Swing Trading Lecture Notes

Introduction

• Swing Trading: The intermediate strategy between position and scalp trading.
• Duration: Trades last from 4 hours to a few days.
• Goal: Avoid rapid, frequent trading like scalping or long-term holding like position trading.

Active Account and Scaling

• Active Account: Must include swing trades in allocation.
  • E.g., $500 active account out of a total $10,000 account.
• Allocation Example:
  • $500 active trading fund.
  • Swing trades: Allocate $100 for swing trades out of $200 set for scalp trades.

Managing Trades and Stop-Loss

• Initial Technical Analysis: Identify hold levels and trend ranges.
• Trade Management: Employ stop losses to manage risk and secure profits.
• Proportional Risk: Lower risk for swing trades compared to scalping.

Types of Swing Trades

Knife-Catching

• Method: Buy during a sharp decline anticipating a reversal.
• Two Development Approaches:
  1. Quick Exit: Take profits upon small reversal (e.g., 20% of decline).
  2. Hold & Adjust: Raise stop-loss progressively; not recommended for novices.

Inverse Level Trading

• Step-by-Step Process:
  1. Entry (Knife Catch): Buy at initial drop.
  2. Exit & Re-Short: Sell at inverse level, potentially re-enter a short position.
  3. Confirmation: Hold above inverse indicates potential trend reversal.
• Trade Strategy Breakdown:
  • Execute scalps and swing trades based on inverse levels and confirmations.

Ladder Analysis for Swing Trades

• Identifying Ladder Patterns: Recognize levels where the price stabilizes and ascends.
• Swing Trade Execution: Buy at the ladder support; sell at the next significant level.

Example Scenarios and Ratios

• Example: Enter on stabilization, exit on achieving 5-10% profit range.
  • Profit Margin: Aim for steady account growth via these smaller but frequent trades.

Advantages of Swing Trading

• Risk Management: Lower inherent risk compared to everyday scalping; reduces account volatility.
• Profitability: Substantial gains possible without constant monitoring.
• Flexibility: Allow concurrent position and scalp trading without conflict.

Practical Tips

• Level Identification: Constantly mark significant levels for potential entry/exit points.
• Portfolio Repertoire Building: Combine multiple trading strategies (position, swing, scalp) for a diversified approach.
• Tools and Techniques: Utilize stop-losses, recognize ladder formations, inverse levels for maximizing trade success.

Conclusion

• Swing trading offers an effective balance between aggressive scalping and conservative long-term trades.
• It requires careful planning and strategic execution to capitalize on market fluctuations while managing risk.