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My swing trading Process Flow

Posted on 7/30/2014

I look for two kinds of opportunities every day , a big game changing catalyst trade that can add 25 to 50% to account (Episodic Pivots) and small swing trades that can add .25 to 2% to account.

Obviously the big trades do not happen daily so much of the daily focus is on finding swing trades of 8 to 20% profit potential. It is a very simple task now that I have been doing this successfully for 14 years. 

I just run a simple process loop daily and focus on it shutting out all other noise. I do not need others opinion or picks during trading day. It is just a bunch of simple tasks done efficiently. The outcome is profitable year. 

Basic Structural phenomenon

All my swing trading scans and efforts are based on a simple market observation, stocks when they move , move in momentum bursts of 3 to 5 days and 8 to 40% magnitude. This is inherent tendency of the market. 

Scans I run

To find stock likely to make these 3 to 5 days move I run a  bunch of scan throughout the day. 
  • 4% Breakout scan looks for stocks up 4% plus on 100000 volume
  • Dollar Breakout scan looks for stocks up 1$ plus on 100000 volume ( good at finding b/o on high priced stocks above 40)
  • Range Expansion scan for stocks whose range today is bigger than the range in last 3 days and that was not up more than 2% as of a day before
Same scans have bearish version to look for short candidates. 
The scans run on their own throughout the day and I use bunch of sorts using Trend Intensity to narrow down focus to few good candidates. 

If I find a stock that meets my setup definition I buy.

What do I look for in good setup

You can read my post which gives details of what I look for in a good setup for swing trading.

Basic things I look for is :

First leg should be linear

Stock should not be up 3 days in a row (small range days up 3 days is ok)

Orderly pullback or consolidation

Should close near high

Volume high

No 4% b/d in last 3 to 5 days

If good candidate shows up I calculate position size using risk calculator and buy.

Where do I put stop

If I enter a breakout I put my stop at low of the entry day. 

How much do I risk

.25% to 2% per trade. 

How Do I exit

Either it hits the stop in that case it is failed trade.

Exit after 3 to 5 days

Exit if position gives abnormal profit in one day of 10% plus. (at least part exit and move stop to protect rest.

Now this is a simple process I run day in and day out . Small gains like these add up due to compounding and in few years you can run up your account up significantly. 100k has compounded to 789k using this kind of method if you take every trade I take in last 5 years. 

The process has evolved over last 14 years and every year it becomes simpler to do . 

this is just one of the ways to do it. Various traders use various other setups like these to do this day in and day out.

For beginner trader it is difficult at first to do this with same speed and efficiency. It also depends on when you start trading methods like these. If you start trading them in right market conditions you find trades after trades working , in range bound environment you find smaller moves. Near reversal zones you can have trade failures. So overall market filter is used to calibrate trading using this process.

This is a simple process template. If you are new to trading you need to develop your own process flow. Once you do that you can fine tune it over number of trades. 


Drew Robbins said...

Great site! Quick question: do you ever use trailing stops? Like if the price increases, manually move the stop to the current day low or prior day (whichever is lower)?

Pradeep Bonde said...

Yes I do. I move my stops as position becomes profitable. Sometime I will move stop multiple times in a day to protect profit.

Unknown said...

Since your hold time is only 3-5 days, do you move your stop up before the profit hits a multiple of your risk. If you get to day 4-5 are you closing out the trade even if it has not hit your goal with a small profit less than your goal?


Nature's Canvas said...

Guru, what is overall market filter and how do you use it to take setups?

Pradeep Bonde said...

See MM tab at top

Admin said...

Hi Pradeep, I would like to ask you please if the MM burst setup has replaced your Anticipation setup?

I am studying your older videos about antipication setups and understand that they are similar to MM bursts except MM bursts have already shown strength by breaking out prior to entry.

What I liked about your anticipation setup process was that you could enter ahead of time e.g. minutes before market close with a stop order + stop loss. It sounded like an ideal fit for someone like me who is working full time who could check in once a day to manage a position.

Thank you!

Pradeep Bonde said...

I do both momentum burst as well as anticipation. This is old post does not accurately reflect my current way of trading