Stock Trading Basics to Swing Trading

[Stocky2000]

My theory is that if a stock gain is supported by volume increase with large interest by institutional fund managers (mutual fund managers typically buy for long term) and the stock is crossing 50 and 200 MA, it indicates a "BUY" for longer term stock trading

LiveLife great site you have here! i think this filters you are using are pure gold....i use the same since december....this institutional ownership does really means something...but it is just monthly...it should show it weekly...but still ...i also like the intraday volume gainers...i look at the list after the market is closed then i try to trade triggers with the best stocks the next day (sure market conditions needs to be ok)....i can put them with trade triggers (ameritrade)....mostly as you know the trigger price is then when the stock breaks the high of the last day...then i buy mostly...important is to wait around 30 minutes to get a save entry....stock that triggers in the first minutes of the day are risky.... Then i can programm 3-4 stocks that might trigger the day....the risk/reward is quite good. I learned it at www.greatstockpix.com....

ket1390

[LiveLife]

Thanks for the comments ket1390.

Here's another point to consider.

When I started stock trading last summer, I tried to learn trend trading.  I was looking for mid to long term stocks to buy and hold.

What I kept hearing and seeing was "profit taking."  What I did was to treat these profit taking price drops as "normal" price corrections and anticipated that stock prices would recover and resume their gains.

One such example was NVAX when I bought in at $2.02 and stock soon hit $6.00 with the frenzy of Avian bird flu scare.  If you look at the chart you will see many such profit taking/price corrections.  Like many, I just held through the profit taking price drops in the hopes that the stock price would continue to climb until it hit $10.00+.

Well, it did not happen and after a brief $6.00 hit, price dropped to $3.00.  My wife kept telling me to "take profit" as the stock rose to $6.00 and I did not.  I did not want to miss out on a spiking gain to $10.00.  Well, my greed for gains costed me $20,000 worth of profit taking.

It was events like this that "pushed" me to become a short-term swing trader, being quick to take profit and holding cash while stock took profit taking dips and buying back more shares on the rebound or buying another stock altogether.

For longer term stock trading, I have looked at many charts this week and saw the similar profit taking price dips.

I initially considered defining mid-term stock trading as 1+ week.  But looking at these profit taking price dips on the charts, I am looking at ways to anticipate such price dips so we would take profit and be holding cash while waiting resuming of price gains.

Many have commented that they don't have a problem picking good entry points (buy), but they do have problem picking exit points (sell). 

ket1390, yes I do realize that "monthly institutional gain" filter maybe too late of an indicator for us to profit from.  And by the time stocks make the "weekly volume gainer" list, much of large gains may have already taken place. 

For this "swing trading" MB thread, we need to find ways to indicate profit taking/sell points so we avoid losses and maximize gains.  If you are taking profit on gains (even though small) on majority of the trades, you will be able to buy back more shares or buy another stock that is actively gaining.

I have been a "bag holder" too many times already and I HATE  being in that position hoping and waiting for the stock to rebound back to where I bought in.  Best way to avoid being a bag holder is to not buy high on hype or greed.

The mid-term stock trading template is in early draft form and will be a work in progress for a while.  It will be interesting how it turns out.

Good trading!

[bjc]

Livelife, I think you'd have to be Rainman or a Tarot card reader to predict moves like that.  I feel like its simply impossible.  You can't sell every single top and buy every single bottom. 

[LiveLife]

LOL bjc  ,

I did the NVAX chart to make a point, not to demonstrate what we must do.

During the ride up from $2 to $6, there was much discussion on the NVAX boards (3SOF and Yahoo Finance) about entry/exit points.

After NVAX hit $2+, many that bought just above $1 took profit.  After NVAX hit $3+, there was another profit taking.  A lot of us began to "dream" about NVAX going to $10+ and held through $4+.  That's 100% gain!  But for many, including me, greed kept me from taking profit and even as stock went to $5+, I did not take profit.

When NVAX crashed from $6 to $3, RSI (14) dipped below 50.  I did buy back NVAX, but was a lot more cautious and was much quicker to take any realized profit.

Looking back with more objective eyes, profit taking should have occurred at $4+ with 100% gain.  More reasonable thing to do was to buy back with the profit gain and take another profit at $5+.  And buy back when RSI (14) dipped below 50 on the rebound at $3+ and take profit at $4+.  But I am looking back in time as an "armchair quarterback." 

I am kinda excited about developing a mid-term stock trading template now.  It has forced me to look at indicators and company fundamentals (earnings, P/E ratio, debt, etc.) that I have pushed aside as a short-term swing trader.

The short-term swing trading template has done well to provide some guidelines for newbies to short-term swing trading.  Many have expressed that the aggressive short-term stock trading is not their style and asked for another template for longer-term stock trading.

I think it will be more difficult to develop a working template for mid-term stock trading, but I love stock trading and this has given me a new project to work on!    I believe, in time, we can fine tune a template that can be effective for mid-term stock trading (longer than 1 week).

If not, I will die trying!

[nica33]

Let's see if I can say in english what I think......

Live Life, I admire your dedication I feel the same in so many ways, but I don't write here a lot because my first language is spanish, and it's a little difficult for me to do it.   When I start with stocks I read a O'Neil book "How to make money in stocks".  I learn a lot, but I had very confused ideas because inside me I wanted to be a "swing trader" and that book is about investments (long term) ( Now I know the difference  ).  So I have been learning with test and error, sometimes making profits sometimes not, and the most important reading a lot.  After all this.  I am pretty confident that you can make decent profits with swing trading.  For example,  I look the list of High volume weekly gainers, which mostly refers to stocks with heavy instit. invest., choose stocks under 10 $ ( those maybe are starting their uptrend), see the chart....and wait with patiente for a pullback.  And finally I had found that your template really works.!!!!!!

[LiveLife]

nica33, thanks for the comments.

In addition to HANS, I have long been a fan of AMD (all 4 of my computers at home run on AMD Athlon and Athlon64 processors  ).

AMD would have been a good candidate for longer term stock trading.

Another thing I am realizing is that for longer term stock trading, $10 cap may not be applicable since many "established" growth companies have already exceeded that stock price.

I screen for stocks under $10 for short-term swing trading with micro-small cap stocks.  For mid-term stock trading, we may have to broaden the stock price (perhaps to $20-$30?) and look for micro-small-mid cap stocks.

Like I said, this is going to be a work in progress, and we have just begun.

[LiveLife]

I've been continuing to check for stocks that would have been a good candidate for mid-term stock trading.  ELN would have been a nice one too.

Actually, ELN technicals look good for short-term swing trading also.

[LiveLife]

Like NVAX, GTE also showed similar SELL points especially with RSI (14) hitting above 70-80.

Look at the drop from $4 to $2 and rebound back to $4!

Also, I have traded ESLR several times in the past and would have made a good long-term stock.

[LiveLife]

= Mid-term swing trading template development update = This is what goes on in my head 24/7. 

This week and today, I have been reviewing my past trades and charts of stocks to see if I can find "factors" that would have allowed us to identify stocks that have had good mid-term (several weeks to months) gains.

Also, I examined the various filters and indicators I have used in the past (chart trends, technical analysis, fundamentals, stock filters, etc.).

As indicated on previous posts from earlier this week, such filters are often latent (late) indicators.  Here's my proof.  Check out the current "weekly high volume gainer" filter below:
http://moneycentral.msn.com/investor/finder/deluxestockscreen.aspx?query=One-Week+High-Volume+Gainers&btnQryFrm=Go

The top "weekly high volume gainer" list changes all the time based on high volume of stock shares traded and gains in price.  In fact, many great stocks for mid-term stock trading will never make this list.

Why? Hmmmmmm.  I know, I asked the same perplexing question.

So, this is what I have been pondering:

1.  When I day trade or short-term swing trade, I scan my list of 20-40 stocks (I use current and past recommendations from David Randolph, 3SOF MBs and from other filters I use) that I like and see if which are actively gaining.  The process I used to make buy/sell decisions of these stocks on day/short-term basis has become the short-term swing trading template, which over the past months has shown to be effective for trendable stocks for "normal' market conditions (I know, of course it is not 100%!  , remember, it was only a guide?).


2.  When I decided to develop a mid-term swing trading template, things got challenging.  The short-term swing trading template does not reflect stock price movements of several weeks to several months accurately.

Our initial thought of using various longer range filters and expanded 10/50 MA (and 50/200 MA "golden cross" break for even longer range) will identify buy/sell (entry/exit) points for mid-term swing trades, but will not indicate "profit taking" sell points (yes, trying to be Rainman or tarrot card reader, lol  ).

But as I stated, I hate being a bag holder and taking losses.  After painfully learning my lesson of not taking profit, I am now very cautious and quick to take profit.

So, how can we develop a mid-term swing trading template that can also predict short-term profit taking sell points?


3.  Call me crazy, but here's my "draft" proposal for the "evolving" swing trading template:

What if we developed a working mid-term swing trading template, but to anticipate short-term profit taking selloffs, we ALSO utilized the short-term swing trading template?

This way, we can focus on mid-term stock trading (several weeks to months), but when our short-term template indicates "SELL" we can take profit and hold cash to buy back if stock continues to gain or be smiling if the stock takes a nose dive.

I posted a "rough" template below with short and mid-term templates side by side.  Perhaps in the future, we can have short, mid and long-term templates.

Of course, I have not put the indicators for mid-term template.  That's what we will work on next.

What do you think?

[dhiraj19]

Applaud for your great work... I am waiting for the completion of the guidelines as I am going paste it on my investment wall to always remember it..
- Dhiraj

[LiveLife]

OK, I modified the draft template for short/mid-term swing trading.

This is what I have so far.

[LiveLife]

I revised and cleaned up the draft template so it is more "readable" with larger fonts.

[nica33]

Hello Live Life,  You're doing a great job.!!!!

Let me give you a suggestion:  I guess, speak about volume in "absolute" terms is "relative", since it depends largely of float and averages.  Maybe if you can express it in terms of averages could be better?  For example, for short term you can use avg. daily last 2 weeks and for Long term avg. daily last month or last quarter?

In my own filters I look for stocks with at least 2 times the avg. daily for a long position.

[LiveLife]

nica33 thanks for the comments.  That's a nice filter criteria to use (I think I will start using that for my trades  )

Like I said, the Mid-Term swing trading template is going to be a "work in progress" for a while.  At this point, I haven't even considered the indicators that should be used.  All indicators that are proper for Mid-Term swing trading should be considered and incorporated into the Mid-Term template.

I also revised the "BUY" criteria.

I bought GNBT at $1.15 this morning.  Generex makes non-injectable form of insulin.  Can GNBT be a mid-term/long-term stock?  I will treat GNBT trade as a short-term for now, if it has  longer-term legs, I will reassess my position.  Thanks ven_cap_red for the link from Yahoo Finance MB:

http://www.in-pharmatechnologist.com/news/ng.asp?n=65365-generex-bentley-insulin-biotech-diabetes

"New insulin therapies – big players beware of biotech...
Kirsty Barnes
27/01/2006  - The big pharma companies may have dreamed of launching the world's first non-injectable insulin, but it has been Canadian biotech company Generex that shattered this dream, bypassing EU and US regulatory processes and launching its inhaled insulin in Ecuador last November. But do biotech companies prove a real threat?

The approval of Oral-lyn, an oral (buccal) insulin spray product, which is delivered into the mouth by the company's proprietary RapidMist system, was mainly based on the results of clinical trials in Ecuador involving only 250 Type 2 diabetics.

Oral-lyn is now available in Ecuador for Type 2 diabetics and the company hopes to soon have it approved there for Type 1 diabetes and is now conducting a six-month study in this patient population.

In addition, the firm is planning to roll Oral-lyn out in several other South American countries later this year, however, Oral-lyn's success will ultimately depend on whether it is able to receive approval and break into the more lucrative international markets.

The large-scale Phase III clinical trials required by regulators in the US, Europe, and elsewhere have not yet begun and whether Generex's product can stand up to the much tougher international standards remains to be seen."  More at link.

[LiveLife]

Nice gain day for GNBT.  8.7% gain for me for the day.  As you can see from the chart and template, I will be looking at short-term profit taking tomorrow as RSI (14) approaches 70.

Will it regain after profit taking?

That's the question I've been asking all day today - What indicators can we apply to predict the mid-term performance of this stock?

This would be a good opportunity to inquire and apply the various indicators to see if we can start narrowing down the choice of indicators to use for our mid-term swing trading template.

nica33, btw today's volume of 9 million was more than twice the average volume of 3.7 million.

Interestingly, GNBT did not make the "Intraday High Volume Gainer" list:
http://moneycentral.msn.com/investor/finder/deluxestockscreen.aspx?query=Intraday+High-Volume+Gainers&btnQryFrm=Go