How to Swing Trade Stocks While You Work - Rules and System

Updated: Feb 11

'Dom, how do I swing trade stocks while working full time' - that's the question I get from you guys often. So today I've decided to form this blog entry with awesome answer.


Here is the 5 step process I used as a part-time trader on my path towards trading full-time.



"Start a part-time business and make as many mistakes as you can while you still have your day job" - Robert Kiyosaki


The more I work with part-time traders the more I am reminded of the struggles I experienced on my own journey of becoming a winning trader. It was a long and tough road. However, part-time trading is a struggle worth fighting, because once you make it the payoff is big: freedom.


The freedom is not only financial. The freedom of lifestyle that comes from trading can't be measured in dollars and cents.



How does trading lead to freedom?


For some, it means traveling the world, while for others it is setting their own hours and not reporting to a boss. For me, it means living where I originally planned to retire (Canary Islands), and spending quality time with my loved ones.


How did I get here?


First, I took Mr. Kiyosaki's advice a little too literally, because I made every mistake in the book.


The big picture beginner trading mistakes were:


  • Jumping around from strategy to strategy in search of the mythical holy trading grail.

  • Accumulating a vast amount of trading knowledge, otherwise known as trading trivia, without actually learning how to trade.

  • Blowing up two trading accounts because I did not manage my risk and positions size, micro-managed my positions, while continually cutting my winners and letting my losses swell.

  • Not adapting my setups to the market; not understanding sector rotation and money flow.


Second, I persevered through all those mistakes and used deliberate practice to gain a deeper understanding of how to trade.


Third, once I gained that deeper understanding I created a simplified process for part-time trading while at my full-time job.


It was not easy. The demands of my day job and raising a young family required that I streamline my trading process to a simplified routine that took less than an hour per day. What you see below is the result of years of trial and error that lead to finally fine-tuning a winning part time trading strategy.


Here is the 5 step process I used as a part-time trader on his path toward trading full-time.


Daily Habits

Evening


  • Run sector scan

  • Run breakout and overbought oversold scans

  • Review watchlist and build the next day's focus list

  • Add entry, stop and target levels for reach stocks on the focus list


Morning


  • Check futures before heading to work

  • Watch the open


Intraday


  • Monitor the market, focus list and positions 1-2 times per intraday market session

  • Make trades from focus list


Simplified Process: Tracking Money Flow

Market Analysis


  • Two-step process for analyzing market trends and breadth


Sector Analysis


  • Top-down approach to analyzing sectors and stocks within the sector


Simplified Process: Preparing to Trade

Build Watchlist


  • From sector analysis and breakout scans


Setup Toolbox


  • Toolbox of setups that are used in accordance with market and sector analysis


Daily Focus List


  • Build from the watchlist, market analysis, and setup toolbox


The Entry Plan

Focus List


  • 5-15 stocks on watch for entries


Plan


  • Every trade requires a strong setup and risk reward ratio


Execute


  • As entry level is hit and market conditions are favorable


Set it and forget it


  • Post entry, sit back, and watch without micromanaging positions


Trading Around Your Job

This simple systemic process is easy to implement around even the most demanding full-time job. Here is an example of an ideal part-time trading work schedule, although it can be adjusted to fit your needs:


  • 30 minutes in the evening or late night

  • 10-20 minutes in the morning before work

  • Two or three 10 minute breaks during work hours

  • Implementing this trading approach requires an hour per day for a disciplined part-time trader.


How the Swing Trade Report Helps

I've designed my swing trade report to help those who are new to part-time trading avoid the hurdles that held me back for years. First is the education.


As I mentioned above, it's easy to collect "trading trivia" that feels valuable on the surface but is functionally useless. The strategies that I use and teach have zero fluff. If something isn't useful in the real world of trading, I don't include it. As someone engaged in part-time trading, you must focus your limited hours and mental bandwidth on what is most useful, and my report will help you do that.


One of the biggest mistakes I made as a new trader - and it's one that almost all new traders make - was not managing my risk properly. It's important to understand that the way a day trader and a swing trader manage risk aren't identical.


When you are part-time trading, you can't sit and watch every tick of a stock. Some stocks that would be fine to day trade are simply too volatile to swing trade safely. I curate my watchlist with this in mind, leaving out the craziest momentum stocks, while keeping huge movers on hold. When I alert a stock from my report, you run little risk of missing the entry and chasing, and you won't have to be worrying that it will make a drastic move overnight.


The swing report will help you gain confidence as a trader. Rather than trying to piece together something that works from a random collection of books, forum posts and blogs, you'll get one concise, cohesive report that gives you everything you need.


No more jumping around from one system to the next. No more blindly following the latest social media buzz. You'll earn your confidence as a part-time trader one successful swing trade at a time.


If that's the subject you are interested in, join my 'Greatness' Newsletter. There's plenty more...



Now let's talk trading systems: DS PRO’ Swing Trading: Rules and Philosophy.


My style is based on a short-term method for trading daily price movements that relies entirely on odds and percentages . It is a method as opposed to a system. Very few people can blindly follow a system, though many find it easier to be discretionary in a systematic way.


Because this short-term swing technique generates frequent trades, it is important to know the “correct plays,” to lock in profits, and to seek the “true trend.” Taking a loss is merely playing for better position. One trades strictly for probable future results, not for what the market might do.


To know the “correct play” is to know whether to buy or sell first, to exit or hold. Trades are based on “objective points,” which are simply the previous day’s high and low. Movement between these two points determines the “true trend.”


When swing trading, adjust your expectations. The lower your expectations, the happier you will be and, ironically, the more money you will probably make! Entries are a piece of cake, but you must also trust yourself to get out of bad situations and trades. It is important to use tighter stops when trading swings and wider stops when trading trends.


This method teaches you to anticipate! Never react! Know what you are going to do before the market opens. Always have a plan–but be flexible! “See” your stop (support or resistance) before initiating a trade. Know how to trade out of trouble situations and get off the hook with the smallest possible loss.


Finally, never trade in narrow, dead markets. The swings are too small. Never chase a market. Rather than worry that you’ve missed a move, think instead, “Oh, boy! I’ve got oscillations and volatility back…”


Basic Rules for Swing Traders

But first–the rules! Because of the short-term nature of this technique, swing traders must adhere to some very basic rules, including:


  • If the trade moves in your favor, carry it overnight–the odds favor follow-through.


  • Expect to exit the next day around the objective point.


  • An overnight gap presents an excellent opportunity to take profits.


  • Concentrating on only one entry or one exit per day relieves the pressure.


  • If your entry is correct, the market should move favorably almost immediately.


  • It may come back to test and/or exceed your entry point a little, but that’s OK.


  • Do not carry a losing position overnight. Exit and play for better position the next day.


  • A strong close indicates a strong opening the following day.


  • If the market doesn’t perform as expected, exit on the first reaction.


  • If the market offers you a windfall of big profits, take them to the bank on the close.


  • If you are long and the market closes flat, indicating a lower opening the following day, scratch or exit the trade. Play for better position the next day.


  • It is always OK to scratch a trade!


  • Use tight stops when swing trading (wider stops when trading trend).


  • The goal always is to minimize risk and create “Freebies.”


  • When in doubt–get out! You have lost your road map and your game plan.


  • Place your orders at the market.


  • When the trade isn’t working, exit on the first reaction.


  • Work your plan.


Trading the Swing

How does one anticipate entry? The following may be indicators of a buy day or a sell day:


Classic Trading Cycle


  • The Count


Start searching for a buying day 2 days after a swing high or, conversely, a shorting day 2 days after a swing low. Ideally, the market will move in complete 5-day cycles. (In a strong trend, the market will move 4 days in the primary direction and only 1 in reaction. Thus, one must seek entry 1 day earlier.)


  • “Check Mark” on the Test


The potential entry is sought opposite, or contrary to, the previous day’s close. If looking to buy (sell), one first wants the market to “test” the previous day’s low (high), preferably early in the day, and then form a trading pattern that looks like a “check mark”.


This pattern sets up and establishes a “double stop point” or strong support. If entering a market with only a “single stop point” or support formed by today’s low only, exit on the same day–the trade is clearly against the trend.


  • Close vs. Open


The close should indicate the following day’s opening. When a market opens opposite what is expected or indicated by the trend, one may first look to “fade” it–but must take profits quickly. Then look to reverse!


  • Support (Resistance)


Is today’s support (resistance) higher or lower than yesterday’s?


  • Swing Measurements


Where is the market relative to the last swing high or low? Look for swings (up or down) of equal length, and for retracements of equal percentage.


Additional Considerations

No matter in what time frame, always look for supply at tops and support at bottoms. Penetrations should be accompanied by volume and activity.

Expect trends, either up or down, to last for either 2 or 4 weeks.


The following conditions are fairly reliable indicators for the start of one of these trends (I personally skip the first buy or sell swing when one occurs because the move ensuing could be quite strong):


  • Narrowest range in the last 7 days


  • 3 consecutive days with small range


  • The point of a wedge


  • A breakaway gap


Practice

Because a certain amount of confidence in any technique is required to trade it consistently, demo trading can cultivate the faith necessary to recognize and trade pattern repetition. Although the temptation to try too many different styles and patterns always exists, one must strive ultimately to trade in just one consistent manner–or at least to integrate techniques into your own unique philosophy.


System Characteristics

Certain points about trading short-term swings deserve note. Understanding the nature of short-term systems can help you recognize the psychological aspect of trading.


When consistently following a short-term system, you should expect a very high win/loss ratio. Though the objectives with this style of swing trading appear conservative, you will almost always incur “positive slippage”.


In all systems, winners are skewed. Even though making steady profits, 3-4 really big trades may actually make the month. It is vitally important to always “lock in” your trades. Don’t give back profits when short-term trading.


You may be astonished at just how big some winners may be from catching the swings “just right!”


Decision-Making

I feel it is important to address this topic. Every time you make a trade, you make a decision. The more decisions you make, the more you increase your self-esteem.


You grow with each decision, yet each decision has a price–you must discard a choice, and you must commit. Conditions are always imperfect! You must allow yourself to fail. Allow for human limitations and incorrect choices. Reserve compassion for yourself and your limitations.


There is so much instantaneous information available to all market players today. It is OK to use intuition and to listen to that little voice inside your head, “Does the trade feel right?” If in doubt, get out…!


Golden Rules

Finally, I want to leave you with what I believe are two Golden Rules, applicable to all traders but, of essential importance to short-term swing traders:


  • NEVER, ever, average a loss! Sell out if you think you are wrong. Buy back when you believe you are right.


  • NEVER, NEVER, NEVER listen to anyone else’s opinion! Only YOU know when your trade isn’t working.


There you go, helpful?


Dom

Any research in this document has been procured and may have been acted on by 'Dominik Stone' for its own purpose. The results of such research are being made available only incidentally.


The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the 'Unleash Your Greatness' or any part thereof and no assurances are made as to their accuracy.

Dominik Stone

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