How to get Started Swing Trading Stocks


– [Instructor] Hi,
everyone, it is Evan here from thetraderisk.com. And in today’s video, we’re
going to be discussing how to get started swing trading stocks. Now, as you might imagine, this
is a pretty broad question, so we won’t be able to cover
every aspect in detail, but we will guide you through
the most important questions and obstacles that you’re probably going to have when starting out. So if you’re a new trader
or someone just trying to figure out what swing trading is and whether or not it’s
something that interests you, then this video is for you. So with that, let’s jump into it. So here’s what we’re gonna be covering. We’re gonna start right
from the beginning define what is swing trading? Why choose it? So why would you even want to swing trade? What’s needed to swing trade? Capital, broker, tools. What knowledge is need today swing trade. Things like knowing how to
read a chart, risk management, having a strategy and process. This is just a high level overview of what we’re gonna be
covering in this video. Okay, let’s start from the beginning. What is swing trading? I define swing trading
as an active approach to trading the markets where
the planned holding time of the trade extends
beyond a day and the goal is to capture a single
leg in a stock’s trend. Now, there’s a few key
words here and key things to point out. This is not day trading. So we are holding stocks overnight. This is not trend following, we’re only interested
in capturing single legs within a trend. We’re not gonna be sitting
through the pullbacks that are inevitably going to occur in a full developed trend. And generally, this is
a completely technical approach to trading the markets. That means we’re gonna be looking at quantifiable things like
charts, data, numbers, price action. We’re not gonna be interested in the fundamentals of the company, what the management team looks like, how earnings are, what
sector the company belongs in or is trying to navigate through. Those things can be sort of supplemental and help you determine maybe
what stocks you want to trade or have some secondary influence. But they’re not going to be, generally, the primary component of
a swing trading strategy. Swing trading is shorter-term in nature and really relies on market timing and a very quantifiable strategy. So, to illustrate that a little bit better, here’s a chart of price line, and I’ve highlighted here
the swings in this chart. Now, as you can see here, it is is an overall up
trend, and as a swing trader, we’re mostly interested in capturing those low to high points, or
the high to low points if you want to short stocks. You can certainly play
stocks from both directions. But we’re really interested
in capturing those swings over and over again, repeatable, focused on timing, and trying to have great sort
of risk-adjusted returns. Know where you’re wrong,
try and capture some reward, and that’s what trading’s all about. And we’ll get into that a little bit later in this video. So this is effectively what
we’re trying to capture here as swing traders. Okay, we’ve answered the what. Now let’s get into the why. So why swing trade? Well, we’re gonna take the word swing out and just say, why trade? You’re generally going to
be getting into trading because you want to earn additional income or you want to make
trading a primary income. Or you’re not interested
in buy and hold strategies. So you have capital,
and you don’t wanna just put it in an index fund, or you don’t just kind of shell it away in some blue chip stocks. You want to be active. You either want to enhance returns or you want to mitigate risk. That is why you get into the trading. Now let’s talk about swing trading. Why swing trade over other choices? Now, remember, swing trading
is an active approach to trading the market. There’s other active approaches. There’s day trading,
there’s trend trading, there’s position trading,
there’s probably other types. There’s subtypes of all of these. So what makes swing
trading compelling over some of these other choices? Well, there’s a few
benefits here that make it fairly attractive to a lot of people. Lower stress, yet actice. Now, I italicize lower
stress because that’s sort of subjective there. Trading in general can be very stressful depending on how you approach it. Swing trading is very active. It’s not quite as active as day trading, but it’s the next step up. But the next step up
makes it very comfortable for a lot of people because
you don’t have to make minute-by-minute decisions. You’re trying to capture swings in a stock that manifest themselves
over days and weeks. So you have time to sort of plan a trade, sleep on your analysis,
come up with a plan, and then execute and watch
it unfold over a period of about a week or so. So it’s very active. You can juke and jive with the market and really try and be nimble but have time to sort
of sleep on that trade and not have to make such
high pressure decisions. It really maximizes screen time. And it goes with this
third bullet point of, you can easily hold a nine to five job or have a life outside of the markets while still be active. So you can do your homework
when you come home from work. You can look at how the market moved. What stocks are setting
up based on your strategy. You can really have kind
of the best of both worlds of being active but also have
great risk-adjusted returns, earn additional income,
all of the benefits that we talked about before. So those are some of the
benefits of swing trading. It sits in the middle. It’s not as super active as day trading. It’s not as slow as position trading. It’s that happy medium in between. Okay, now let’s move on to what you need to get started trading. And the first thing that
you need is capital. You need capital to trade. And it shouldn’t be money
that you need tomorrow. This should be discretionary income. If you have to pay the gas bill next week, you should not be trading
with that capital, because trading does involve
a substantial amount of risk, especially when you’re just starting out. So make sure you have
some discretionary money set aside to start trading. You can get started with any amount, and there’s a little
asterisk above the any. The costs that you need to
account for are commissions. Commissions are the cost of doing business as a trader. Luckily the costs of
trading are trending lower. So if you have just $500, you can actually start
trade with that amount as long as you’re using Robin Hood. And Robin Hood is a broker, we’re gonna discuss them in
the next couple of slides. But they are a free trading broker. They have zero commission cost. So if you have just $500, then
you have no costs to trade. Therefore you can just start with $500. The one point I want to
just make out here too is have realistic expectations. If you are starting with
a few hundred dollars, don’t expect to quit your job tomorrow and become a full-time trader. It just doesn’t make sense,
the math is not on your side. You want to think in terms of percent. If you can earn 10, 20%, 30%
in a year, you’re doing great. You’re better than 98%
of traders out there. So if you have a $500 account, and you can make $50 or $100
on that money in a year, that’s actually pretty great. So don’t expect to have these grand visions of
retiring and owning a yacht and all of this on just
a few thousand dollars of trading capital. It’s not realistic. Okay, so, number two for what
you need to start trading is a broker. Commissions, again, that is the
most important consideration when determining what broker
you want to open up with and start trading with. How many trades a week or
month are you going to make? This is a little exercise
to sort of think about how much trading is going to cost you. You may not know the answers
to this right off the bat, but for simplistic purposes, let’s say we’re gonna
make 20 trades per month. That’s about a trade every day. One trade every day, that’s
gonna involve 40 transactions. Remember you have to buy and then sell. It’s a transaction, it’s
a cost going each way, in and out of the market. If you’re paying your broker $5 per trade, it’s going to cost you $200
monthly to make those 20 trades. If you paid $10 per trade,
then your commission costs are going to be $400. So this is your hurdle just to break even. This is your direct business
expense as a trader. That’s what you need to
clear just to break even. And we’re still not talk about slippage and all these other little microfactors that can kind of eat away at
your trading profits as well. So that’s your most
important consideration when you’re deciding on
what broker you want to make is how much do they
charge you in commissions? The second consideration
when deciding on your broker is the ease of use or mobile features. So let’s say you want
to trade on your iPad or you want to have
some mobility features, you travel a lot, that’s
gonna be your sort of next most important consideration to have. And then finally research or news feeds if you want certain
things delivered to you. If you want a list of
all of the big stocks that are moving on the
open or that have had big news events overnight. These are things you can
inquire about for your broker and this will help determine who you want to ultimately go with. So, these are the most
important considerations. Let’s talk about some
specific brokers out there that you may want to go with. Robin Hood is a free trading platform. It is a broker that offers free trading. Mobile only, so they
only allow transactions of trades through their mobile app. And this is as of 2017. Perhaps in the future, they will offer a web version of this, but for now it’s mobile only. In my opinion, if you
have less than $5,000, you should be here almost regardless. Because it just makes sense. There’s no reason to pay
money if you have an account that’s under $5,000. I mean, hell, even under $10,000
you should really be here because it’s just, again, a hurdle that you have to overcome, commissions are your costs. Direct cost of doing business
here, so why people anything if you don’t have to? There are, of course, other reasons that, you know, again, research, accessibility, if you want a web platform,
if you want charting software, then I understand you
can’t just use Robin Hood. You may need to sort
of graduate into a more professional broker. So it’s not for everyone, but if you’re just starting out, it is by far a very tough
broker to beat right now. Scottrade, again, not recommending these directly. These are brokers that I
have personally used myself. So I have first-hand experience. I have a Robin Hood account,
I know how they operate. So I can at least list them
here as a viable option. Scottrade is a broker I used to use way back in the day. They are who I started with. They have more tools and
research than Robin Hood. They have a clean UI. But their commission costs are high, $7. So again, that’s a very
expensive proposition versus a free Robin Hood. Are the tools and research worth it? That’s something that
you would have to decide. Interactive Brokers,
these are who I use now. This is my primary broker. They are a professional
platform, lots of hedge funds on Interactive Brokers. There’s a bit of learning curve. It’s a bit more advanced. It’s maybe not as retail
friendly as Scottrade or some of the E-Trades and some of the other bigger brokers. But they do have an attractive
commission structure. They charge a half a cent per share. So if you were to make
200 share transaction, that would cost you $1. And again, they do have a lot more other sort of features, and
different customizable options. You can write code and
algorithmic strategies. So they do offer quite a bit
more with a full API suite that you can tap in to. These are the three brokers that I at least have insights in to. And based on these bullets points, you can sort of figure out where, if any of these are
something that you would like to explore or open up with. I have no affiliations with any of these. I will provide links at
the bottom of this video to all of these websites
that you can check out more. But again, I don’t have any affiliation with any of these websites or brokers. Okay, now let’s move onto tools that you should have in your
tool belt to start trading. You’re gonna say, why do we need tools? What tools do we need? Well, they’re for research. It’s to know what’s going on in markets. And to find stocks to trade, ideas and set ups as a trader. You’re gonna want to be in
the best ideas possible, names that are moving,
names that are setting up, that fit your strategy. And there are three
websites, three resources that you should bookmark,
that way you can help find and maximize your chances of finding these candidates that are
gonna be good trading vehicles. The first is Finviz,
the second Stockcharts. And the third is TC2000. I will include link to
all of these websites below this video. So let’s discuss these three and talk about why you
may want to use them and book mark them. The first is finviz.com. This is a free screener. They do have a premium product. But 90% of what they offer here is free. The screener is entirely free. And what you can see is all of the filters thay you can filter by
both of a fundamental and technical basis to
narrow down and find stocks that are gonna be
actionable and ready to move based on your trading style. So different performance metrics, different technical
indicators, different patterns, RSI, gap, 52 week highs, all
of these different filters that you can narrow down your universe and then just walk through and see if they
fit your trading criteria. Great way, great resource,
great free site to use to find trade ideas. The next is stockcharts.com. This is a free and premium product. To unlock more of their features, they do have their premium
product which gives you access to a lot more different charts. Intermarket relationships. I like stockcharts.com
partly for the trade ideas. They do have a screener like Finviz. But not as intuitive and
easy to use as Finviz. Finviz is definitely gon
be your easiest way to just find the different set ups and to find those different trade ideas. Stockcharts has a lot of
interesting different views and data that you can pull
across different markets, breadth, big picture views. Lots of data going back, 50
plus years, clean charts. Customizeable. So there’s just a lot
here to really dig in to and going to stockcharts.com
and just digging into the different features that they offer is gonna be your best bet. But I would definitely
suggest checking out stockcharts.com. And finally, TC2000. This is my personal favorite. This is, they have a
free and paid product. This is a screen shot of what
their interface looks like. It is a bit more advanced,
but it is very powerful. So you can write, it’s a
screener like finviz.com. The difference with their
screener, they’re gonna give you some prefixed, prefiltered
stocks that you can screen for. But now you can actually write code here and get very specific based
on your style, strategy, and set up to find different stocks, create different watchlists. Save different layouts. You can actually trade
I think they offer now a full broker trading platform through this piece of software. It’s very powerful. I love it. This is the best 30, $40 I spend a month is on this software because
all of my trading ideas come from it. I do have an affiliation with them. So I do have an affiliate blank if you are interested in their software. It kicks back a piece of sale to me. But it also offers you a discount. So I would equally encourage TC2000 again. I think the learning curve
a little bit steeper here, but it’s definitely a
platform I think that’s worth paying attention
to if you’re interested in finding different set ups and serious about stock selection. I really like TC2000,
so check the link below if this is something that interests you. So these are the three tools. All around idea discovery. And I think that’s a
great, all three of these are great platforms to
have in your back pocket and to explore further. Okay, now let’s move into the knowledge the things you should
know do start trading the stock market successfully. The first is going to be
just flat out experience. And I encourage you to start slow. There are no barriers to entry into trading the stock market. You’re in the big leagues right away. So think of it as if you wanted to learn how to play football and you had to start by just getting dropped
into a professional NFL game right away on your day one, as you’re trying to learn everything. That’s exactly what it’s
like in the stock market is you can log on to your computer, open an account with a broker,
start trading immediately. And you’re gonna be playing against, trading against
professionals on wall Street that get paid millions of dollars to essentially take your money. That’s what you’re competing against. So, the most important piece of this is to start slow. Your greatest education will
which from accumulating hours of screen time, and you want to continue to build up experience,
learn what not to do, learn what works, learn
what you enjoy doing and what makes sense to you. That’s going to be sort
of your greatest asset. And if you can start by
understanding that trading is a journey. You’re gonna have lots
of pivots, failures, and breakthroughs along the way. And if you treat it as a
journey, I think you’ll be best suited and have your best odds of success rather than coming into it and just trying to push as many buttons as possible and trying to make a
lot of money right away. That’s gonna be a recipe for disaster. Now, the second checkbox
under the knowledge column would be charts. To understand how to read a chart. Now, forget about
memorizing pattern names, Japanese candle stick formations. Don’t worry about getting into the weeds and knowing all of these specific cup and handles and measured moves and whether or not the
candle has moved enough ticks to be a valid pattern
for such and such name. That doesn’t matter. I couldn’t name more than a
half a dozen different patterns or candle stick formations. What’s really important is
understanding the psychology and collective behavior
that charts represent. Charts represent the collective
sort of human emotion sentiment gauge on an
individual stock, ETF, or whatever you’re charting. And that is going to be very
important to understand. There’s a lot of knowledge
out there on the Internet that you can look up and just Google. For books, Al Brooks’ books
on trading price action, I have thought have been the best. They are a difficult read, they’re thick. They’re very kind of dense. There’s three of them. I’ll include the links below, on trends, reversals, and trading ranges, but I think he does a great job explaining sort of the underlying psychology of how markets move and the battle between buyers and sellers and that option system that really, you know, get to the core of what reading a chart is all about. So, I think it’s very important. Again, don’t get bogged
down into the semantics and memorizing all of
the different definitions and patterns. Think about the psychology part of it. I think that’s what actually
is gonna make you money. Third part for knowledge and
probably is the most important. I think I’ve said that
on almost every slide for knowledge is risk management. Focus on risk, let the
reward handle itself. Now, if you’re a new trader, I know you’re gonna glance over this because I did the same thing, and I think everyone does it as well. They all want to make money,
everyone wants to make money. That’s why they get
into trading ultimately. So nobody wants to be conservative. But it is the most important thing. You will figure it out sooner or later, later will be the unfortunate
time that you learn it because that’ll generally be after you’ve blown up an account or two. That’s when you’ll start to respect risk. Risking 1% of your capital at most, that’s per trade. So in other words, every
time you put on a trade, if you have a $500 trading account, that’s $5 of risk per trade. That’s how much you should
be risking on each trade. I know that’s not sexy, that’s boring. But that’ll keep you in the game. That’ll keep you accumulating experience and knowledge and hours of screen time. That, again, like I said at
the beginning of this section, is going to be your biggest asset. So if you risk 1% of your
capital at most per trade, you can make a handful of mistakes, whether or not they’re mistakes or not, just a handful of trades
and still be in the game if you lose those consecutively in a row, because you will have
plenty of losing trades, and you want to have that
staying power and not to blow up your account,
but to keep accumulating that screen time. So stop losses are very important. If you’re in, if you’re buying
at stock at whatever price, you need to know exactly
where you’re getting out in the event that you
are wrong, and again, you’ll be wrong plenty of times. It’s very important that
you need to think of trading in terms of your next 100 trades. Don’t focus so much on this next trade. This next trade that you’re gonna make is just one little drop in the bucket. You want to be thinking for the long term. You shouldn’t be stressing
out over the next trade. You should be thinking
about getting to your next 100, 1,000, 10,000 trades. That’s what the real journey is all about. So volatility, multiple positions, there’s a lot that goes
under risk management. I’ve written about the topic. I’ll include some links and resources that you can read more about this. But focus on the risk management. This is where you want to spend
a lot of your initial time is protecting the down side. I can’t say it enough. Focus on the risk, and let
the reward handle itself. If you protect the down side,
then that’s the hard part. But the reward will handle itself, okay? Strategy. This is the fun part. This is what everybody likes to focus on and likes to spend time
on, and it’s important. You need to have an edge in the market. You need a strategy. You can’t just go in there and throw darts at the screen all day. You need to have something
that you stay consistent with and that actually has an edge. So how do you gain an edge? Well, reading a chart is one way. Bar by bar analysis,
look, it’s competitive. Everybody can look at charts now. It’s been well researched,
well documented, everybody knows what breakouts look like and where the general stop losses are. So you need to be careful. You need maybe more of that, but there is plenty of
information that you gain in a chart, and being a retail trader, we have the luxury of being nimble, choosing when to trade and
being very active in positions. So reading a chart is one way. Technical studies and indicators. So these are things like
throwing on some moving averages onto your chart, throwing
on RSI indicatOR, MACD. You can study those
technical sort of studies and indicators to try and
discern some type of edge there ore develop a system that
utilizes sort of a combination of all of these things. Buying 10 day highs, something like that. Again, breakout systems
where you’re only buying when a stock hits sort
of a new momentum high. Only buying after a three-day pullback. These are just examples, but these are little building blocks they can sort of put together
and start to formulate an edge and have something
that’s consistent and repeatable. That’s the goal. There’s gonna be a lot of
playing around with this. And the important part about
the strategy part of this is we’re dealing with probabilities
and edges can be small, so sample sizes need
to be large sometimes. So in other words, if you have a 5% edge and you’re winning at
55 to 60% of the time, you could still have
seven trades that go wrong or that lose you money in a row. It doesn’t many your strategy it bad, it just means there’s variance there and you’re dealing with probabilities, and statistically, you’re going to have losing streaks like that. So what makes trading difficult, especially at the beginning is it takes time to know if
you actually have something, and it takes that screen
time and that repeatable sort of the consistent
behavior to know if you really have an edge, and sometimes
you may think you have an edge and you’re really just getting lucky. So it takes a while, but spending time on this. And again, coming down to risk. Risking just the little bit
as you start to play around, develop your strategy, and
play with some different building blocks is gonna be key. There’s plenty of information out there. There’s plenty of different
resources and books on strategy, and I think a lot of it just gonna come down to experimenting, picking something that makes sense to you, and really sort of refining
it and getting good at that one or two things. I’m gonna include links
to some different articles that might be able to help you out. So, putting it altogether, trading is a journey and one that carries substantial risk of loss
if not approached carefully and with discipline. My recommendation is if
you’re new to trading, for the first year,
forget about making money and just focus on learning
and experimenting. That’s gonna be your best
way to approach this business is forget about the money and just learn. Just try everything,
focus on different things, risk a very small amount, or paper trade, and think and just experiment with things and accumulate that screen time. That’s gonna be the most important piece. So, again, trade tiny with a fraction of your available capital. I think we covered that in
pretty good detail already. Additional reading, how to position size when swing trading. These are all posts that
I have put out there. Why end of day trading is superior. How moving averages can
simplify your trading. How to emerge from a trading drawdown. These all cover different
aspects of trading, but they’re all fairly in-depth articles that can give you some
more context and color into different aspects of trading. I’ll put the links to all of these below. Finally, stay informed. Twitter and Stocktwits
are great social networks. If you can find the
right people to follow, you can really reduce your learning curve, find some great people
doing similar things to you, or people doing different
things that may interest you. But there are a lot of great traders on these two networks, recommend spending some time there. Looking for traders on each of those. I’m both, so you can follow
me on Twitter and Stocktwits. I have a newsletter that goes out weekly, the Trade Risk Newsletter,
completely free. I recommend signing up for that. That’ll keep you up to
date with what’s going on with the markets, I put
out some trade ideas, things that I’m watching. Lots of different content
goes into that newsletter, so I’d recommend
following that on my site. And again, follow me and my channels. They’re all here. I’m across everything. YouTube, of course, where
you’re watching this. My e-mail address is there. The website is there. If you have questions, I’m
happy to answer, just reach out, I’ve been doing this for a long time. I do have premium services
that I offer to people that are interested on
the swing trading side. But plenty of free stuff that I’m publishing every single day,
so take advantage of it. Drop an e-mail, even
if it’s just to say you liked the video or you learned something, or if you have a question,
I’ll absolutely respond to you. So hope this video helps. Again, was not meant to
be a full in-depth video to cover every single aspect,
because there’s a lot. Particularly on the strategy side, we could spend the next two hours just discussing trading strategy. Maybe that’ll come in the
form of another video, but for now I wanted
to give you an overview of things to focus on,
getting started swing trading, or just new to trading in general. So hope this video helps. Thank you guys for watching. And I hope to talk to you
again soon. (electronic music)

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