trading.
We present many different tracing variations at DTU, in the hopes that you'll be able to find someof the trading styles useful and profitable in helping you make good trading decisionsRemember to treat trading like a business, and as 4 smart business owner, you want tominimize costs and maximize profits. Would you start a new small business by spending moneyon lots of things without any business plan or market research? Those that do help account forthe 80% failure rate of new small business failures. Same exact thing in trading - many failbecause they do not do their hard work and research and stop losses that are necessary tosucceed. You have to do your work and not enter a position and "hope it goes up".. you have toknow why it may go up, when you'll exit, and how you'll manage the financials.
So many traders are lazy and look for easy money in the markets. Most lose. To guys like me,who do their work and treat this as a business. You simply have to work hard. Period. Gamblersshould go to Las Vegas, at least they get free drinks and flashing lights while they lose money.Traders who are serious, and | know most of you are since you've joined DTU, should expect towork 4-5 times harder than they currently are before they can expect to take profits consistently,for a living. That was my leaming curve, and I'm a former quality engineer/statistician from theFord Motor Cornpany. Charts were my work life...and trading is much harder than that ever wasEventually, you get to a point where you're not surprised by anything the market does, you'reskeptical of most trade situations and use a criteria list to rule out trade entries, and go deepwhen you see @ window of opportunity present itself that you feel will work out. It becomes kind ofroutine, the emotions go away, you know what you're looking for, you make 4 living at it. Thegood partis, the hours and pay are a lot better. And the places where you can live. It all counts
1. Print out a copy of the worksheet below and Use the guidlines we've included tohelp you manage your open swing trade positions.
2. AS always, keeping your stops is the most important part of the trade, followed by a profitableexit
Screensnap: Worksheet 1 - Click here to dil Powerpoint worksheet file (43K)
& Swing Trading Portfolio Mgmt. Worksheet eee
 
‘Compkite this workshact to helpyou manage risk and cnitice'axietws ighting in your swing trade portfolia
 
Guidelines:
1) Noone por tion should 13 ke morethan 2% of yourswing trading capital fag in aS20K swing portyou ve gat nomora than S4K worth of ATHM).
2) Your swing trading stops should be no morethan 5-ftimax. fromyourentty point. {og buy DCLKGMQ, stop BOS).
3) You vet trailing stops st 5% bolowesch day's closing price io lock in profits. Take any open profit of 20% or baticrJeayon favorable: gap opens cx)
4) You vats “time siop” of no longst than onc month farany-singk: portion, preferably 2 weeks.
5} You cell anyopen position right under “dcasde rosintanca",and buy back once a's aver. jog buy DGLKBAG, 211843,buy.sgain st S1,ect stop 3143 122 otc).
@) You newar *buy Ds" ag never buy st 29, $3,d9, 0% 28 you'll got resistance at the decade number sbowe it.
 
Dirstucda, Fill curtis sovindies gyd below ada tie aurdehdca abows waiags Your pornla of 2 oda, We recneatard you Uae &uae a2e of uae 100-100 star yar goateeSamba: Bey Pio: Ske BATT
   
Ine Slop: Mer pO: Talon ReskeuMe: ot al: PRORTILOSS:
 
 
 
 
 
 
 
 
 
 
 
 
 Module i i i Back topiesle, Swing Trading Strategies wit
Module Four: Activity 1 - “Swing Trading Research: Picking12 Stocks for Swing Trades”
« This activity is designed to help you research and choose 12 stocks thatyou think would be good for swing trading.
+ Refer to Module 4 Lesson 4 first.
« Papertrade a portfolio of swing trade stocks, identifying the entry, exit,trading range, shares you would trade, and stops.
 
The GOAL for this activity is for you to be able to wisely choose 12 stocks that make forgood swing trading candidates.
Directions:
1. Take some time to do research on anywhere from 70-100 stocks and narrow the list downto a dozen or so that would be good for swing trading. | like stocks like WMT TF HRL HETVISXCHAS ANN BEI and many others
2. Include both Nasdaq as well as NYSE-listed stocks in your group. Remember, NYSE listedstocks are generally less volatile thar Nasdaq stocks, and make for ‘safer’ swing trades, ingeneral.
3. Make sure your stocks have decent analyst ratings (best ones are less 1.5 rated), maybecheck IBD for 80/30 AAA type stocks as well.
4. Write down the following:
« stock's 10-day support and resistance
» type of trade itis (bottom fish, buy on breakout, uptrend, etc.)
e how many shares you would buy (100-300)
» how long you expect to be in the trade for
« analysts rating for the stock
« 2 reasons why you personally think you should buy the stock here
5. Now, papertrade these 12 stocks over the next 2 weeks and see how you'd do. Remember,you can easily be profitable even if you're only 50% night, as long as you manage your stops andexits correctly. Where you sell is more important than where you buy.
5. Choose one of the stocks that you should have had a “time stop" for.. which one is it? vouldyou really have sold at this stop, or would you continue to hold on to it indefinitely "til it came backup’? Be honest Wark through these things to help yourself becorne 4 more skilled swing trader
Hint week of April 17th is probably a “bottorn fishing" type week :)Look at the 10-day charts below. Which of therm would be good to buy here? Which would be
good to sell? Remember, you wart to trade with the trend and the crowd, if it "looks overbought"to you, others probably feel the same way, so it may be a good sellshort point.   
Fa] [mrt PW IEA TR
 
(9 “alfa “|v Sa) fv
fee aos Ply Sle | ST |
 
Each chart could be traded profitably, somehow. the keyis toknow when to go long, when to short, when to cover and when tosell. We'll look more at technical analysis for swing trades soon.
ModuleFour
 
PF i i BackSwing Trading Strategies wien
Module Four: Activity 2 - "Bottom Fishing on Small Shares
This activity is designed to help you leam how to make "bottom fish" plays on reversals after astock has consolidated in a low range, or on a pivot on an extreme oversold condition.Remernber that "buying bottoms” 1s the rnost risky of all types of plays, and you rust use smallshares (100-200) and a tight stops (under the most recent bottorn) to succeed using this tradingstyle
1am never able to pick the exact bottorn or sell the exact top, nobody is.. remember, as aprofitable trader all you want is a “piece of the action” in your direction, after youve identified ahigh-probability chart setup.
Remember, ifthe stock loses the support level that you bought at and starts ta head dawn,Never hold it evernight...sell it and buy again either the next day or when buyers come back intothe stock, whichever occurs first. Overnight holds or downtrending stocks are asking for anopening gap down, which will be much more costly than the stop you had wanted to use. Onlyhold bottorn fish plays ovemight for a swing when the close of the day is higher than what youpaid for the stock. Please Remember this and use Discipline for these plays.
The GOAL for this activity is for you to learn how to bottom-fish swing trades relativelysafely with minumum downside risk.
Directions:1. Start by looking at several dozen 3-month charts for stocks that have sold off inrecent weeks. Determine what the cause of the selling is: was it due to bad earnings,bad news, or random sell pressure? Rarely should you buy 4 dip on bad earnings, theyusually have further to fall (| speak fron personal experience herel).... wait for a 2nd or 3rdbottom to form, then buyers to come in, before buying a Stock that gaps down on the openon dad earnings news. Review recent headlines for a clue as to why people have beenselling the stock.
2. Look for either a reversal (fast pivot off a >15% selloff) in the price ancvor a breakoutabove a consolidation in price. Thatis, if the stock has sold off, has stayed flat for a fewdays or even weeks, and has now started to come back up through the resistance level
3. Do Not pick stocks that have been slowily selling off in along downtrend. ...the best bottombounces are reversals off of volatile stocks...some examples include RIMM RNVWik DCLKSPLS, you want volatility, stacks that have recently attracted both buyers And sellers, asseen by a choppy up and down trading pattern. Don't buy stocks whose 3-month chartlooks like ETYS, for example (Jan-May 2000). No buyers have emerged, only steadyselling. that's not bottorn-fishing, that's called "throwing good money into a loser"
4, Your actty here 1s to papertrade with 100-share lots of 12 stocks that you are choosingfor "bottom fish" swing plays. ‘You only want to use 100 shares in this because of the riskinvolved in bottern fishing ...if a position goes against you 2-3 points it won't damage yourcapital too bad .f you're trading 300-1000 shares and get 4 2-point gap down that wouldcost you $600 - $2000. .not a pretty picture. Your #1 goal is to preserve capital from thepros and other traders who want to take it from you
5. Carefully identify and write down the following:
« The trading range. 3-month and 5-day support and resistance levels for these stocks,« Your entry price
e Number of shares your bought (100) for each trade
+ Your stop loss that you will hold to (the most impartant part of your trade), and
« Your profit target, which should be right under the previous major resistance level
Notes: Hold these papertrades no longer than 3 weeks, and evaluate your progress, using“paper money". ..evaluate your trading record ...when during the 3 weeks did you sell each of thepositions? YWhat profit or loss did you take on each of the 12 trades?
[find that holding yourself to a 3 week time frame is useful because it forces you to look for agood exit point, and to take @ stop more effectively than if you are saying to yourself "welll I'll justkeep ittil it comes back up, no matter how long it takes"... You need to put your capital to workfor you, not tied up in an underperforming stock.
Swing Traders’ Keys to Bottom Fishing
‘Success: Remember that swing trading 1s muchmore dependent on correct technical
!) Wait for a breakout above consolidation analysis than is daytrading, in which
area/trading range reading Time & Sales and your Level 2
2) Look for pivot off extreme oversold conditions chart are important.
(>15% on the day)
3) Put your stop loss in right under the Leaming how to correctly identify
support/previous low breakouts, trends and
4) Use buying volume as an indicator as to “howright" you are on the long side
5) Never take home a losing first-day position, if itdrops from where you bought on day I then takethe stop and look for a better re-entry onafollowing day.
6) Don't chase a swing trade, look to enter beforelam, or in the last hour of the day
7) Set your profit target right under a previousresistance level.
supportfesistance lines is critical tobecoming a successful swing trader,
Candlestick charting also helps in swingtrading TA.Module i i i Backnal Swing Trading Strategies yea 4
<> Module Four: Activity 3 - "Trading Breakouts and Uptrends"
This activity will help you practice entering and exiting swing trades when buying strength hascaused the price to increase.
As in any swing trade, knowing the key 10-day and 3- or 6-month support and resistancelevels is helpful, as you can betier determine when the stock will "look overbought" or “lookoversold" to other traders. Using supportfresistance with 20V50/200 MA lines helps in this aswell.
Alsc be sure to look for fluctuations in the volume of the stock over time, eg at what pricepoints does the volume of the stock increase dramatically? Can you predict when thepWvots/reversals are based on volume patterns?
One of the important keys to success in swing trading is to properly identify support andresistance lines using your chart software, and being able to keep stops and exit with decentprofits based on your careful analyses
Remember, the stock market seems largely random at times, so it's important to keep stopsand take profits when they are there
The GOAL for this activity is for you to learn how to swing trade breakout patterns and uptrendseffectively.
Directions:
1. Look at the chart patterns below, showing both uptrends (SPLS} and breakouts (VISX). How
would you play these stocks from this moment on? Is there any trade potential left in either
one?
Scan your own 10-day stock charts and look for stocks that trade on decent volume (over 500K
shares/day) with similar movement (eg at least 15-20% movement in the trend or breakout). Choose
Five (5) of your own stocks to follow, and print out the charts, labeling them either Uptrend or
Breakout, based on the pattem you see.
3. Next, draw trendlines, support and resistance levels for these stock charts using a ruler.
4 How would you trade each of them from this point forward? For each of your charts, identifgy thefollowing:
ne
Major and minor support levels
Major and minor resistance levels
An optimal entry point for each of the stocks: would you wait for a pullback or buy sooner?Where a stop loss should be set if the trade were to be entered on the next trading day.Where your profit would be taken - what's your exit target?
Other notes that you want to make.
This activity should help you develop an eye for uptrends and breakout patterns:
Papertrade the stocks for the next 10 days, using just 100-share lots, and see which of therm would bewinning vs losing trades
Be sure to document your money management practices for these stocks as well, eg where wauld you havetaken a stop loss, and where would you take profits, for each of your 10 stocks?
Atthe end of the 10 days, calculate your net profitloss, and jot down your ‘lessons learned - what would youdo differently next time? What did you do effectively?Uptrend patterns: SPLS SPLS ¥) [interval Chat P| [Va Q| A 8) hy
You can see that SPLSmade a cup and handlepattern from 6/5 through6/8, with a breakout endsubsequent uptrendstarting on 6/3.
The trade entry would be onthe breakout, at 15 1/2, on6/9, and using trailing stopsthroughout the uptrendpattern.
We look to exit the positionright under decaderesistance at 20, sa wetake some profit here in the185, and use a trailing stopat 18 for the rest of theposition.
Breakout pattern: VISX quis TU ntenarcrat i] [P/V @)Sfesl 4) fir) SG
Here, you can see that thestock was in a choppytrading range for severaldays, finally breaking outabove resistance at 22 1/2
The trade entry would be at22 1/2, with a stop at 22
The exit would be right under‘decade’ resistance, or 30This stock could be just anovernight hold, or could beheld for additional longer-term gains
 Module i i i Back tiniule Swing Trading Strategies won 4
Module Four: Activity 4 - "Playing Positive News and EarningRelease Trades”
This activity will help you practice entering and eziling swing Irades in response to favorable
and negative news and earings reports that are made public
¢ Asin daytrading, you wouldn't, for example, buy an open gep up on positive earings ornews, @ good recent example is CSCO, it gapped up and sold off on pesitive eamingsrecently.
In swing trading, our goal is to enter at a favorable price in a trend, a channel, or an
‘oversold condition, selling to buyers who entered later than you did, for a profit, several
days or weeks later
We'll have you practice swing papertrading both eamings and news plays in this activity.
In general, stocks tend to selloff after earnings releases more often than they gap up, sol
never hold overnight into an earnings release.
Unless you have a realtime news feed and can jump on a news-release related trade within
1/2 point of the news release, do nol chase i, a yood example is XING in the week of
August 28th, it ran from 12 to 23 then back down to 14 the next day...
It's tough to play positive news releases unless (and it's a perfectly valid trade method too,
by the way), you keep ¢ realtime news ticker open and buy a stock within a minute (or less)
of a favorable story breaking the news wires You need to buy a realtime news feed for this
Buyers havent been coming in to scoop up oversold stocks as much this year, so dead cat
bounce plays are tougher, again wait for yolurne buying signals before entering a trade off
the bottom (or what you think is a bottorn).
In earnings releases, you should lock 10 sell open gaps up and buy gaps Gown, egain
though this needs to be done with a finely-tuned set of market indicators (eg stochastics,
RSI etc) for the intraday charts you're using, dor't atternpt these trades if you don't have a
professional ng set up (eg 2 monitors, L2, time&sales 1 to 3-minute intraday charts on
esignal or RTIIl etc)... Why? Because you'd be trading at a disadvantage, against those of uswho invest in those toolsets.
« Also in this cetegory are Upgrades and Downgrades: a secret tip : lock to buy stocks in thesame sector that selloff In sympathy with a stock that’s been downeraded, eg if youreplaying the retail sector and YHOO gets 2 downgrades, the whole sector may take a hit,buy one of the cther (gond) stocks in the sector (eg EBAY) that also gets taken down thatday... the downgrade had the effect of “throwing cut the baby with the bathwater", so youwant to buy a quality stock that got sold off "in sympathy with" the stock that gotdowngraded (this is usually best for either a scalp daytrade or a swing trade, if thesymapthy selloff is >5-7%).
 Papertrade a handful of these as well, it's easy to look at the day's winnersflosers about 20
minutes Into the trading day...or, look at the most active on ISLD prermarket around Samm...
see whal the crowd's reaction is, in a trend, to the news that causes a stock to sell offbefore the open, are they buying yet, or still selling? Then prepare to trade:
The GOAL for this activity Is for you to learn how to successfully trade News and Earnings Releaseplays.
Directions - EARNINGS RELEASE PLAYS:
1. Look at an earnings release calendar (click link) to see what companies are releasing earnings inthe next few days. Pick 3 that you're famillar with to watch.
2. Look at the 10-day and 6-month charts for this stock a day or two before the release is due, using bigcharts.com Youwant te identify the same information as you usually do.
« Major and minor support levels« Major and minor resistance levelsAverage intraday trading range (eg BVSN has a 2-point range)
Papertrade the stocks into the earnings release - note that stocks will often run up (or down) in anticipation ofearnings for 5-10 days pnor to the actual release, at which time they often retrace to where they were at earlier{making new 52-week lows for bad earings, or gapping up (seldarm) on good eamings.Two type of earnings release trades to look for. 1) jump on the trend going into the earnings release, egANIZN is going to release earnings on September 30th, watch the stock price carefully from Sept 21st to the 30thto look for a trend... or 2) after the earnings release comes oul, buy a bounce if it tanks and then gets buyers{eg AMZN is 42 prior to earnings release, they miss by 4 penny, it opens up the next day at 36 1/2 look to buy Itif it breaks over 37 before lunchtime etc }
3 Ok, now sez how you do on playing the earnings release for several stocics, and document your lessons leamed: which strategy
would've been the nght one? Did you play that one or the opposite one’? Most mportantly, how did you manage your nsk andtrade swzes throughout the trade? IFyou were wroag, did you get out fast vs, hope for a tumaround? ok
Directions - NEWS PLAYS (litte known trading tips in here, read it):
Be carefiul with these, they are very difficult, they are more suted for daytrading than swing trading.
2. #1 Mistake to Avoid: Let's say SBUX announces that they've been chosen as a key supplier for a major retailers’ coffeeshops. They release this information Wednesday at 4:30 pm. The stock had been trading at 37... after hours it runs to 42.Thursday moming it has settled down to 41 to open You do Not buy the gap up at 41 Dont do it Wait til at least 10°15or so to see fit still gets ever more buyers... more likely, 1t would sell down to 40, consoldate around there for awhile,maybe zo back up to 41 by the end of the day.... the only time you would buy a gap up is if it keeps running on goodvolume for at least 20 minutes or so early in the moming, . usually the gap has "satisfied the buying urze" of the public andsellers/shorters will appear, selling into the momentum until the stock reverses at 10am... again these are general patterns.but they happen more often than not. The point? Do not buy gaps up unless the stock takes out a new high on heavyvolume. -be careful with these.
3. Howto play news let's say you've got www. thefyonthewall. com or www. jagnotes.com or another service .. and, mostimportantly, you've got a realtime news feed that gives you headline news releases throughout the trading day. Here's whatto do:
4. The instant a headhne comes out that has Major Financial Impact on a stocks' price (eg announced new strategicpartnership, wins major contract, releases new product/service, has major drugitechnology patent approved) then pull up.your 1-mmnute chart and time and sales window You do not yet know what impact this news will have on the share priceMuch of the news that comes out has no effect on stock prices, you're warhng to cherry pick a headlne that has a majorfinancial impact on a company.
5. Buy the stock as soon as st makes anew High for the day after the earnings release. Why wait? Because what you think isgood news may, for other reasons, be seen as a negative by the analysts following the stock, who will issue sell programorders, selling the stock off so, wait to make the buyers prove to you that there's buying interest in the stock
6. For shorting, almost the opposite is true. . f you see a “Firetire Recall’ news headkne then you may be able to get a shortoff... because ofthe uptick rule, however, it's much more difficult to get a short sale off for bad news, the stock pnce willplummet, so short sellers need to respond immediately to negative news headlines and fire offa short as soon as possible(eg within 15-30 seconds after the news hits the wire), you can't wait for a new low of day, since you may not get anuptick to short on. . you might, it's just not as easy.
7. Okay, papertrade the news releases with your realtme news feed too Are you a swing trader? That's why you're reading
this, nght? Well, news releases can still be played profitably from a swing trading perspectwe, the key to look for
“unresponded to" news. . eg if theres a release that has genuinely positive financial impact on a company, but for some
reason the stock hasn't gone up, you might want to buy into it and see if it goes up during the next 10 trading days or so
Ive personally seen many stocks, usually the cheap ones (eg $10-$20) that aren't heavily traded, pop up 2-3 days after the
news has come out They aren't as closely watched, so the find managers who pour money into the stocks may take a
couple of days to decide to buy in. This is a good buy opportunity, before the big money comes m. Of course, ifthe news
comes out and the stock is still lat 2 weeks later, then sell and move onModule i Back toee Swing Trading Strategies umtnan é
Module Four: Activity § - "Scaling In and Out of Your SwingTrade Positions"
wity will help you practice adding to and
 
ng of positions you ha
 
na single stock
 
to use what might be called a
with @ certain number of sh.
 
aling approach to manage youthen add to (or subtract
ng trades. You initiate afi
 
misell) the jp
 
n based on profits
     
   
ing and major swing support and resistance levels
© A.good guideline is: add to winning po Not 10 losing positions (eg dant average down, or do so only
for stocks that keep pric
 
ed 1-2 month trading rarworse pyrarnid’ ae previously mentioned is a ¥, 0g buy 600 shares DEL00 at 34 and a final 200 at 36 1/2 11 S00 at 35 the final 2way back down as it Sells etc... like a rollercoaster, you want to add the most weight to your positionou think tha bottorn is, then add bat cing up, than sall out a major piece withgood profit as the "tra ential” decre y, then fade out the rest of your
ra of & wall
   
 
support off ab
       
 
© Also,
   
         
 
    
 
 
position on the way down, locking in profitsadded and subtracted as few ac 50eg PHCM)... to manage your tisk and “hedge” as the price moves for or against your position & dossgenerate more commi: bul that's generally msagnificart.. you shouldn'T be constantly churning yourswing trades, eg 1 of Sells per day per stock at most,..usually Ml buy a position, maybe add fo it ifwer a kay br a, put a trailing stop at the breakout point, sell some of the initial pering on the edge of selling off, etc
 
 
» This techraque is useful,
 
hares at atime (for expansive stocks
 
 
     
 
   
                  
       
© Sone of the types of stocks that are ok for swing trading are ROST BB! SSCC SPLS NOVL WMT Tones with o fairly steady trading range that you can get in and out of relatively safely. remember you@ slower-moving 3 ng trades if youre & newer trader, dont swing trade anyoure experienced in risk and trade management
     
© Take a look attpos
hart below, which you saw earlier in Module 4 Las(eg buy 50
1.6. How would you do a”H at 46 1/2... then what ..27)
 
ion swing trade" in this etc
   
 
 
 
 
[interval Chart e|4|_ [7 Seor
DAY ONE DAY TWO DPSS Motel DAY FOUR i
ivath
1
ero ero i eros
 
The GOAL for this Next activity is for you to learn how to successfully Scale in and Out of swingtrading positions during a 1- to 3 week time horizon.
Directions - Papertrading a SCALED-INISCALED-OUT SWING TRADE:
1. Choose a stock whose 10-day chart has at least a 10% trading range.... eg a $50 stock with a $5range (it's traded in a range or trend from 48 to §3)..2. Paper-trade how you would manage a trade entry and exit, varying the size of your position such that youenter the trade with the largest size, and add to it if the stock is going in your direction. Of course, you needto also identify where you would stop out, this should be the "fastest stop" you take in the position, as itisthe largest position size you take, eg 300-500 shares, don'tlet it go more than 1/2 point against you... waitto rebuy later...
3. Ahead of time, identify where key support and resistance areas are, and at what price point and level you'dsell your stock out at... where will you sell the most shares? Where will you keep that last 100-200 to see if itretests a breakout point?
4. This takes a lot of practice, and is a very important skill to master. Many new traders, myself included at first,make thelr trades as “all-or-nothing" trades, eg I'll buy 500 shares and sell 500 shares. That's It. ... Thebetter approach is to work like a market maker does, eg start with a 300-share position, add another 100 toit if it keeps going up, add a final 100 if it's making new highs, then sell 300 when the momentum starts tofade etc.. this can be an extremely powerful swing and daytracing technique and | encourage everyone toleam to master it
Afew more signals you should also be looking for when scaling in and out of a trade:
+ Volume patterns: keep a very very close eye on relative volume during a short term trend, either swing or
daytrades... volume = voting... so, If you see a lot of selling volume, then you should also be a seller,
quickly... if you see ouying volume then don't chase, enter on a pullback if it looks right to you.
Earnings releases: make sure in all swing trades that you are aware of when earnings will be released.. |
generally sell my positions off the day before earnings release and re-enter on a pullback (or tank) the
morning after earnings are released, if volume revers