Trend Line





Consolidation Breakout

Consolidation Breakdown





Cup And Handle Pattern





50 And 200 Day Moving Averages

SWING TRADING IMPORTANT KEY POINTS

Swing trading means holding a position for more than one trading session, whether long or short, but usually no more than several weeks or a few months.Swing trading in this case refers to trades that will typically last from 2 to 5 days. You should be looking to take several points of profit out of the market with each trade. Since holding overnight can be risky, you may wish to hold fewer shares. If you normally day trade 1000 shares at a time, consider trading only 200 to 500 shares on these setups.This limit your loss potential if after market news on the company causes it to gap open against you. Fewer shares also allow to use a wider stop loss (typically 1 to 1&1/4 points) so that you don't get hurt. At some point the stock may trade in your favor to a price level where you want to go ahead and take your profit.Some reasonable exit points are a price support or resistance level, the other side of the channel on a trend channel trade, or if you get daily "reversal bar" setup counter to the trade direction. Your risk/reward ratio should be good. In other words, take the best setups that have the potential to give you 10 to 18+ points. This way you are risking just a few hundred rupees/dollars for a profit of 1 to 2 thousands rupees/dollars. Following swing trading strategies could improve your chances for success.A trend channel (for an up trending stock) is constructed by drawing a trend line through or very near 2 or more swing lows on a daily bar chart. If a line parallel to the initial trend line can be drawn through at least 2 swing highs on chart then you have a trend channel (ex. below video). The tighter and more defined the channel is, the better. A stock often continues the trade within the channels if the trend lines are projected into the future on the chart.In an up trend you can buy subsequent dips down to the bottom of the trend channel also coincides with a bounce on the average and / or a bounce on price support level, and / or you get a "reversal bar" pattern setup to buy, then the odds are stacked strongly in your favor. In a downtrend channel you would sell price rallies at the upper trend line. After entry, expectations are for price to attempt to trade to the other side of the trend channel. Near this area may be a good place to take your profits.If a stock enters into a relatively tight trading range for 1-2 months, be prepared for a breakout to the upside. This is especially true if the prior trend was up, and you are in a bull market environment. The breakout day should close above the highest high of the consolidation range and trade on heavier than average volume.You should expect a several day follow through in the direction of the breakout. This trade setup is even the top side of the price range has a well defined resistance area, then the penetration to the upside will often be even more dramatic.This name was coined by the founder of investor's business daily, William O'Neil. The chart pattern resembles the profile of a cup. The cup part of the pattern can last anywhere from several weeks to several months.The stock initially puts in an intermediate term price high, then begins selling off. After a while, buying comes back into the market pushing price up to, or very near, the earlier intermediate term high. This completes the right side of the cup. At this point the stock sells off again only slightly, trading sideways to down. It then trades backup to the right edge of the cup pattern to complete the handle.Be looking for a day that breaks out of the horizontal resistance area across the top of the cup and handle. This breakout begins an often substantial move up in price. Also keep an eye on volume. The setup is stronger if volume tends to decrease when price. Also keep an eye on volume. The setup is stronger if volume tends to decrease when price is selling off and increase when price is rallying. Here is the diagram of how price might look.Many times the 50 and 200 day moving average will tend to halt price. Fund manager key off of these indicators. This is where the "big money" can come into the market and affect price. If a stock is trading above the 50 day moving average and is selling off, often it will bounce up off of the moving average line.Conversely, a stock hat has a day which strongly penetrates up or down through one of the moving averages typically follows through in that direction, at least for the short term. Knowing where the 50 and 200 day lines are for stocks that have trade setups can only help. It may be just one other confirming reason to take the trade, or it may help rule the trade out.As you near the end of a trading session you may have one or more open day trades with profit in them. Before closing them out, evaluate each of them to see if they have a strong chance of continuing their move for several more points over the course of a few days. If so, then consider selling 500 of your shares to book the bulk of the profit.Swing traders analysis the simple observation that all market activity reflects itself in the fractal properties of price and volume. These small bits of information create a profound visual representation when tied together into continuous time series: a display of current and past outcomes for all interactions of infinite market forces as seen through the eyes of all participants.Swing traders use pattern recognition to identify these profitable turning points.Price bar range (distance from the high to low) tends to narrow as market approach stability. Skilled swing trader eye search for a narrowing series of these bars in sideways congestion after a stock pullback from a strong trend.Swing traders analysis the price action trend only 15-to-20% of the time through all, equities, derivatives, and indices. This is true in all charts, 5 minutes bars through monthly displays. Markets spend the balance of time absorbing instability created by trend-induced momentum. Swing traders see this process in the wavelike motion of price bars as they oscillate between support and resistance.Swing traders also use Rate of Change (ROC) indicators to measure trending price over time. Volatility studies this same information but first removes direction from the equation. It stretches waves of price movement into straight line and then calculate the length.* Swing trading exposes a trader to the risk of overnight and weekend, where the price could gap up or gap down the following session at a drastically different rate.* Swing traders may take advantage of a risk / reward ratio based on a stop loss and profit target, or they can take profits or losses based on technical indicator or price action movements.You've seen how to recognize and anticipated high probability trading in several time frames. Putting them all together only increases the odds of successful trade. Trading with stock's trend and with the market direction only enhances your win rate.