Swing Trading Strategy Lecture Notes

Overview

• Swing trading can be highly effective; one successful trade can make a significant impact.
• The lecturer is primarily a day trader but has shifted some focus to swing trading due to its less volatile nature.
• Swing trading strategies are suitable for beginners or part-time traders with limited time.

Event-Driven Swing Trading Strategy

• Purpose & Criteria: Focuses on event-driven scenarios, such as earnings announcements or market-moving news.
• Stock Selection:
  • Use high-volume gainers as selection criteria.
  • Monitor large-cap stocks with market caps over $800 million.
  • Avoid small-cap stocks.
  • Use a proprietary scanner (Stocks.io) to identify potential stocks.

Scanning Process

• Look for stocks:
  • Trading above $1 per share.
  • With a dollar volume of at least $1 million pre-market.
  • Gapping up more than 3%.

Example Case: Nvidia

• Nvidia’s Q1 earnings report acted as a catalyst.
• Stock gapped up significantly post-earnings due to positive growth expectations and a stock split announcement.
• Ideal for event-driven swing trading due to its strong bullish sentiment and technical setup.

Types of Catalysts for Swing Trading

1. Earnings Beat & Growth Expectations: Nvidia example.
2. Sector Hype: Including meme stocks or crypto.
3. IPO Hype: Example - Reddit stock DXYZ.

Technical Analysis & Chart Patterns

• Look for stocks in a consistent uptrend; avoid those in a downtrend.
• Use indicators like 200 SMA and 8 EMA to assess stock momentum.
• Favor stocks trading above these indicators.
• Analyze daily charts to confirm bullish patterns.

Entry & Exit Strategy

• Entry: Enter once the stock surpasses pre-market highs.
• Exit & Risk Management:
  • Aim for substantial moves; risk is greater in swing trades than day trades.
  • Exit positions to secure multi-day gains.
  • Avoid cutting profits short; allow winners to run using higher timeframe charts.

Risk Management

• Use pre-market lows as a stop-loss indicator.
• Calculate risk-per-share to determine appropriate position size.
• Keep risk consistent across trades using a risk management calculator.

Additional Advice

• Separate accounts for day trading and swing trading to avoid mixing strategies.
• Regularly review and refine strategies based on experience and market changes.
• Understand that no strategy guarantees success.

Conclusion

• Swing trading can be a powerful tool for those seeking less frequent but high-impact trades.
• Detailed planning and execution are crucial for success in swing trading.
• Encouragement to learn more through courses and trading content.