Stock Trading Basics to Swing Trading

[rurouni]

LL,

I have a question.  How would you allocate the percentage of investment capital that should be swing traded at any one stock?  I know 3sof only invest 6.66% on any given stock.  You said swing trade 1-3 stocks, would that means 33% of your investment capital maximum?  or depending on how attractive the stock is?

Wayne

[LiveLife]

rurouni,

I do swing trade 1-3+ stocks (100% - 33.3%) with my entire stock trading account, but I must clarify something in regards to my portfolio (I'll make portfolio percentage one of the "Knowledge Base" topics).

When David started his "Fast 3SOF" folder, he allocated $15,000 (I believe about 6.66% of his portfolio) to buy 3 positions of $5,000.

In addition to my Scottrade "stock trading" account, which is my "hobby" account, (This information is for US stock traders) I have a separate 401K account for my retirement.  I also have two Roth IRA accounts, for myself and wife, with Scottrade.  Unlike traditional IRA, you can withdraw some or ALL of Roth IRA at age 59 TAX FREE! 

You can also pull out your initial/subsequent Roth IRA contributions AT ANY TIME.  So, you can initially fund your Roth IRA (say $100 - $4,000, the current annual cap), but after significant "growth" of your Roth IRA, you can pull out your initial/subsequent contributions without penalty to, perhaps, add to your "swing trades."

I have my 401K money in mutual funds (T. Rowe Price Mid Cap Growth Institutional during bullish market conditions and Vanguard GNMA during bearish market conditions).  My selection of available mutual funds through my employer is limited and these (and others) have been "acceptable" performers.

For now, Roth IRA accounts are "parked" 100% in HANS (Hansen Natural Soda).  I will be looking to diversify Roth IRA accounts into 3-5 stock positions.  I DO NOT swing trade with Roth IRA funds and look for "long term" growth stocks.  (Roth IRA for US stock traders is one of the topics I will be posting in the "Knowledge Base")

Now comes my "hobby" stock trading account.  I swing trade with 1-3 stock positions, but they DO NOT represent 33.3% - 100% of my "over all" portfolio, only my "hobby" stock trading account.

For many, short-term swing trading will be "speculative" and I recommend that you only swing  trade a "small" percentage of your portfolio that you feel comfortable with (maybe 5% - 10% to start with, until you are more "comfortable" and "proven effective" with profittable swing trades under your belt).

- John

[gielda2003]

Hi LiveLife,
Thanks for this thread. I'm more of an intermediate to long term trader. But,  I'm always open for "other" ways of making money in the stock market and swing trading came across many times. From your post I can see that you've picked up very quick and you are willing to share your knowledge with others. I'll be more then happy to learn from you. Thanks again and GLTY.
Waiting for the pointers.

Gielda

[rurouni]

I understand, you have a good mix of low, medium and high risk investments.    Thanks LL.

[LiveLife]

I bought TIII at $3.05 (yes, 100%) this morning.  BTW, TIII is one of David's "Fast 3SOF" (Thanks again David!  ).

I am not sure how high it will go intraday, so I will put a "trailing stop" sell order at 5% (If I was more certain about how high the stock would go, I would have used "stop limit" sell order.)

Well, I am off to work!

[LiveLife]

Good evening!

Looking at the intraday chart, "stop limit" sell order at $3.15 ($0.10 gain) may have been more appropriate than "trailing stop" sell order (But since I am not daytrading, I could not have known that).

I am a day-to-day swing trader, still learning the "ropes" and "evolving" with the market each day.

If you look at the StockChart below closely, instead of candlesticks I have used in the past, I am trying the HLC bars.  I am examining if HLC bars (more simple to read than candlestick patterns IMO) are better indicator to use for short-term swing trading.  Time will tell.

RSI is high at 80, indicating "overbought" condition, but instead of a declining selloff, the stock is showing spiking gains.

I pulled a StockChart for HOM as a comparison.  If you look at the blue oval, the RSI is above 70 at several points with corresponding decline, but the stock continued to gain (blue box) over all.  Not until HOM hit $5+, did the stock take a $1 pullback (Red ovals), only to continue back towards $6.  Of course, TIII chart may not be representative of HOM's performance, but just a thought and comparison.

= update = LOL, since many of you asked which you should buy (TIII or HOM), I added a 5-day comparison chart below. 

[rurouni]

HI LL,

Just wondering, what made you jump into TIII this morning and why at that time?  Is it because of increase in volume and increase in price? and how did you notice this stock this morning?

Thanks in advance.

Wayne

[LiveLife]

With my Scottrade account, you can have 20 "streaming quotes" per window.  I have my 20-40 stocks (I will post how to select 20-40 stocks to monitor in the "knowledge base") in the windows and each morning at market open, I watch for gain/volume activity.

I noticed this morning that TIII had a significant gain with "acceptable" volume level in comparison to other stocks (20-40 stocks) and I made a decision to buy.

[LiveLife]

Good morning!

Repost from Yahoo TIII MB this morning:

Since I am new to TIII as of yesterday, thanks for all the previous informative posts on TIII.

I am a short-term swing trader and I do take profits on "significant" gains, only to buy back on dip/pullback more shares, and so on, to end up with more shares at the final "sell" of the stock.

However, if TIII's current gain performance is similar to or repeat of HOM's recent 4 month gains, then I may "hold" my swing trading and allow TIII to gain, until significant profit taking takes place.  If TIII remains bullish after profit taking, then I will buy back more shares.  Time will tell, and I will watch TIII very closely in the coming days.

[LiveLife]

This is Technical Analysis composite indicator from Barchart.com.  Can you get any better "BUY" indicator? 

http://quote.barchart.com/texpert.asp?sym=TIII

[LiveLife]

Wow, what a morning!

I took TIII profit at $3.15 - $3.17 this morning (my initial sell target at buy in was $3.15 and I bought in at $3.05).

So, onto the next trade.  I will return to TIII in the future if the conditions are right.

I've been waiting for NVAX to rebound after $6 to $3 dollar fall.  Well, this moring may have been the "bottom" I've been waiting for.  I bought in at $3.18.

Below are comparison charts of TIII and NVAX (TIII vs NVAX1) at the moment of TIII sell and NVAX buy.

= update = I also added followup comparison charts since the sell/buy (TIII vs NVAX2).  It's neck and neck at $3.23.
Which stock will prevail?

I thought about holding 50/50 position, but with recent $5-$6 memory fresh on a lot of traders' mind and with TIII hitting new 52 week high, many may take profit on TIII.  By comparison, NVAX is rebounding from bottom.

= update = Dang, this is like watching a race! (see TIII vs NVAX3)  I am thinking about doing 50/50 again.


= update = Well, looks like NVAX may have the upper hand (see TIII vs NVAX4)

[OneStockMind]

Great trading LifeLife.
Question: TIII looks really overbought. Isn't that a good candidate for a short?

[LiveLife]

Well, this is where I go off to work.  I wll hold NVAX for now (I haven't set my sell target yet, since I anticipate a "significant" rebound for NVAX towards $4 - $5 range)

OneStockMind, this newbie (since July of this year) hasn't learned the art of shorting and option trading, YET! 

See you after work.

= update =
Good evening!  Wow, I guess NVAX won the race (TIII vs NVAX6)!!!

[LiveLife]

Here's the my quick recap for today.  I will post more analysis after dinner. 

[LiveLife]

For the "unbelieving" Yahoo finance MB posters, here's copy of my Scottrade closed executions: