If you have been making swing trades at a loss for a number of months, it is very easy to get discouraged because your losses have been too large in some cases.
While a few hundred dollars is a big loss, it is usually not that big. If you are doing it on a regular basis, and if you pay attention to the risk, it could still be a good time to swing and if you follow the suggestions below, you could also profit.
This article focuses on long term, daily volatility, and does not consider volatility within days or weeks of trade executions. I find that the daily volatility is about the same as during a swing trade on a regular basis – perhaps less the day after you execute your trade. This means your swings generally come every couple of weeks so a single trade can be fairly consistent and safe.
For example, let’s say you are in the 50’s and you buy one dollar-worth of DIX at the low of this year’s low. You could expect the DIX price to rise slightly after trading the day or two after execution. But if you don’t buy the DIX when you trade, then the risk could be higher than usual.
Let’s say you also have a 2.5% margin loan that you buy to hold some stocks that are not yet available for your portfolio, but do not need to be put into action. You could also hold the DIX and then sell it at the DIX price when that trade is executed.
This is a much more conservative way to go and can potentially be more profitable in the long run. Since your margin loan is small in comparison to your long term position in that stock, it could be better to trade the stocks and take profits if you prefer. This can avoid any temptation to use margin to buy the DIX stock that is not readily available to be used in the trade because of the larger size of your position.
Also, remember that you should also be aware of your expected long term volatility. This is a much more important factor than in other areas of investment. You can’t beat the volatility of the stock market by doing a swing trade, but you can be sure if you don’t buy a given stock a day or two after it’s gone up, there is a chance that you could be out of luck.
Should I take a position in some DIX?
It is very difficult to find good DIX news and it is unlikely that the stock will
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