My Trading Profile: Swing Trading

Last year, before I even started actual trading, I already started studying swing trading and my first three months perhaps is more about swing trading. As I go along the journey, I learned new techniques, tried them and failed miserably, but, I noticed that I still win in swing trading occasionally. Therefore, I am now convinced that I’m a swing trader and it would be my bread and butter setup for the years to come.

Bounce Plays and Momentum Plays

When I got exposed to the ZeeFreaks style of trading, I learned about momentum trading and bounce plays. Bounce plays are fun to be honest and I think I can do better in bounce plays than in momentum trading.

My frustration in momentum trading is that every time I entered on breakout, sell down happens either in the afternoon or the next day after, but if I don’t enter during the breakout, it will continue to go up and goes parabolic the next day. Now, if I enter when it goes parabolic, it started to pause, wildly swing low, kicking me out of the trade, then at the end of the day, closed near the previous close. A classic whipsaw.

I’ve spent a significant amount of time trying to learn the momentum trading style and I’ve sacrificed a lot actually. I also try to learn the bounce plays too but I think I focused on momentum trading for three months. For the first two months, I thought I’m doing momentum stocks, but it turned out to be bottom picks with lots of resistance.

I did the proper momentum trading (52 week high / all time high) for at least one month with very low win rate. I tried different indicators, tweaked indicators, study other momentum trader’s styles but I still can’t get it right.

Swing Play

In momentum trading, there is a style wherein you don’t buy on breakout, but instead, you buy during pause days or pullbacks. I tried pullbacks and it is quite successful and is not very stressful. Then I traded non-momentum stocks with the same win rate too. This is where I realized that I’m doing swing trading and I’m a natural swing trader.

I reverted back all my indicators to use the swing trading style but retained some indicators that I used on momentum and bounce plays. I’m all set, I know I’m a swing trader by heart and these are the reasons.

New traders usually have a full time job or business when they start like me. Time, planning and focus are very important considerations when choosing your trading style. For a full time web developer like me, I still need to do my job and I still love to write codes. Of course, I still need to grow my capital before I can switch to full time trader and to be truly profitable.

I find the right balance between trading and work when using the swing trading style. I choose stocks that are liquid, not too volatile but are promising (I don’t search their fundamentals but I do read disclosures). When it is the right time to buy, I buy, then watch it until closing. I don’t really have to watch it closely as it is not a momentum stock and I know it won’t wildly drop low that much.

My swing trades usually lasts from 3 days to 2 weeks. With this pace, I can still do a lot of things instead of constantly checking the chart or the price as I know it won’t change that much. A lot of things, like, work.

The disadvantages of swing trading are: long waiting time and small gains compared to momentum plays. The advantages, on the other hand, are: long waiting time, so I can do other things, and small losses compared to momentum plays. Yes, you can win big in momentum plays, but it can make you broke too if you are not careful.

Trading Strategy

Plan your trade, trade your plan. Yes, always need a plan. Here are my trading strategy that I tried to improve as I go along my trading journey. Yes, trading is a journey!

Build a Watch List

Every weekend, I scan stocks from the Philippine Stocks Exchange using a screener from Investagrams. My criteria for screening are:

  • Average traded value for 20 days > 5M
  • Price above 100MA
  • Price above 50MA
  • Good volatility, meaning, it should not be very slow like those blue chips

The watch list usually grows and shrinks every week depending on how the price go. The watch list ranges from 10-30 stocks.

Build a Weekly Plan

Based on my watch list, I create or update my weekly plan. The weekly plan contains my top picks based on the following criteria:

  • Pullback from the recent high
  • Approaching the immediate support level (either previous resistance or 20MA or Fibonacci level)
  • RSI >= 50

The weekly plan also includes the trade idea, price level to watch and other indicators to watch too. The number of stocks included in the weekly plan is usually below 10 stocks.

Build a Trading Plan

Based on my weekly plan, the stocks that most likely hit my buy criteria will be added into my trading plan. Below are the criteria for buying (simplified, other indicators and triggers not included):

  • Price bounced from the known support level
  • A bullish candle stick pattern appears during the bounce
  • Support holds or 20MA holds or Fibonacci level holds
  • Started going up but should not be > 5%

I also indicate my entry price, number of shares, cut loss price, break-even price and target price on the trading plan. During the trading hours, whenever a stock in the trading plan hits the buying criteria, I just execute the trade and monitor it from time to time until closing.

As long as the price didn’t hit my cut loss level or my target price, I just focus on my day job until I get notified by my alerts at Price Stalker.

I think that’s it for now. I’m still developing my strategy and hopefully I’ll improve more and more every week. My biggest improvement so far is that, I actually have a trading plan! This is exactly what the book says!

Plan your trade. Trade your plan.

Also, trade what you see, not what you foresee.

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