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What Is SwingTrader?
SwingTrader applies the rules of IBD's CAN SLIM investing system in a swing trading environment to help you take advantage of short-term trends. Please utilize this SwingTrader FAQ page as your go-to resource for answers to frequently asked questions about the platform, our strategies and more.
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What Is Swing Trading?
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Swing trading is a strategy that focuses on taking smaller gains in short term trends and cutting losses quicker. The gains might be smaller, but done consistently over time they can compound into excellent annual returns. Swing trading positions are usually held a few days to a couple of weeks, but can be held longer.
The swing trader's focus isn't on gains developing over weeks or months, like position trading. The average length of a trade is more like 5 to 10 days. In this way, you can make a lot of small wins, which will add up to big overall returns. If you are happy with a 20% gain over a month or more, 5% to 10% gains every week or two can add up to significant profits.
Rather than the normal 7% to 8% stop loss, take losses quicker at a maximum of 2% to 3%. This will keep you at a 3-to-1 profit-to-loss ratio, a sound portfolio management rule for success. It's a critical component of the whole system since an outsize loss can quickly wipe away a lot of progress made with smaller gains.
What Environment Is Best For Swing Trading?
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There are some environments that are better for swing trading, and some that are better for position trading. Choppy environments tend to lend themselves more to swing trading.
While we've been in a strong uptrend, it's been a volatile uptrend. That's led to upside reversals that have provided ideal swing trading setups.
How Do You Play A Reversal?
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The most powerful reversals usually occur when the stock market in general also shows a reversal. If you look at a chart of the Nasdaq composite, some of the pullbacks during the current market uptrend seem dramatic. It feels even worse when you put a dollar amount lost on the move down.
Don't put all your focus on defense during these times. If the pullbacks are short-lived, you need to be prepared to quickly go back on the offense for your swing trading. It's more like the quick shifts from defense to offense in basketball rather than football.
We look for these reversals in strong stocks that meet our screening criteria. A typical entry is above a short-term resistance level like the previous day's high.
How Many Stocks Do You Put On In A Day/Week?
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How many stocks we put on depends on the number of quality of setups presenting themselves, overall market conditions and our existing level of exposure.
How Are You Addressing The Immediate Buying After An Alert Goes Out?
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Since a lot of people are using the SwingTrader platform, at times there might be a big increase in buying that's immediately seen once an alert is sent.
The less liquid — meaning the fewer shares that are traded on a daily basis — the more likely that stock gets "pushed around" when the alert goes out. To adjust for that, we've been focusing on much more liquid names and ETFs.
Why Are Your Entry Prices Lower Than When I Get The Alert?
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The entry price listed for the trade is the exact price for the stock as we send out the alert. When buying comes into a stock after the alert is sent, that may push up the price.
If that happens to you and the stock is extended before you're able to buy, we suggest waiting for the stock to pull back into the buy zone. If it doesn't pull back, don't chase the stock.
Is IBD's Team Buying Stocks Before Sending Out The Alerts?
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No. Our team has to wait 30 minutes after an alert goes out before buying.
Can We Get A Watchlist Of Stocks Before They Trigger Buy Points?
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If we set up a watchlist of stocks with buy points and stops before they trigger, that could create problems. First, there are those who would sneak in a little early, and then they'll push it above the buy point. Then we would question whether it was naturally going above that level because of the action in the market, or if it was our people that pushed it higher.
Plus, there's also the issue of stocks limping through the buy points, which is not what we want. And since SwingTrader is a mock portfolio, we want to be selective with the stocks on our list. For example, if we have Amazon on as a trade, we most likely wouldn't want another internet retailer in there — even if it had a good setup.
Still, with our goal of helping subscribers make money with ideas, we now have a SwingTrader watchlist for subscribers. While we may pass on a number of these, it will give subscribers an idea of what we are looking at and provide even more ideas than what is on the current trades list.
How Do You Size Positions For Swing Trading?
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A key tenet of swing trading is to keep your losses small. If you have a maximum risk of 4% for a trade and want to limit the risk to your portfolio to 0.5% or less, a 12.5% position gets you there (0.5%/4% = 12.5%). Given where we are in the market, we've captured the low-hanging fruit by hitting it hard on reversals in May and June. So we'll risk less to make sure we keep our gains. Full positions are now 9% rather than 12.5% of the overall portfolio.
That's roughly 11 stocks to be fully invested, rather than eight. And for a $100,000 portfolio, 9% would be $9,000 for a full position instead of $12,500.
We got the 9% by shifting down to a portfolio risk of 0.36% and keeping our trade risk the same (0.36%/4% = 9%). Since we've been taking profits off in thirds, this can also make the calculations easier for subscribers. Roughly 9% for a full position, 6% after the first third is off, and 3% after the next third is off. Of course those numbers will differ based on how the trade has progressed.
You can read our article on swing trading position sizingand check out our swing trading position size calculator for more details.
More On Position Sizing
How To Calculate Position Size
Position Size Calculator Excel Spreadsheet
What Should I Consider When Taking Profits?
Our swing trades typically start as full positions. As they go up, we lock in profits. Usually, we take profits in thirds.
We're basing our profit-taking decisions off the price we use in the alert, but we recognize that isn't the same price everyone gets. Our profit taking doesn't have to be followed exactly, but it gives you an idea of our mindset.
While we take profits in thirds, if your profit isn't as great, you can consider a smaller portion of profit taking — or delay a little to get closer to our profit level.
How Do You Calculate Performance?
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For SwingTrader performance, we use a model portfolio. Alerts sent to subscribers include the price at the time of the alert. These serve as our entry and exit prices and allow us to calculate the number of shares for the model portfolio. Until recently, full positions started out at 12.5%. They will now start at 9%. We use the prior day's portfolio value multiplied by the position weight.
We review our performance for subscribers every month on our SwingTrader Scorecard webinar.
Why Is The Market Direction In SwingTrader Different Than IBD's Market Pulse?
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The market direction in SwingTrader may differ from IBD's Market Pulse since we're looking at shorter-term trends and looking at technical signals that shape our expectations over the next few trading days.
A Note On Selecting Stocks
With position trading, the fundamental analysis gets a heavier weight than technical analysis. For swing trading, however, technical analysis rises in importance.
More On IBD's Swing Trading Strategy
Swing Trading Article Library
SwingTrader Scorecard Archive
SwingTrader Scorecard April 2024
SwingTrader Scorecard January 2024
SwingTrader Scorecard October 2023
SwingTrader Scorecard July 2023
SwingTrader Scorecard May 2023
SwingTrader Scorecard April 2023
SwingTrader Scorecard March 2023
SwingTrader Scorecard February 2023
SwingTrader Scorecard January 2023
SwingTrader Scorecard December 2022
SwingTrader Scorecard November 2022
SwingTrader Scorecard October 2022
SwingTrader Scorecard September 2022
SwingTrader Scorecard August 2022
SwingTrader Scorecard July 2022
SwingTrader Scorecard June 2022
SwingTrader Scorecard May 2022
SwingTrader Scorecard April 2022
SwingTrader Scorecard March 2022
SwingTrader Scorecard February 2022
SwingTrader Scorecard January 2022
SwingTrader Scorecard December 2021
SwingTrader Scorecard November 2021
SwingTrader Scorecard October 2021
SwingTrader Scorecard September 2021
SwingTrader Scorecard August 2021
SwingTrader Scorecard July 2021
SwingTrader Scorecard June 2021
SwingTrader Scorecard May 2021
SwingTrader Scorecard April 2021
SwingTrader Scorecard March 2021
SwingTrader Scorecard February 2021
SwingTrader Scorecard January 2021
SwingTrader Scorecard December 2020
SwingTrader Scorecard November 2020
SwingTrader Scorecard October 2020
SwingTrader Scorecard September 2020
SwingTrader Scorecard August 2020
SwingTrader Scorecard July 2020
SwingTrader Scorecard June 2020
Swing Trading Webinars
How to Swing Trade the Market Rebound
Swing Trading: Buy. Sell. Profit. Repeat.
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