After years of buying and investing in stocks, I’ve always wanted to test the waters by short-term trading. I often hear of traders making kills while holding a stock for a few days, a few hours, or even a few minutes.
Who wouldn’t want to make some quick returns like that?
Some of you might be thinking “And quick losses too”. Yes, short term trading can be risky but those risks can be mitigated significantly. Mostly it comes down to having solid strategies and sticking to them.
Besides the potential risks, the process also seemed intimidating to me. I didn’t have spare time to research companies regularly. Even if I did, I wasn’t confident that I would always correctly predict that company’s short-term future.
Instead I tried to learn stock chart patterns on my own. With this approach, you can observe patterns in the stock price that usually precede a gain or decline in the stock price. I liked this approach because it relied on price trends rather than learning the ins and outs of specific companies. However, it was difficult to try on my own.
Recently a blogger friend told me about the most profitable part of his trading system. Despite his success streak with this system, the unpredictable economy worries me. So his email sat in my inbox as a reminder, but I’m good at procrastination.
With my online business taking a induced economic hit this year, I decided not to keep putting this on hold. If you are careful, this can be a fairly reliable additional income stream. Who knows, maybe it will be a future profession.
So now I am writing this post to chronicle my method of short term trading and hold myself accountable. At the same time, it should help other people looking to give this a shot.
Read on to learn about my strategy and planned results. I plan to keep this completely transparent. Check back or subscribe to my mailing list for progress updates.
My planned short term swing trading strategy
As mentioned, my blogger friend gave me the inside track on his strategy. He claims to have been using this specific strategy for over two years now with a 100% success rate.
His secret weapon is expert stock alerts. Specifically, it’s the Fast 5 Trading Alerts that have a 100% success rate.
When you pay for these alert services, the expert will send subscribers their stock picks periodically. Provided it is not a company with a large market capitalization, these and other short-term traders can cause the share price to go up. I suppose the expert also dumps some money into this stock to help him go higher and also to make more profit from his subscriber.
Seems pretty foolproof to me. Instead of trying to find waves, you hop on a predictable, artificial wave.
mitigate my risk
Now you know my initial orientation, but what do I do to avoid losing money?
- timing – Keep in mind that in most cases these nails are artificial. Some of these companies may be legitimately about to take off, but most of the people who caused prices to skyrocket are bound to get out quickly. Some of the existing shareholders will take their earnings and exit as well.
The magic number for how long you should hold a stock is down to your risk appetite. The shorter you keep it, the safer it is but it can also limit your winnings. While getting started, I will literally sell the stock just 2-3 minutes after I buy it.
When I get some experience I’ll keep tabs on how long the hikes take to peak. I don’t intend to risk trying to time that peak or even getting close to it. It still gives me an idea of my margin of error and allows me to be more careful.
- Determine the size of the investment The other big factor is how much money you invest in each trade. Even if I heard someone else had great success with this approach, I wouldn’t drop 6 figures on my first trade.
This week’s trade is probably the only week where the system will fail in some way. Maybe your internet is going down or your computer is crashing. All kinds of things can happen when you’re still holding the stock as the price drops.
The higher your investment, the greater the potential loss. The bright side is that you will never lose 100% of your investment if things go wrong in some way. You still want to avoid any potential losses.
- automation With every short term trade I plan to use a stop loss order. So if the stock falls below a certain level, it will automatically try to sell the stock.
I acknowledge that if the share price is crashing, it may be hard to sell at that point. I might try to protect myself anyway. Also this can be my savior if the internet goes down.
The other way you can protect me is by avoiding some possible human error. While doing these early morning trades, maybe I can somehow buy the wrong stocks. This alert does not sound every Monday morning at 6 AM Pacific Time. So I can be a bit groggy in the morning. Hopefully that won’t cause problems. This is the challenge when doing short-term trading on the West Coast.
The truth is that I could lose money on the trade and need to get out if things go wrong.
- regimentation – I admit that this is where I expect to face the biggest challenge. To keep things safe, you need to take the emotions out of the process.
If I have a good week or two, I shouldn’t be in a rush to change the investment size or timing. I’m fine with some incremental changes on that front, but nothing reckless. I would like to gain confidence before increasing the risk level.
And just to be safer, I don’t plan to rush out to try other systems. If that works, I’d like to ride for a while before adding another strategy. Yes I can experience other alerts that go out more frequently than once a week. The increased frequency of those other alerts could mean less work for the subscriber base on each inventory alert. I also want to start one that I know I’ll be home with constantly.
Weekly swing trading strategy
progress
This week I’m going to sign up for Fast 5 Alerts. At first I was going to do a dry run for the first week, but then I remembered I’d be up before 6am. If I get up early, I might at least try with a small investment.
Before Monday alert, I need to get organized. I signed up for a new investment broker recently. This means that I will need to make sure I am comfortable enough with their platform to make a quick buy and sell fast. It is important that you buy the stock as soon as you receive the alert or you will miss out on the early increase.
I would also need to know how to execute a stop loss order. Since I only ended up buying and holding stocks, I never used a stop loss order.
I think I need to transfer some cash to this brokerage account as well
Trade results in the first week
For my initial trades, I decided to use $10,000. Maybe I should have started smaller to be on the safe side. The reason I haven’t invested less is because I want to hold for a very short period but still get enough profit to justify getting up early.
If you try short term trading. You don’t need to spend much. Really, it should be just enough so that your earnings easily cover the transaction fees. Ideally, you pay off your alert service subscription quickly, but there’s nothing wrong with taking things slow.
As planned, I bought the stock and sold it within 3 minutes. The stock finished peaking after X minutes. Then the price dropped as expected.
Here is the breakdown:
Morning opening price:
My purchase price: (6:01 AM)
My selling price:
Net profit: (%)
Peak price: (%)
Stay tuned for next week’s trade results.
Click here to learn more about Fast Alerts 5.
