Newsletter: Swing Trading 4 Income

Swing Trading 4 Income

August 2024

5 min read

Basic Swing Trading

Income in 4-Steps

In 2020, an astounding 30 million hungry newbies opened new accounts to trade in the market. “Everybody’s” making a killing in equities. They would too - easy. Except that at least 30% didn’t trade with a METHOD. Those who jumped in and traded without a method didn’t survive. 9 out of 10 lost 90% of their small accounts within 90 days. And many of those still seek a method, someone to teach them. Young traders are determined to find someone to teach them - a mentor.

Likewise, would-be traders post how-to questions and scour Google and Quora everyday for how-to trade answers.

So, consider yourself lucky. You’re about to learn. Whooph is a 23-year swing trader who trades everyday, and produces consistent results. There’s always more to learn, and he’s always learning.

The simple method below is just one way to put yourself in the right direction for income. It’s basic. In Whooph’s Trading Methods we’ll delve many exciting market tells, tools, and signals.

Study of Cause and Effect

The goal here is to simply show you an example of a Trade Method.

Below is a 4-Step Process a trader may use to time an entry in a swing trade. The process involves a study of effects of ALL causes on your market.

Note: You may not understand the terms and process detailed below. That’s okay. The point is that you see an example of a valid trading METHOD designed to put you in the right direction in a swing trade.

This is not a Jump-all-in-Gamble! Whooph does not condone gambling with sloppy entries into The Market. Every Whooph trade studied. Entry is timed and risk is defined and controlled via a METHOD.

Before a pro enters a trade he or she stacks the odds! Every question and every STEP below is your WORK in the process we call “the swing trade”.

If you learn and do this WORK, you’ll take money from the market’s Big Boys. But every trader gets cocky, then humbled. You get greedy, lazy, or deviate from your method, considering yourself smarter than everybody else, you’ll have your ass handed to you.

Waves

Markets move in logical sequenced waves characterized by swing highs (excess supply) and swing lows (excess demand). We’ll help you understand these waves and the reasons for their patterns as proven for Wall Street by technicians like Ralph Nelson Elliott and George Lane, investor of Stochastic.

There are many fundamental causes for market movements. More importantly a technician studies the effects of all known and digested causes. A trader doesn’t need to know and understand all causes. He needs to be able to see and read their effects. This text is geared to help you acquire that expertise and a method.

Indicators

Price action is also accompanied by technical Indicators; consider them the temperature, blood pressure and, pulse of the market or fund or equity.

Below is just one rendition of an analysis you’ll learn to do before placing your hard-earned dollars in a BUY order.

1 - Review the Daily and Hourly charts for these checks.

Consider this a pre-flight checklist:

• Check the trend. Are you in an Uptrend or Downtrend ?

• Where are you in the Elliott’s Wave sequence (1,2,3,4,5) ?

• Are you above the Moving Average (MA) ?

• Check the Stochastic Operating Area©️2007. Is Stochastic operating in the Upper 3/4 (25–100) – which suggests a healthy uptrend ?

• If price is above or left of the MA, do you see any Short-term pull-back to the MA ? Has Stochastic pulled back to 50 or 25 ?

• If a pull-back, do you see any Reverse Divergence - bullish?

• Are you in Elliott Wave 5 ?
  

* Wave 5 precedes and foretells a pull-back or trend reversal, I’m typically looking to exit my long position. Or I may buy an ETF inverse of the long play. If the stock has been in an upward trend and now sits at Wave 5, in Disagreement or Divergence (Trade Secret), this might suggest a price reversal is imminent.

Trade Secret: IF the most recent Indicator consecutive highs trend down while Price highs trend or slope happily higher, I will avoid; this is one rendition of technical disagreement indicative of possible reversal or end of the current uptrend.

2 - Measure your gain. Calculate your risk/reward.

• Estimate the short-term gain prospects with respect to the stock’s range over the last week to ten days.

• Conventional Practice: Risk of losing $50 for the chance to gain $100 might be appealing. This gives risk-rewardratio = 50/100 or 2:1 ratio.

• Measure how far to the 7–10 day high or to a price gap near the high. Calculate the $ gain or profit. If the trade goes against you to the nearby low or support (your stop loss), there’s a risk of loss. Calculate that $ loss. Now calculate your risk-reward: $gain / $loss. Is it at least 2:1 ?

• A risk-reward of 2:1 is desirable.

  
  

3 - Consider placing 1/2 position.

• Whether you are trend-following and buying the pull-back to the MA, or gauging technical weakness in a swing trade, always consider likelihood that you’re timing is too early.

• Fading in with a half-position is generally good risk control and good cash management. It allows for averaging down once if the pull-back continues against the trade.

Tip: In accordance with Elliott Wave Theory, a price pull-back consists of a First Leg, a Pause, and a Second Leg or a down spike against your position. It’s best to wait for that Second Leg. An ole Whooph saying: Stocks never turn nicely.

Tip: Identify a logical low (at a price gap or support) and consider placing an order for the second 1/2 of your position there.

4 - Place an automatic SELL order at the nearest high.

• In the event price spikes or gaps up in the premarket, which can be fairly often, you can lock in your gain and get out! Meeting your daily objective early if possible. Bird in the hand...
  

Thank you for your interest. Look out for Whooph's next Trading Methods Newsletter with more tips and teaching !

Refer to Whooph’s Trading Methods handbook for more help on terms and concepts like Divergence or Elliott Wave.

Pay What You Want to buy Whooph's Trading Methods Handbook.

CAVEAT/DISCLAIMER: This guide is for general educational purposes only. None of the technical analysis, positioning, or trade decision strategies provided in this guide should be considered investment advice appropriate for your specific situation, risk tolerance, or objectives. If you are seeking specific investment advice, you should consult a licensed professional.

A Trade Method is your creation. Its rules and process is derived or designed by you and for you the trader. Perhaps inspired by Whooph, but as the old adage goes, “Your trade is Your trade.” Do your own due diligence.

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