Timing Solutions for Swing Traders: A Novel Approach to Successful Trading Using Technical Analysis and Financial Astrology

SELECTING STOCKS

There are many methods for choosing stocks to trade. Stocks may be selected on the criteria of fundamental and/or technical analysis. The market index may be used as a benchmark to choose those stocks within a certain range of price-earnings ratios, dividend yield, and consistent earnings. But there is one universal rule: Never buy any stock on hearsay information, no matter where the information comes from, without doing a study of it prior to the purchase. More exoteric approaches on how to select stocks are provided in the next chapter; however, the methods are not exhaustive.

Whichever method you prefer in selecting stocks, do not trade a stock that has no trading liquidity. If a stock is not very liquid, it means that you may not be able to buy and sell it at the volume you want, at the price you would like, or when you want. Trading liquidity is therefore important to the relative size of your holding. Here is a simple example. If the average daily trading volume of the stock is about 10,000 shares, it would not be in your best interest to hold 100,000 shares because you will not be able to dispose of them quickly when the trend turns bearish. But, on the other hand, if the average daily trading volume is 100,000 shares, it should not be difficult for you to dispose of your holding.

After you have picked the list of stocks to trade, you then have to decide on position sizing: the number of stocks to trade and the dollar value of each stock you feel you will ...