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Swing Trading For Dummies®
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Swing Trading For Dummies®
by CFA Omar Bassal
Swing Trading For Dummies, 2nd Edition
Cover
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Where to Go from Here
Part 1: Getting into the Swing of Things
Chapter 1: Swing Trading from A to Z
Understanding What Swing Trading Is (and Isn’t)
What Swing Trading Is to You: Determining Your Time Commitment
Sneaking a Peek at the Swing Trader’s Strategic Plan
Building Your Swing Trading Prowess
Chapter 2: Understanding the Swing Trader’s Two Main Strategies
Strategy and Style: The Swing Trader’s Bio
Wrapping Your Mind around Technical Theory
Appreciating the Value of the Big Picture: Fundamental Theory
Chapter 3: Focusing on the Small Stuff: The Administrative Tasks
Hooking Up with a Broker
Selecting Service Providers
Starting a Trading Journal
Creating a Winning Mindset
Part 2: Timing Is Everything: Technical Analysis
Chapter 4: Charting the Market
Nailing Down the Concepts: The Roles of Price and Volume in Charting
Having Fun with Pictures: The Four Main Chart Types
Charts in Action: A Pictorial View of the Security Cycle of Life
Assessing Trading-Crowd Psychology: Popular Patterns for All Chart Types
Letting Special Candlestick Patterns Reveal Trend Changes
Measuring the Strength of Trends with Trendlines
Chapter 5: Asking Technical Indicators for Directions
All You Need to Know about Analyzing Indicators
Determining Whether a Security Is Trending
Recognizing Major Trending Indicators
Spotting Major Non-Trending Indicators
Combining Technical Indicators with Chart Patterns
Using Technical Indicators to Determine Whether to Be In or Out of the Market
Chapter 6: Trend Following or Trading Ranges
Trading Trends versus Trading Ranges: A Quick Rundown
Trend Trading
Trading Ranges: Perhaps Stasis Is Bliss?
Comparing Markets to One Another: Intermarket Analysis
Putting Securities in a Market Head-to-Head: Relative Strength Analysis
Part 3: Running the Numbers: Fundamental Analysis
Chapter 7: Understanding a Company, Inside and Out
Getting Your Hands on a Company’s Financial Statements
Assessing a Company’s Financial Statements
Analyzing More Than Just Numbers: Qualitative Data
Valuing a Company Based on Data You’ve Gathered
Chapter 8: Finding Companies Based on Their Fundamentals
Seeing the Forest for the Trees: The Top-Down Approach
Starting from the Grassroots Level: The Bottom-Up Approach
Deciding Which Approach to Use
Chapter 9: Assessing a Company’s Stock: Six Tried-and-True Steps
The Six Step Dance: Analyzing a Company
Step 1: Taking a Company’s Industry into Account
Step 2: Determining a Company’s Financial Stability
Step 3: Looking Back at Historical Earnings and Sales Growth
Step 4: Understanding Earnings and Sales Expectations
Step 5: Checking Out the Competition
Step 6: Estimating a Company’s Value
Part 4: Planning the Trade and Trading the Plan
Chapter 10: Fail Fast: Managing Risk
Risk Measurement and Management in a Nutshell
First Things First: Measuring the Riskiness of Stocks before You Buy
Limiting Losses at the Individual Stock Level
Building a Portfolio with Minimal Risk
Planning Your Exit Strategies
Chapter 11: Knowing Your Entry and Exit Strategies
Understanding Market Mechanics
Surveying the Major Order Types
Placing Orders as a Part-Time Swing Trader
Placing Orders if Swing Trading’s Your Full-Time Gig
Chapter 12: Walking through a Trade, Swing-Style
Step 1: Sizing Up the Market
Step 2: Identifying the Top Industry Groups
Step 3: Selecting Promising Candidates
Step 4: Determining Position Size
Step 5: Executing Your Order
Step 6: Recording Your Trade
Step 7: Monitoring Your Shares’ Motion and Exiting When the Time is Right
Step 8: Improving Your Swing Trading Skills
Chapter 13: Looking at the Scoreboard to Evaluate Your Performance
No Additions, No Withdrawals? No Problem!
Comparing Returns over Different Time Periods: Annualizing Returns
Accounting for Deposits and Withdrawals: The Time-Weighted Return Method
Comparing Your Returns to an Appropriate Benchmark
Evaluating Your Trading Plan
Part 5: The Part of Tens
Chapter 14: Ten Simple Rules for Swing Trading
Trade Your Plan
Follow the Lead of the Overall Market and Industry Groups
Don’t Let Emotions Control Your Trading
Diversify, but Not Too Much
Set Your Risk Level
Set a Profit Target or Technical Exit
Use Limit Orders
Use Stop-Loss Orders
Keep a Trading Journal
Have Fun
Chapter 15: Ten (Plus One) Deadly Mistakes of Swing Trading
Violating Your Trading Plan
Starting with Too Little Capital
Gambling on Earnings Dates
Speculating on Penny Stocks
Changing Your Trading Destination Midflight
Doubling Down
Keeping Open Positions While You Travel
Thinking You’re Hot Stuff
Concentrating on a Single Sector
Trading Illiquid Securities
Overtrading Stocks
Appendix: Helpful Resources for Today’s Swing Trader
Sourcing and Charting Your Trading Ideas
Doing Your Market Research
Keeping Tabs on Your Portfolio and the Latest Market News
Fine-Tuning Your Trading Techniques
Index
About the Author
Advertisement Page
Connect with Dummies
End User License Agreement
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Prev
Previous Chapter
Title Page
Next
Next Chapter
Introduction
Swing Trading For Dummies®
To view this book's Cheat Sheet, simply go to
www.dummies.com
and search for “Swing Trading For Dummies Cheat Sheet” in the Search box.
Table of Contents
Cover
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Where to Go from Here
Part 1: Getting into the Swing of Things
Chapter 1: Swing Trading from A to Z
Understanding What Swing Trading Is (and Isn’t)
What Swing Trading Is to You: Determining Your Time Commitment
Sneaking a Peek at the Swing Trader’s Strategic Plan
Building Your Swing Trading Prowess
Chapter 2: Understanding the Swing Trader’s Two Main Strategies
Strategy and Style: The Swing Trader’s Bio
Wrapping Your Mind around Technical Theory
Appreciating the Value of the Big Picture: Fundamental Theory
Chapter 3: Focusing on the Small Stuff: The Administrative Tasks
Hooking Up with a Broker
Selecting Service Providers
Starting a Trading Journal
Creating a Winning Mindset
Part 2: Timing Is Everything: Technical Analysis
Chapter 4: Charting the Market
Nailing Down the Concepts: The Roles of Price and Volume in Charting
Having Fun with Pictures: The Four Main Chart Types
Charts in Action: A Pictorial View of the Security Cycle of Life
Assessing Trading-Crowd Psychology: Popular Patterns for All Chart Types
Letting Special Candlestick Patterns Reveal Trend Changes
Measuring the Strength of Trends with Trendlines
Chapter 5: Asking Technical Indicators for Directions
All You Need to Know about Analyzing Indicators
Determining Whether a Security Is Trending
Recognizing Major Trending Indicators
Spotting Major Non-Trending Indicators
Combining Technical Indicators with Chart Patterns
Using Technical Indicators to Determine Whether to Be In or Out of the Market
Chapter 6: Trend Following or Trading Ranges
Trading Trends versus Trading Ranges: A Quick Rundown
Trend Trading
Trading Ranges: Perhaps Stasis Is Bliss?
Comparing Markets to One Another: Intermarket Analysis
Putting Securities in a Market Head-to-Head: Relative Strength Analysis
Part 3: Running the Numbers: Fundamental Analysis
Chapter 7: Understanding a Company, Inside and Out
Getting Your Hands on a Company’s Financial Statements
Assessing a Company’s Financial Statements
Analyzing More Than Just Numbers: Qualitative Data
Valuing a Company Based on Data You’ve Gathered
Chapter 8: Finding Companies Based on Their Fundamentals
Seeing the Forest for the Trees: The Top-Down Approach
Starting from the Grassroots Level: The Bottom-Up Approach
Deciding Which Approach to Use
Chapter 9: Assessing a Company’s Stock: Six Tried-and-True Steps
The Six Step Dance: Analyzing a Company
Step 1: Taking a Company’s Industry into Account
Step 2: Determining a Company’s Financial Stability
Step 3: Looking Back at Historical Earnings and Sales Growth
Step 4: Understanding Earnings and Sales Expectations
Step 5: Checking Out the Competition
Step 6: Estimating a Company’s Value
Part 4: Planning the Trade and Trading the Plan
Chapter 10: Fail Fast: Managing Risk
Risk Measurement and Management in a Nutshell
First Things First: Measuring the Riskiness of Stocks before You Buy
Limiting Losses at the Individual Stock Level
Building a Portfolio with Minimal Risk
Planning Your Exit Strategies
Chapter 11: Knowing Your Entry and Exit Strategies
Understanding Market Mechanics
Surveying the Major Order Types
Placing Orders as a Part-Time Swing Trader
Placing Orders if Swing Trading’s Your Full-Time Gig
Chapter 12: Walking through a Trade, Swing-Style
Step 1: Sizing Up the Market
Step 2: Identifying the Top Industry Groups
Step 3: Selecting Promising Candidates
Step 4: Determining Position Size
Step 5: Executing Your Order
Step 6: Recording Your Trade
Step 7: Monitoring Your Shares’ Motion and Exiting When the Time is Right
Step 8: Improving Your Swing Trading Skills
Chapter 13: Looking at the Scoreboard to Evaluate Your Performance
No Additions, No Withdrawals? No Problem!
Comparing Returns over Different Time Periods: Annualizing Returns
Accounting for Deposits and Withdrawals: The Time-Weighted Return Method
Comparing Your Returns to an Appropriate Benchmark
Evaluating Your Trading Plan
Part 5: The Part of Tens
Chapter 14: Ten Simple Rules for Swing Trading
Trade Your Plan
Follow the Lead of the Overall Market and Industry Groups
Don’t Let Emotions Control Your Trading
Diversify, but Not Too Much
Set Your Risk Level
Set a Profit Target or Technical Exit
Use Limit Orders
Use Stop-Loss Orders
Keep a Trading Journal
Have Fun
Chapter 15: Ten (Plus One) Deadly Mistakes of Swing Trading
Violating Your Trading Plan
Starting with Too Little Capital
Gambling on Earnings Dates
Speculating on Penny Stocks
Changing Your Trading Destination Midflight
Doubling Down
Keeping Open Positions While You Travel
Thinking You’re Hot Stuff
Concentrating on a Single Sector
Trading Illiquid Securities
Overtrading Stocks
Appendix: Helpful Resources for Today’s Swing Trader
Sourcing and Charting Your Trading Ideas
Doing Your Market Research
Keeping Tabs on Your Portfolio and the Latest Market News
Fine-Tuning Your Trading Techniques
Index
About the Author
Advertisement Page
Connect with Dummies
End User License Agreement
List of Tables
Chapter 9
TABLE 9-1 Comparing Fundamental Analysis Tactics
Chapter 10
TABLE 10-1 Hypothetical Order Book
List of Illustrations
Chapter 3
FIGURE 3-1: The Financials page on the Reuters website provides a wealth of data...
FIGURE 3-2: Tesla faced significant debt challenges and questions regarding the ...
FIGURE 3-3: A sample excerpt from a trading journal.
FIGURE 3-4: A sample excerpt from a trading journal.
Chapter 4
FIGURE 4-1: A bar chart (a) and a candlestick chart (b).
FIGURE 4-2: Sample line chart, bar chart, and candlestick chart featuring shares...
FIGURE 4-3: A sample P&F chart featuring shares of AK Steel (symbol: AKS).
FIGURE 4-4: The accumulation phase of APA.
FIGURE 4-5: The expansion phase of APA.
FIGURE 4-6: Shares of SNDK during a distribution phase.
FIGURE 4-7: Shares of SNDK enter a contraction phase.
FIGURE 4-8: Shares of PHI traded in a Darvas box before breaking out in November...
FIGURE 4-9: Shares of LEN formed a head-and-shoulders pattern that signaled the ...
FIGURE 4-10: Shares of LFL formed an inverse head-and-shoulders pattern in July ...
FIGURE 4-11: Shares of BVN formed a cup and handle over two months during an upt...
FIGURE 4-12: A depiction of idealized ascending, descending, and symmetrical tri...
FIGURE 4-13: Common gaps appeared in shares of DSX.
FIGURE 4-14: This chart of MCF shows a consolidation period followed by a clear ...
FIGURE 4-15: FLS shares form a continuation gap.
FIGURE 4-16: An exhaustion gap appears in a chart of SIGM.
FIGURE 4-17: Shares of WDC represent a clearly defined hammer on April 10.
FIGURE 4-18: Shares of NEU form a bullish engulfing pattern.
FIGURE 4-19: Shares of DO formed a bearish engulfing pattern to mark the end of ...
FIGURE 4-20: The morning star and evening star patterns.
FIGURE 4-21: Shares of China Mobile Limited (symbol: CHL) formed an evening star...
FIGURE 4-22: This chart of SNDK shows an uptrend line and a downtrend line.
FIGURE 4-23: In this chart, the downtrend line is touched several times, signali...
Chapter 5
FIGURE 5-1: Applying a non-trending indicator to a trending security leads to pr...
FIGURE 5-2: A data error can cause indicators to yield incorrect signals.
FIGURE 5-3: This trading log shows profits and losses over the course of ten tra...
FIGURE 5-4: The ADX indicator applied to shares of Old Dominion Freight Line.
FIGURE 5-5: A chart of ISRG with the DMI indicator.
FIGURE 5-6: A comparison of the simple moving average and the EMA using shares o...
FIGURE 5-7: Shares of APPF plotted with a nine-day EMA and ADX.
FIGURE 5-8: A four-day moving average and a nine-day moving average crossing ove...
FIGURE 5-9: This chart shows shares of FSLR with the MACD indicator applied.
FIGURE 5-10: This chart of GLD shows the different ways you can use MACD.
FIGURE 5-11: This chart illustrates the effectiveness of divergence as an import...
FIGURE 5-12: This chart shows how observing overbought and oversold levels can h...
FIGURE 5-13: This chart demonstrates a positive divergence in RSI for shares of ...
FIGURE 5-14: This chart shows an inverse head-and-shoulders pattern in the RSI i...
FIGURE 5-15: A chart of MANT shows the value of combining chart pattern observat...
FIGURE 5-16: The S&P 500 Index with an 18-week moving average.
Chapter 6
FIGURE 6-1: This security hits a new 52-week high and is a prime candidate for t...
FIGURE 6-2: A day of strength is often a good opportunity to enter a strong tren...
FIGURE 6-3: ADX above 20 signals the existence of a trend — enter on a day of st...
FIGURE 6-4: This chart shows a trading range with resistance at $65 and support ...
FIGURE 6-5: This chart shows a buy signal from stochastics and a profit objectiv...
FIGURE 6-6: Watch the strength or weakness of the U.S. dollar for clues on the d...
FIGURE 6-7: Commodity prices (top chart) tend to be positively correlated to bon...
FIGURE 6-8: Equity prices and bond yields tend to be negatively correlated.
FIGURE 6-9: Comparing markets to one another helps you determine which markets a...
FIGURE 6-10: Comparing industry groups to the broader market can help you identi...
FIGURE 6-11: Comparing an individual security to its industry group can help you...
Chapter 7
FIGURE 7-1: The balance sheet of Amazon.
FIGURE 7-2: The financial strength ratios of American Eagle (symbol: AEO).
FIGURE 7-3: Apple’s annual income statement for three years.
FIGURE 7-4: The cash flow statement of Twitter for the nine months ending 2017 a...
FIGURE 7-5: Key statistics of several large drug manufacturers relative to the i...
Chapter 8
FIGURE 8-1: The average P/E of the S&P 500 Index from 1954 through 2018 was 16.6...
FIGURE 8-2: A comparison of bond rankings in the S&P and Moody’s scales.
FIGURE 8-3: Find out the yield of corporate bonds with different maturities and ...
FIGURE 8-4: This snapshot shows various fundamental measures on all major sector...
FIGURE 8-5: Performance comparison of growth and value stock indexes.
Chapter 9
FIGURE 9-1: Market sectors perform differently depending on the stage of the eco...
FIGURE 9-2: A low interest coverage ratio is a red flag for Toll Brothers.
FIGURE 9-3: Snapshot of VG’s income statement from 2002 through 2006.
FIGURE 9-4: A quarterly earnings and sales surprise history of MRK.
FIGURE 9-5: Snapshot of the fundamentals of American Eagle (symbol: AEO).
FIGURE 9-6: Snapshot of Paycom’s fundamentals at the end of 2018.
Chapter 10
FIGURE 10-1: Assessing a chart can help you calculate how large a position to ta...
FIGURE 10-2: Information from Trader Bob’s hypothetical portfolio.
FIGURE 10-3: GICS sector classification.
FIGURE 10-4: This chart of XOM shows how you can plan your exit based on previou...
FIGURE 10-5: Placing stop-loss orders below swing lows helps you stay in strong ...
FIGURE 10-6: Taking profits based off of a technical signal in shares of WTI.
FIGURE 10-7: A stop-loss order for YHOO, based on the nine-day moving average.
Chapter 11
FIGURE 11-1: A Level I quote of Starbucks.
FIGURE 11-2: A Level II quote of Walt Disney indicates sizable market depth.
FIGURE 11-3: Use the Time & Sales report to compare actual trades to market make...
Chapter 12
FIGURE 12-1: The daily chart of the S&P 500 Index in 2018
FIGURE 12-2: The weekly chart of the S&P 500 Index.
FIGURE 12-3: The top-performing industry groups in mid-2018.
FIGURE 12-4: A ranking of stocks by return on equity in two industry groups.
FIGURE 12-5: This chart of Iradimed shows the stock moving higher.
FIGURE 12-6: This chart of Sony Corp. shows a stock continuing an uptrend.
FIGURE 12-7: Your trading journal should include enough details to make it usefu...
FIGURE 12-8: Shares of Iradimed rallied after purchase before triggering an exit...
FIGURE 12-9: Shares of Sony stalled after purchase before breaking below the 17-...
Chapter 13
FIGURE 13-1: Break the year into subperiods to use the time-weighted return meth...
FIGURE 13-2: The return calculator on the FTSE Russell website provides returns ...
Chapter 14
FIGURE 14-1: A trading questionnaire is a useful tool that helps you stick to yo...
FIGURE 14-2: Most securities in the technology industry fell in unison in late 2...
Guide
Cover
Table of Contents
Begin Reading
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