions.


HAPPY TRADING..

8 comments:

Mark said...

Hey,

Just dropped by to leave a comment. Great blog, keep it up! If you could return the favor that would be great!

Weight loss secrets revealed

Shreejana Hickman said...

Great tips. Thanks.

http://businessvartha.blogspot.com said...

thanks mike

http://businessvartha.blogspot.com said...

thanks shreejana

techii said...

Nice article.. Very helpful too. Looking forward to more online trading tips.

govt employee news

Stop Foreclosure said...

hey bud-

I would love to be able to day trade.

hey I got a question...

I want a well rounded natural resource/GOLD/other metals/oil/anything tangible/ all in one investment. suggestions?

Great stuff

check out mine...

http://www.stopforeclosureshere.blogspot.com

http://www.hopenhousing.org

businessvartha.blogspot.com said...

I will inform you stop as soon as i get the information.thanks

businessvartha.blogspot.com said...

thanks techi

Blog Widget by LinkWithin