Swing Trading with $300 – Week Four – Stop Losses

Empty board swing covered in lichen.

A week with no swing trades being executed makes for an introspective weekly post on swing trading. Yep, no action this week. I watched and waited as my two holdings sat below my entry. No profit to be made. The prices sitting well below a sensible stop loss amount.

I teed this one up in my Swing Trading with $300 – Week Three post. My reluctance to set stop losses and my hope that a trade will turn positive are both factors that kept me from bailing on these two trades even when the share price plunged. A couple of factors, or shall we call them excuses, for not setting stop losses include the overall market drooping that week and the fact that I was not trading penny stocks. While both companies are volatile and carry a high level of uncertainty, they are established, reputable companies. They aren’t dividend aristocrats, but they aren’t highly speculative either.

No Stop Losses No Momentum

Since I am just sitting on a couple of slumping stocks, my momentum from the first three weeks ground to a halt. A stop loss would have locked in losses, but it would have allowed me to keep moving, find the next play, and make up the lost ground. Because the entire market was down this particular week, it presented many wonderful opportunities to buy at great entries. I couldn’t take advantage as I sat holding my two bags.

However, it is not all doom and gloom. I am swing trading after all. Swing trades can take a week or two to develop. It just isn’t fun sitting on the bench when you see all the great plays you could be making for your team. Tune in next week as I will get the ball rolling again one way or another.

Summary and Analysis of Week Four

No trades completed. Holding 19 shares of IVZ at $8.74 and 28 shares of AZUL at $7.27.

Trading account balance remains at $369.88 with no change from the week three ending balance.

One strategy I am using to reduce risk and to increase my number of transactions is to divide my $300 in half. I am not putting all $300 into one trade. Instead, $150 is dedicate to trade A while the other $150 is dedicated to trade B. I’m not all tied up in one stock. I can let one of the trades simmer for a few days if needed. Or maybe for a few weeks in the case of my IVZ swing. Following this strategy, you could say my IVZ holding is trade A in progress while my AZUL holding is trade B in progress.

Decent volume and volatility combined with low share prices are ideal conditions for my style of swing trading. Because I am trading with such a small amount of money, I look for stock that is moving up and down three to ten percent from lows to highs. I want decent volume so my limit orders can be filled, and I want to avoid penny stocks which are typically priced at $5.00 a share or lower. Both AZUL and IVZ fit this style of stock. Lately they’ve hung out in the $6.00 to $8.00 range. They move enough to provide good profit opportunity without moving so much that I get blown out of the water.

In Conclusion

I treaded (or trod if you like weird past tenses) water this week. But I continued to learn. I am recognizing and owning my trading psychology. I am observing a tumultuous, unpredictable market. Not being able to drive further profits and move my trading account higher is frustrating, but it is part of trading and learning. Thank you for following along. I’ll see you next week where hopefully I’ve broken out of the trading doldrums.

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