Learning the Best Swing Trading Strategies

After years of buy and hold stock investing, I’ve always wanted to test the waters with short term trading.  I often hear of the traders making a killing while only holding stocks for several days, a few hours or even a few minutes.

Who wouldn’t want to make some quick returns like that?

Some of you are probably thinking “and quick losses too”.  Yes, short term trading can be quite risky but those risks could be significantly mitigated.  Mostly it comes down to having solid strategies and sticking to it.

Besides the potential risk, the process also seemed intimidating to me.  I didn’t have the free time to regularly research companies.  Even if I did, I wasn’t confident I’d always properly predict that company’s short term future.

Instead I tried learning stock chart patterns on my own.  With that approach you watch for patterns in a stock’s price which usually precedes a gain or drop in the stock’s price.  That approach appealed to me since it relied on price trends rather than knowing the ins and outs of specific companies.  Still, it was daunting to try on my own.

Recently a blogger friend told me about the most profitable part of his trading system.  Despite his success streak with that system, the unpredictable economy worried me.  So his email sat in my inbox as a reminder, but I’m great at procrastinating.

With my online business taking an economy induced hit this year, I’ve decided that I shouldn’t keep putting this off.  If I’m careful this could be a fairly reliable extra income stream.  Who knows, maybe it’s a future career.

So now I’m writing this post to chronicle my short term trading approach and hold myself accountable.  At the same time it should help other people who are looking to give this a shot.

Read on to learn about my planned strategy and results.  I plan to keep this completely transparent.  Check back or subscribe to my mailing list for progress updates.

My Planned Short Term Swing Trading Strategy

As mentioned, my blogger friend gave me the inside track on his strategy.  He claims he’s been using this specific strategy for over 2 years now with a 100% success rate.

His secret weapon is expert stock alerts.  Specifically it’s the Fast 5 Trading alerts which he’s had his 100% success rate.

When you pay for these alert services, the expert will send subscribers their stock picks periodically.  Provided it’s not a company with a large market cap, those subscribers and other short term traders can cause the stock price to spike.  I’d assume the expert also dumps some money into that stock to help it spike and also to further profit from his subscriber.

Seems pretty foolproof to me.  Rather than trying to find the waves, you jump on a very predictable artificial wave.

Mitigating My Risk

So now you know my initial approach, but what am I doing to avoid losing money?

Timing – Keep in mind that in most cases these are artificial spikes.  Maybe some of these companies are legitimately set to take off, but most of the people causing the jump in price are bound to get out quickly. Some existing shareholders will take their gains and get out too.

The magic number for how long you should hold the stock comes down to your appetite for risk.  The shorter you hold, the safer it is but it could also limit your profits.  While starting out I’m literally only going to sell the stock 2-3 minutes after buying it.

As I get some experience, I’ll keep tabs on how long the spikes take to peak.  I don’t intend to risk trying to time that peak or even get close to it.  Still it would give me an idea of my margin of error and allow me to be more careful.

Limiting Investment Size – The other big factor is how much money you invest in each trade.  Even if I’ve heard someone else have extreme success with this approach, I’m not going to drop 6 figures on my first trade.

Maybe this week’s trade is the one week that the system will somehow fail.  Maybe your internet will go down or your computer will crash.  All kinds of things could happen where you’re still holding the stock as the price comes crashing down.

The bigger your investment, the bigger the potential loss.  The bright side is that you’re never going to lose 100% of your investment if things somehow go wrong.  Still you obviously want to avoid any potential losses.

Automation – With each short term trade I plan on using a stop-loss order.  So if the stock dips below a certain level it will automatically try to sell the stock.

I acknowledge that if the stock price is crashing it might be tough to sell at that point.  I might as well try to protect myself anyway though.  Also this could be my savior if my internet goes down.

The other way this could protect me is by avoiding some human error potential.  While doing these early morning trades, maybe I could somehow buy the wrong stock.  This alert does go out every Monday morning at 6AM PT.  So I could be a little groggy some mornings.  Hopefully that doesn’t cause issues.  That is a challenge doing short term trading on the west coast.

The reality is that I could lose money on a trade and I need to get out if things go awry.

Strict System – I admit this is where I anticipate having the biggest challenge.  To keep things safe, you need to take emotions out of the process.

If I have a good week or two, I shouldn’t rush to change my investment size or my timing.  I am ok with some gradual changes on that front, but nothing reckless.  I want to gain confidence before increasing my risk level.

Also to be extra safe I don’t plan on rushing to try other systems.  If this works out, I want to ride it for a while before adding in another strategy.  Yes I could try other alerts that go out more frequently than once per week.  The increased frequency of those other alerts could mean less of their subscriber base acts on each stock alert.  Also I want to start on one which I know I’ll be home for consistently.

Weekly Swing Trading Strategy


This week I will be signing up for Fast 5 alerts.  Initially I was going to do a dry run for the first week, but then  I remembered I’d be up before 6AM.  If I’m getting up that early I might as well at least try with a small investment.

Before the Monday alert I need to get organized.  I did sign up for a new investment broker recently.  That means I’ll need to ensure I am comfortable enough with their platform to make a quick purchase and quick sale.  It’s important to buy the stock as soon as you receive the alert otherwise you miss out on the early surge.

I’ll also need to figure out how to do a stop-loss order.  As I’ve only done buy and hold stock investing, I’ve never actually used a stop-loss order.

I guess I need to transfer some cash to that brokerage account too 🙂

Week #1 Trade Results

For my initial trade I decided to use $10,000.  I probably should’ve started smaller to be on the safe side.  The reason I didn’t invest less is that I want to maintain a very short window but still get enough profit to justify waking up early.

If you try short term trading. You don’t need to spend a lot.  Really it just needs to be enough that your profits will easily cover the transaction fees.  Ideally you’re paying off the alert service subscription quickly, but there’s nothing wrong with taking things slow.

As planned I bought and sold the stock within 3 minutes.  The stock ended up peaking after X minutes.  Then as expected the price plummeted.

Here is the breakdown:

Morning Opening Price:

My Purchase Price:  (6:01AM)

My Sale Price:

Net Profit:  (%)

Peak Price:  (%)

Stay tuned for next week’s trade results.

Click here to learn more about the Fast 5 alerts.

Related Investing Product Reviews:

TradingView Review
Trade Ideas Review
TrendSpider Review
Scanz Review
SpeedTrader Pro Review
TopStepTrader Review

The post Learning the Best Swing Trading Strategies appeared first on Modest Money.

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