The Definitive Guide To Swing Trading Stocks by Kevin Brown introduces the concept of how to make money through the concept of Swing Trading. The guide takes the reader through a step-by-step process of stock analysis assessment and market changes. This book is a quality swing trading book that teaches the reader the complete strategy for being successful.
Swing Trading Defined by Kevin Brown
The concept of Swing Trading, introduce by Kevin Brown, informs the reader about being able to gain insight into how to invest successfully in stock and monitor it successfully for a given length of time (anywhere from a handful of days to weeks. The stock is analyzed for patterns and trends that give the stockholder an option for capital gains.
Swing Trading Breakdown
Kevin Brown uses his knowledge to breakdown swing trading into easy-to-understand concepts. This book is more than a “how-to” book about Swing Trading. The book helps the average trader understand why they are not making a profit from their own actions. The methods added in his book are ones that a stock trader can use in multiple ways to see the gains they are hoping to make.
Swing Trading Basics
The focus of swing trading is on strategy. It looks to yield up to 25% more financial gain from the stocks in a portfolio. This can go as low as only 5% gains during a bear market. This is not the amazing profit desired by my investors. This is a slowly growing concept.
The gains aimed to develop a lot more slowly. The idea is to reach the right length of time for the stock and have a lot of small profits. Over time, these will end in big returns. The profits increase from week to week through added assessment of the market. This can be as high as a 20% gain in a month with 5% gains from week to week. Its stepping up to profit in small increments.
There will still be losses as the market is unpredictable, but with the swing strategy, they are lessened. Much of the gains made through the careful trading and analysis of the market. This is one of the main benefits of the swing trading theory. With a monthly gain of 20% and a loss of 5%, the gains still average out to a net profit of 15% a month. This captures the market gains as the prices move.
15% gains a month might not seem like a lot when watching the portfolio expand and contract, but this adds up over the months and years for considerable portfolio gains and financial security. This can deliver larger gains for the individual trader over many months and shows how healthy the stocks are for more trading.
The Day Trading Comparison
Kevin Brown’s book addresses the concept of day trading and makes a fairly accurate comparison of techniques. A key difference between the two different strategies is the length of time an investor holds a stock. A day trader holds their stocks for a shorter period of time; hence they “day” part of a day trader. This time frame averages a day.
He breaks down the differences at the beginning of his book into the day trading, ultra-short position and the swing trader who holds their investments for a short time. He compares all three methods to the position trading method in which the trader holds their stocks for months and years beyond what the day and swing trader holds theirs.
A swing trader holds overnight and risks the evening market shifts. This is a big risk for larger traded stocks. Swing trades are more often down on a smaller size which reduces the risk, but this reduction also reduces the gains in the margin. A day trader takes a larger position and gains or risks a larger margin.
Swing Trading Strategies
The strategies addressed in Kevin Brown’s book make understanding the concept of swing trading simple. He writes simply and breaks his principles down into two simple concepts:
- Follow the rules
- Keep it simple
He looks at the trades through real-time purchasing and holding. He uses the simple method of observation without the need to constantly watch the market or spending money on complex software for trading. He looks to provide the trader with a balanced trading perspective without wasting time and effort or money.
Kevin Brown establishes his ground rules for being a swing trader. These rules are hard and fast rules for his method and approach. He uses these in his own trading and has been making around $7,000 a month through carefully researched and placed trades.
It requires studying the movements of the ETF or stock carefully before a trade occurs. The way the stock or ETF acts provides the complete picture of how its future actions will be. Mr. Brown explains this through the rules he uses when preparing to make a trade.
The Rules:
The rules written by Kevin Brown are guidelines on how to proceed when assessing and making a trade. They are not the only way to approach trading. His writing is direct on how the method can be successful. It makes no promises on the success of the trader, it provides the basics of what he and others like him have figured out.
Nothing is secret
Kevin Brown basically states that there are no secret methods for trading because nothing is truly secret. Long and short trades occur equally without strategy. The stocks will rise and fall with the number of trades each day as the buyers and sellers watching the market and making a choice.
The Price matters
Kevin Brown introduces his basis for making decisions through his second rule. He uses price charts that include historical and current data to analyze the stock and makes his own choice This includes looking at how the stock has been behaving and reading up on the opinions written for those stocks.
The price is the ultimate indicator that needs watching with all possible outcomes assessed. This helps the trader understand the small dips and jumps the stock takes so they know when and how they need to react to a real indication of action. This reduces all possibilities to when and how the stock needs to be bought or sold.
Its not about winning
This concept is a simple concept. It is not about winning. This is looking at how large of a loss or a win made in the trade without overexcitement in winning streaks or losses.
There will always be risk
Every trade is a risk. There will never be trading without risk. Even the most careful analysis can end in a loss.
Kevin Brown looks at the acceptance o the realities of any kind of trading and councils the trader to accept what happens good or bad. This means not everything can be predicted and not all trades will be successful, but without taking a risk nothing is possible.
No Ego allowed
His final rule looks at the old idea that it’s not about winning the game it’s about trading a stock made as a business decision. He looks at guessing and predictions as a way to brag about making “the right” call or decision.
A trade should happen only if the research shows that it would be a sound financial decision. This removes the emotion and the ego from the decision. Proving you are right to whoever is reading your blog or listening to you advise is not the point of trading.
Swing Trading Examples
Identifying the right time for a swing trade requires watching for trends. Select an EFT or stock that is up and review the daily bar chart. If it has a short and distinct bottom and has returned to its current position at least 3 times and does not fall or rise above or below 1.5% of the price than a buy order can happen if it’s around 1% of the stock or ETF’s usual price.
Placing a stop order just below the purchase price provides the safety net to prevent too great of a market swing from taking out the entire order. From here, the market watching starts. A strong market provides more opportunity to grab the high-profit margin the security routinely experiences. A weaker market means grabbing a lower profit to prevent loss should the market fail to move up in the estimated fashion.
It is a matter of measuring the performance of a stock or ETF and gauging the extent of average movement. If the security acts as it has in past weeks than generate profits accrue from the sale at the estimated max price. A weak market watch means selling earlier with reduced gains. With a stop in effect, protection is made for the stock or the ETF.
When to trade
The method of placing the trade and making a profit from it can be broken down through the research that goes into researching the security and following the rules. The trades occur at and with the following steps:
- High and low prices are established.
- Trades to buy or sell are initiated when the price reaches the highest point, the careful middle point or the safety point.
Understanding how the stock or ETF moves is how to make swing trading successful. This prevents blind trading or panicked trading if the movement of the stock market is too unstable. It makes for efficient trading and the most cost-effective way to make money without risking too large a loss.
The buy and hold method and the day trading method have their advantages. The swing method employs emotion-free trading and profit with stop-sale protection. When trying to do any of these methods, the cost of doing business is part of the formula.
While there are some apps and online websites allow for free trades on select securities brokerages and banks charge per trade and make a commission off of the funds generated. This cuts into the profit margin and requires additional work. It can also reduce the pay off if the security is trading too low or the stop is set at the original purchase price.
The Definitive Guide to Swing Trading Stocks
The concepts laid out in The Definitive Guide to Swing Trading Stocks by Kevin Brown do an excellent job of making complex terms simple and removing any ambiguity that occurs in other types of investing books. His approach is straight forward and easy to understand without showing off inaccessibly large returns.
His website provides a portion of his book to download, for a more complete review of his process; a full purchase of the book is required. The book is simple and easy to read with terms defined and charts explained. The book does not pretend to have all the answer to trading successfully; it merely describes the chosen method used by Mr. Brown and others like him.
