A lot of stock investing is emotional. Successful investing, however, leaves emotions behind, because it will cause mistakes and result in lost opportunities. Swing trading can be especially emotional. It is very important, in order to be successful, to follow essential rules to stay objective. Here are four rules to invest intelligently.
When Swing Trading: Expect Losing Streaks
Overall, swing trading is a long-term investment strategy; but in the short-term, there can be more risk by attempting to capture profits from the “swings” in stock values. All swing traders will suffer losing streaks at some point in their career. This can be draining, especially for those new to swing trading. Expect these losing streaks, in order to be emotionally and financially prepared.
Keep Losses as Small as Possible
Of course, the goal is to keep the gains as high as possible and the losses as small as possible, but this is easier said than done. The better the investor does with minimizing losses, the better he/she will do at minimizing losing streaks.
Don’t Hold Too Long or Too Short
Getting too greedy or hoping for a reversal can hit you in your pocket for a loss. Patience, planning, and education is the key — greed and hope is a trap-door. In other words, it is a matter of emotions versus objectivity. Emotionally, it is easier to sell and take a profit, than to sell and take a loss. For this reason, investors often will hold stocks too short to take profits, or hold stocks too long in hopes of a rebound. This can quickly deplete positions. Therefore, the successful investor will rely on patience, planning, and education to follow the trends and to make objective decisions — leaving greed and emotions out of the picture.
Invest With The Trend When Swing Trading
This very simple rule is also one of the most important rules. When swing trading, always invest with the trend If the trend is bullish, buy stocks; if the trend is bearish, short stocks. Doing the opposite is an easy way to taking some hits. Thinking, “it has to turn around” or “the market can’t slide any further” and then betting against the trend is a recipe for taking a loss.