Entering a Position – Swing Trade
Below are the rules for managing an initial entry into a swing trade.
- The 1st three days usually dictate if you will be profitable or not.
- If you enter position and within 3 days you are below your entry point, exit the trade.
Portfolio Management
Position Sizing
We are using a portfolio that is $135K.
- Each position entered should not be greater than $8K (roughly 5% (8/135) in total cost), or the number of shares should be greater than 100, or an options position should not exceed 1% of total portfolio value.
- When stepping into a swing trade, where length of time is days or weeks, always start with half the number of shares. So for example, if you’re looking to a position of 100 shares in QQQ then buy 50 shares first and see where the trades goes to either double down or short – recall October 2023 QQQ IB trade.
- If the price of the stock goes down 10% or $10 per 100 shares, consider doubling down on entry position as a 10% reduction should be a 1% drawdown on total portfolio.
- VLO trade on AUG 2021 was a good example. Bought 100 shares and it sold off from $66.50 to $59.36. It was a $750 loss. Had we started with 50 shares it would have been a $350 loss and we could have doubled down a lot easier than doubling down at $750.
What You Do
Expand on the idea that in a week the first two days of a down week are spent fighting and clawing back. Day 3 of the week sets the stage for up or down. Thursday doesn’t make much progress and Friday closes the trend.