The SPY and QQQ indexes drive the market and a trader should always be fully aware of their short term trend on the 15 minute charts, and their longer term trend on the Daily Chart.  Its best to swing trade with the current trend of the market and major indexes when aiming for a larger 3 to 1 risk/reward ratio.

The Swing Trading strategy is based off trading stocks or ETF's trending and pulling back to a prior Buy/Sell Zone with ema support on the daily chart. The gradual pullback proceeds to form a daily candle wick off this buy zone. Entry price will be between the top of the wick and the mid-point of the wick with stop placed below the low of the entering candle. The preferred entry method is at the End of The Day before the markets close to catch the overnight price movement. Traders unable to make trades at the End of the Day can place trades the next day if the opportunity presents itself.

Finding swing trading candidates starts with scanning daily charts. Similar to scanning for day trading ideas I only scan for stock's trending in one direction and use the 9, 20, 50ema's as my gauge. I want these moving averages trending in the same direction. I trade highly liquid Blue Chip stocks and ETF's that trade on average two million shares a day and can be traded with options. Before entering a trade I first identify the stop point followed by identifying an exit point. The stop point is always located below the low of entering daily candle.

Traders can manage risk/reward one of two ways:

  1. A set 3 to 1 risk reward ratio, which works best when the overall markets are in a strong trend. No management of the trade outside of setting the stop and exit point.
  2. A conservative 1R exit goal and a trail the stop using the low of the day (for longs) as the new stop point. A 1-1 to 1-1.25 risk/reward ratio with a daily trail stop keeps winners larger then the losses with the boost of the trend and momentum of the stock behind the trade. A 1-1 to 1.25 R/R allows more trades as you are in and out of positions in only a few days. This is the method I track and trade with the EOD/Swing Trade Ideas that is emailed out daily 15 minutes before the markets close. Each day in the daily email will state where the new trail stop is to be placed. The only trade management is adjusting the trailing stop price before the opening bell. An example of a 1R trade is if entering stock XYZ at 90.50 with a .75 stop (89.75) - the exit will be a set .75 away from the entry at 91.25. I will shoot for a slightly larger 1.25 reward on small candles or entering in the mid candle range.

On occasion I will only fade a large index ETF (spy, dia, qqq, iwm) against the trend for a quick 1-1 ratio trade when the index is well extended on the daily chart and confirmed intra-day for a possible short term reversal. I will not fade stocks against the trend.

The number one priority is always to manage risk. Never risk anymore then 1% of your trading account on one trade and never hold an over night position that exceeds the total value of 20% of your account. Practice trading on a simulator to gain experience, success and confidence before going live.

Forming Daily Chart BUY and SELL Zones: A simple way to form Buy and Sell Zones on the Daily Charts is to find strong candle wicks, (Other names: Pin Bars, Shooting Stars or Hammers), wicks larger then the candles body, that start a move that developed into a trend. These wicks represent zones of price rejection where demand exceeds supply and can be targeted for swing trades on pullbacks. Once price trades or gap's through these zones, breaking the trend, this zone now can be considered as reverse zone. (reverse zone: if the zone was a BUY zone and now a large gap down through/or over the zone occurs, breaking the trend, this zone is now a sell zone and can be considered for a possible short area.)

Sample of Bullish and Bearish Daily Candle Wicks/Pins Bars that form basic Buy and Sell Zones.

I look for two types of Swing Trading Daily Chart patterns with entry of the trade recommend at the End Of the Day, before the markets close, as this is when the pattern is most fresh. Traders who don't have access to trading before the end of the day can look to enter the next trading day if the setup presents itself:

1. Pullback to a Buy/Sell Zone:  After trending in a strong direction the stock pulls back on the Daily Chart into a rising moving average and prior Buy/Sell zone and forms a daily bar off this zone with a wick showing rejection of the zone. Entry is anywhere between the top of the wick and mid wick.

2. Consolidation after a Gap or WRB trades through a buy/sell zone: The Stock has gaped up far from the moving averages, well above the 9ema. I now need the daily chart to trade sideways/consolidate and wait for the 9ema to catch up. Once I see daily candles rejecting the bottom of this consolidation (daily wicks) with moving average support will look to enter in a wick with the stop below the consolidation.

Click here for Examples of Buy & Sell Swing Trades Examples:

Swing Trading Strategy

 Knowledge & Discipline is Power