The Definitive Guide to Swing Trading Stocks

The Definitive Guide to Swing Trading Stocks free pdf ebook was written by ADMIN on November 19, 2009 consist of 17 page(s). The pdf file is provided by and available on pdfpedia since July 31, 2012.

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The Definitive Guide to Swing Trading Stocks pdf

: 1888
: 10
: July 31, 2012
Total Page(s)
: 17
The Definitive Guide to Swing Trading Stocks - page 1
The Definitive Guide to Swing Trading Stocks 5.0 Edition The Definitive Guide to Swing Trading Stocks Copyright 2002 -20010 1
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The Definitive Guide to Swing Trading Stocks - page 2
The Definitive Guide to Swing Trading Stocks 5.0 Edition Disclaimer The information provided is not to be considered as a recommendation to buy certain stocks and is provided solely as an information resource to help traders make their own decisions. Past performance is no guarantee of future success. It is important to note that no system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using The Definitive Guide to Swing Trading Stocks will provide information that guarantees profits or ensures freedom from losses. Copyright © 2003-2010. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, without written prior permission from the author. This is NOT a free eBook. You are not permitted to give this eBook away or resell it or any part of its contents without written permission from its author. You should have purchased this eBook from If you did not please inform the author at [email protected] Copyright 2002 -20010 2
The Definitive Guide to Swing Trading Stocks - page 3
The Definitive Guide to Swing Trading Stocks 5.0 Edition The Definitive Guide to Swing Trading Stocks TABLE OF CONTENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Introduction Who Should Read This Guide The 5 Immutable Law of Trading What Is Swing Trading The Basics Trading Systems Overview Some Common Trading Methods Using Multiple Time Frames How to Choose Stocks for a Watch List Identifying Trends Using Price Charts Trade-Entry Setups Profit-Taking Methods Stop-Loss Methods Managing Portfolios Putting It All Together Brokers Resources Copyright 2002 -20010 3
The Definitive Guide to Swing Trading Stocks - page 4
The Definitive Guide to Swing Trading Stocks 5.0 Edition Introduction I have been involved in trading the securities markets for more than 20 years. I remember when I first learned about stock trading: I thought it was truly amazing to be able to make money from anywhere in the world and all I needed was a computer, Internet access or a telephone. It is, in many ways, the perfect business opportunity. It offers a multitude of unique benefits: no employees low overhead no physical inventory instant liquidity multiple ways to leverage capital independent of economy independent of climate easy to scale easy to automate favorable tax considerations the ability to take time off at any time People are drawn to stock trading for many reasons. Yours might include: Making additional spending income Producing capital for other investments, such as real estate Saving for your children’s education Becoming self-employed Building your nest egg for retirement In my library of stock trading books and courses, I have found that 90% of the information is the same, just rehashed in some way. Every book store in the country has stock trading books readily available so with such a high percentage of traders losing money, you have to wonder how credible the information available in book stores really is. However, if I learned just one new thing, I considered each purchase worth my while. In this trading course, I believe you will find not just one, but many things that will elevate your trading to new levels. In the chapters that follow, you will learn some of the best techniques I have found for extracting profits from the stock market. It’s a well known statistic that 90% of traders lose money most of the time. Lose some of their money, or even all of their money. Statistically, if you are reading this you are part of that 90%. What does it take to win?? In his recent book ‘Outliers’ Malcolm Gladwell describes the 10,000-Hour Rule, claiming that the key to success in any cognitively complex field is, to a large extent, a matter of practicing a specific task for a total of around 10,000 hours. 10,000 hours equates to around 4hrs a day for 10 years. For some reason most people that ‘try their hand’ at trading view it as a get rich quick scheme. That in a very short space of time, they will be able to Copyright 2002 -20010 4
The Definitive Guide to Swing Trading Stocks - page 5
The Definitive Guide to Swing Trading Stocks 5.0 Edition turn $500 into $1 million! The greatest traders understand that trading much like being a doctor, engineer or any other focused and technical endeavor requires time to develop and hone the skill set. Now you wouldn’t see a doctor performing open heart surgery after 3 months on a surgery simulator. Why would trading as a technical undertaking require less time. Trading success, comes from screen time and experience, you have to put the hours in! Is there an alternative to the 10,000 hour rule? Well, yes and no. You can circumvent the process by learning from someone who has already invested the 10,000 hours. Someone like me. However, you still must study and practice what I teach you until you perfect it for your own personality. REALIZE THIS: If an idea in this course can make you an extra $100 on your next trade, this course will have paid for itself! But my wish is that it pays for itself hundreds of thousands of times over. With that in mind, prepare you brain to soak up everything like a sponge. I have written this guide in a very concise manner. You won’t find a lot of anecdotal stories or hypothetical filler. I tell you what you need to know and how I use it, along with plenty of examples of what I am talking about. I find this to be the easiest way to learn my methods. Here’s to your success in the markets! Kevin Brown Author/Trader Copyright 2002 -20010 5
The Definitive Guide to Swing Trading Stocks - page 6
The Definitive Guide to Swing Trading Stocks 5.0 Edition Who Should Read This Guide? The Definitive Guide to Swing Trading Stocks was written for anyone who wants to learn easy and time-tested stock trading methods that are successful in all stock sectors, all time frames, and all economies. Regardless of your motivation, at some point in time you need someone to teach you the ropes of stock trading, whether it is by seminar, videos, or a written guide such as this one. There are lots of ways to make money in the stock markets, but my experience has taught me that the simplest methods work best. The methods I use are driven by two principles: 1. Abide by the IMMUTABLE LAWS of trading. (You will read about those in the next section). 2. Keep the trading SIMPLE. In general, I always try to keep things simple. Making stock trading more complicated than it really needs to be is the tendency for many “intellectual” traders, who eventually burn out. After all, it can’t be as simple as just picking up the phone or logging on to a website, placing an order, and making money—can it? No, it’s not quite that simple. But you certainly don’t need to stare at a screen all day, spend thousands of dollars for trading software, set up multiple computer monitors, purchase real- time data feeds, and subscribe to several advisory services. Throughout this guide, I will provide you with a double look at things. First I will show you what are conventionally considered to be “best practices,” so that you’ll be aware of them, Then I will give you my take on the same thing and why I have taken that position. I think this is a more balanced approach, and it’s fairer to you as a reader. Copyright 2002 -20010 6
The Definitive Guide to Swing Trading Stocks - page 7
The Definitive Guide to Swing Trading Stocks 5.0 Edition The 5 Immutable Laws of Trading If you’re like me, you may have been “taken” a time or two by overzealous or unscrupulous vendors offering stock trading information that may have seemed a bit too good to be true—but you just had to find out for yourself. That need to “find out” was driven by some internal beliefs. Some of those are good; some are not. Over the years, I have come to understand a few things about the markets, and I’d like to debunk a few of the most prevalent beliefs that are unfounded. My hope is that I can pull you alongside me, and we both can look out of the same window. To do this, you will need to relinquish (or at least adjust) some beliefs you may have regarding trading and the stock markets. This guide contains many trading methods and their related “rules”. Below are the immutable laws that you must use to guide all of your decisions as a trader, regardless of whether you use my trading methods or not. Law #1: No “SECRET” method will work So many trader educational offers out there supposedly reveal “little- known” or “secret” formulas for finding profitable stock trades. But here’s the most important secret you need to know: NO trading method that is truly secret or little known will work. You must understand that the very first requirement for making a profit is to make trades (long or short) involving stocks that everyone else is trading. Now think about this: If a method is secret, then very few traders are using it. But it takes more than a few traders to move a stock price. The preponderance of buyers or sellers is what causes a stock to rally or decline in the first place. Thus, many traders are suckered into thinking that there is some new method, system, technique, or indicator that no one else knows about, that will give them the winning edge. You don’t want to be a lone wolf with a winning edge in trading; you want to be part of the pack that’s on the right side of the price moves. It is, always has been, and always will be, that plain and simple. Copyright 2002 -20010 7
The Definitive Guide to Swing Trading Stocks - page 8
The Definitive Guide to Swing Trading Stocks 5.0 Edition Law #2: Price is the ONLY reality I mostly use price charts for determining when to enter and exit trades. This is otherwise known as “technical analysis”. Price charts are more than just current and historical references for a stock’s price; they are also visual representations of the opinions of all active participants for that stock. This is an important concept to grasp. If something important (positive or negative) is going on in a company, someone knows about it. If they know about it, they are going to act on it, and if they act on it—that is, place trading orders for that company’s stock—it will be reflected in price. Since price is the indicator everyone uses to keep score in the market, this is what I mostly pay attention to when it comes to money management, entries, and exits. I allow the price-sensitive rules of my methods to dictate all actions. I’m still waiting for someone to disprove this fact. Nobody has yet been able to show me that orders being placed for a stock DO NOT affect its price. Understand that this is not a single instance; it is a cumulative effect. But it is always present. Now, as it pertains to price movement, did you know that there’s only four market-price occurrences possible? Although a plethora of technical indicators have been isolated to measure these few occurrences, the only possible price changes are trend continuations, trend corrections, consolidations, and breakouts. That’s it! All technical indicators or methods attempt to measure or capitalize on one of these stock-price occurrences. With no fewer than 10 different ways to measure each one of these occurrences, you would have a minimum of 40 different trading indicators, with more than 3,628,800 possible combinations! 3.6 million combinations of trading indicators is a vast number. Now you know why so many trading books, courses, videos, and websites are out there offering to teach you esoteric trading methods and secret information. They are merely measuring the same things in millions of possible ways and calling it NEW and REVOLUTIONARY! This is also how some traders fool themselves. They create their own indicators, find a consistent pattern, and believe they have found something that nobody else knows about. But in fact, they’re measuring the same price occurrence that others are measuring, only in a different way. Copyright 2002 -20010 8
The Definitive Guide to Swing Trading Stocks - page 9
The Definitive Guide to Swing Trading Stocks 5.0 Edition Law #3: A high percentage of winning trades is NOT the answer This is truly the hardest lesson to teach ANY trader. It certainly was the toughest one I had to learn. So many trading gurus out there are pitching their amazing winning streaks. Who wouldn’t be mesmerized by “90% winning trades” or “more than150 winning trades in a row”? What they don’t tell you is that the winning trade’s profits are so small that the few—but much larger—losing trades and commissions tend to completely swallow the profits. In addition, there are any times where the more detailed statistics seem to be curiously absent. What makes it even tougher is that we are trained from birth to think that we must win more times than we lose to be successful. As a trader, you must learn to concentrate on what is important: the “size” of your average loser versus your average winner. Here’s an example. I put ten bills on a table. Each is just a $1 bill. When I say “go,” we both try to grab as many bills as possible and the person with the highest dollar amount wins. Of course, in this scenario the ONLY way you can beat me is to grab more bills. Now, suppose I lay out ten bills again, but this time three of them are $20 bills. Ahh . . . now you’ve got it! You can still win, even if you grab fewer bills. That is the essence of making money in stock trading. What if you could duplicate this over and over? Most trading-course offers are touted as set-it-and-forget-it trading “systems.” A trading system is a mechanical way of trading stocks, a hard and fast set of rules that must be followed each and every time. No opinions or subjectivity are involved. Though I am not this rigid in my own methods, I do believe trading systems can be good for some traders. This guide includes a section to help you evaluate and construct trading systems. It also will show you how to calculate a positive, mathematical expectation for profit, using trading statistics. Copyright 2002 -20010 9
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The Definitive Guide to Swing Trading Stocks 5.0 Edition Law #4: Risk is ALWAYS present You must understand the fundamental fact that risk, as it pertains to trading or to anything else, can never be eliminated; the best you can do is manage it. Even so-called risk-free investments, such as savings accounts, run a risk—that the cost of living will grow faster than the account balance. Good stock-trading strategies should always address the management of risk. There are only five ways to manage risk. Risk can be: Avoided – A trader avoids risk by not entering the market at inopportune times. Transferred – A trader transfers the risk to others by exiting positions. Reduced – A trader uses stop-loss orders to reduce risk. Distributed – A trader distributes risk by trading a number of individual issues, rather than just one. Assumed – A trader assumes risk by entering a position or by not entering a position. In the second scenario, the trader assumes the risk of lost profit opportunity. Copyright 2002 -20010 10
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