Swing trading stocks can be very profitable, but also risky.
I keep things simple by trading leveraged ETFs. If you read my book, you will see why and how. Here we are going to look at SOXL which is the leveraged version of SMH. Would anywhere from 5/4/2021 - 5/7/2021 be a good entry point? Only time will tell. Looking at two different style charts, moving averages and things like Bollinger bands this would be a time I would enter. Heiken-Ashi candle sticks alone are one simple trading strategy as the bars are based on moving averages that show buy and sell candles. That is the chart above. Friday would have been a buy candle based on the Heiken-Ashi candle.
Looking at the Stochastics reaching oversold territory on Tuesday would have made a great time to buy based on that alone. If you would have bought SOXL (the leveraged version of SMH) last time it was oversold (or switched from sell to buy Heiken-Ashi candlestick) you would have made roughly 30% in a month. If you would have exited around the last oversold area it has taken 20 days (about 3 weeks) for a pullback. Could you have made 30% during the pullback? Yes, because there were other leveraged ETFs in another buy zone.
Let us say we bought SOXL 5/4/2021-5/7/2021 what would be a good trading plan? One rule is to always have extra money to average lower if you need to. If you buy anything oversold or breaking out, you want to be prepared if the stock or ETF starts declining further than your purchase. Have a plan to average in lower. The lower your cost basis or average purchase price the better chance you have of making money on the trade. Some people will cut their losses but remember the only time you make or lose money is when you finish the trade. Just because it goes down does not mean it will not go back up above your entry price. I would not sell this position until it either hit the most recent highs or hit an oversold spot. This amount of increase could give you another 30% swing.
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