Stock Trading Rules & Risk Management

Many have asked what I look for when I enter and exit positions. I’ll share how I trade, and many will disagree because we all do things differently. This is just what’s worked for me. I tried scalping 2%-5% here and there day trading, but I did not enjoy it. Also, I don’t have the time to day trade, and catch every dip for scalping. I found it stressful, and it just isn’t my cup of tea. I’m more of a set it and forget it type of trader because I have such a crazy schedule. I’ve actually compared my accounts for long investments, long swings, short swings, and day trading. I never made more money from day trading, I actually lost more money from day trading. Timing is everything, and if you get the timing wrong, there goes the trade. Here are my rules that I put in place:

Day Trading Rules

1. Choose market movers/high volatile stocks/offering sell offs
2. Analyze the chart for the stock (Daily/5D/10D/30D/90D/180D)
3. Follow Indicators (VWAP/RSI/MACD/Volume)
4. Stop loss at $100 or 5%, whichever is less
5. Do not add more to the position if it’s going down
6. Only add to position if it’s moving up for a reversal
7. Set price target before entering, and sell at that target
8. Close the position out end of day no matter what.

When entering swing positions, I’m choosing stocks that have many red days. I primarily look for positions that are super red, and clearly oversold, with more upside potential. (i.e. Gamestop, AMC, SAVA, CBAT, SNDL etc.) My goal is to accumulate all the red days and big dips for a reversal upward.

For me to continue holding a short swing, and to avoid not selling too soon, I watch to see if there will be a continuation up. If my 30m/1hr/4hr indicators gives me an all clear, then I’ll continue swinging. If it looks like it’s going to go down using those same indicators, I close out my swing positions, and wait ’til the dust settles to reposition my swing.

If I’m swinging long, I look at where it’s sitting on the 30D/90D/180D/1Y/5Y chart. If it looks like it’s forming higher lows, showing new support levels, then I will hold.

Swing Trading Rules

1. Do thorough Due Diligence: Research sec-filings, company website, LinkedIn, news articles, PR, etc.
2. Analyze the chart for the stock (Daily/5 D/10D/30D/90D/180D/1Y/3Y/5Y)
3. Follow Indicators (VWAP/RSI/MACD/Volume) to accumulate shares
4. Entries: 1st – 5%; 2nd – 5%; 3rd – 10%; 4th – 10%; 5th – 15%; 55% Lifeline (no less than 45% lifeline in case the trade goes south)
5. Have a buy target and sell target before entering; scale in and out of positions
6. Set GTC Sell Limit at targets
7. Be patient. It will run without you, once you even think about selling =P.

Example)

That’s essentially the gist of how I enter and exit positions. When in doubt on when to sell, remember, you never lose when you choose to scale out your profits. Always make sure you get back your initial investment, and let the rest ride out. By doing this, you’re essentially riding on free shares. Happy trading!

Disclaimer : This should not be considered investment advice, and should not be used to make investment decisions. Do not buy or sell any stock without conducting your own due diligence. Information on eyelovegains.com is opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts and data provided here are not meant for investment purposes and only serve as examples. We are not liable for any losses you may endure from the buying and selling of stocks or securities within your accounts.

For those who would like to support my blog, here’s the donation link: