The Complete Swing Trading Strategy

Now lets put everything together into a swing trading strategy. This trading plan is for discretionary traders. Your success will depend on how well you use your discretion!

After you understand the concepts, then modify this trading strategy into a strategy of your own.

Feel free to change things around a little. Maybe you want to add some other kind of technical indicator. Or, maybe you would like to incorporate some fundamentals into the mix. Whatever you decide, make it your own.

You will be far more successful with a trading strategy that you design, rather than just blindly following someone else's plan! Ok, lets get started with our trading strategy. We will begin by preparing for the week ahead.

Preparing for the trading week

On Sunday mornings, I get up early, grab a cup of coffee and head to the computer to get ready for the trading week ahead. I am wanting to know what types of trades I will be focusing on for the upcoming week (long or short). This part is easy. Using our market timing strategy, we look at the moving averages to determine if we will be biased to the long or short side of the market.

Remember that staying in cash (having no positions) and out of the market is a strategy. You do not have to trade!

Once we find out what type of trading we will be doing, it's a good idea to get a feel for what will likely affect the market for the week ahead. These are some of the things I look at:

  • Economic Calendar
  • Industry Groups
  • Charts

I look at the economic calendar to see what types of reports are coming out that could influence the market. I also look at charts for all the major industry groups to see which ones are strong, which are weak, and which ones have potential to make major moves.

Have a notebook handy next to your computer to jot down ideas about the upcoming week. When you are trading you will forget about your weekend research! Having you notes next to you will come in handy.

Scanning for stocks

Now we will run our scans to find some potential trades. Remember that we are looking for stocks that have pulled back into the Traders Action Zone. Here is an example:

trading pullbacks

Specifically, we are looking for stocks that:

Sift through your scan results and find the ones that show these specific characteristics. Add these to your watch list.

Go through the example trades on this page to get a better idea of what you should be looking for on a stock chart.

Trading strategy

Using this trading strategy, we will wait for Williams %R to give us a signal to go long or short (See the market timing page for details). Once that happens, then run through your watch list to find potential trades. It may be that the scan that you ran on Sunday will not offer any good setups, so run your scan again to look for trades using the same criteria as outlined above.

Now you are looking for a specific entry into a stock using candlestick patterns.

WAIT! Before you trade a stock, check to make sure that the company is not about to release their earnings report. Otherwise, this could happen to you:

earnings release on a stock chart

A stop loss order will not protect you against an overnight gap like this! Do you think that you can predict ahead of time whether or not the earnings release will be a good or a bad one? Think again. That is not trading - it's gambling. You can lose a lot of money buying or shorting a stock right before an earnings release.

You can easily check to see when a stock is about to release their earnings report by using Yahoo Finance. Just type in the ticker symbol and it will show you the date of the next earnings report. Pretty easy, huh?

Now, once you are in a trade, forget about the market, forget about the news, and forget about opinions! Trade the chart. Use your exit strategy to either take profits or losses. If you have managed your money correctly, then you should have small losses and by trailing stops your profits will cover these and more!

The success of this trading strategy relies on your discretion to find good stocks to trade and how well you manage your money. While I cannot guarantee that you will have success with this trading strategy, I will guarantee that some of these concepts will improve your success as a swing trader.

Beginners: Learn the Basics

Intermediate: Trading Strategy

Advanced: Swing Trading Tactics