Here's an educational example for those who are trying to swing
trade and struggling with some things like entries but also mainly
stops.
When you enter a position, your initial stop has to be wide
enough to account for noise. You can't have it too tight where you
simple get stopped out on noise basically. For horizontal
resistance plays I find those myself harder to swing trade based on
the daily chart because my stop has to be pretty wide, wider than I
like based on my psychology. One thing that helps is make
sure your position size is not too large so you can sit through the
noise. Anyway another idea is to focus more on patterns where
your initial stop can be tighter such as bull flags, falling wedge
patterns, basing patterns, and coils. On those type of
patterns your stop can be much tighter typically than on a
horizontal breakout play. ALSO make sure to view a 60 min
chart along with the daily because as I show, many times you can
get an earlier trigger point and thus a tighter stop.
So here's a real example using one of the recent trade ideas
ETSY, which has a textbook symmetry triangle pattern. Even if you
only used the daily chart and you bought on the trendline break
your stop needed to be at that 76.6 higher low, so let's say you
entered at roughly 85 on the daily chart, well your initial stop
needed to be that 76.6 based on the daily.
Next let's look at a 60 min chart, notice you see a fractal
pattern here another triangle pattern. This gave you a tighter
entry at roughly $80, or $5 points better! But again your initial
stop needed to be placed at that higher low of $76.2. Now
once the stock broke out you could have trailed your stop up to
each new higher low - you could have now raised your stop FIVE
TIMES!!!
Again not all trades will be this easy but this is a great
example and something that you guys who work can do!
thanks Matt. This is an interesting example.
Assuming that i am setting up trades the night before, and
therefore ignoring all indicators except price, I would be looking
at an almost 10% max loss between entry and the first stop.
Assuming that my rate of winning trades is 60/40 I would have
to make a minimum of 6.5% on a successful breakout just to break
even over time. This serves to tell me that this ain’t easy!
Also Steve - I showed the 60 min because it allowed one to have
a $5 earlier entry price and have the same stop. $80 vs $85.
The initial stop for a swing still needed to be set at around
76.6 the higher low.
again if you work a job and stuff, don't bother with 5 min and
15 min charts, but when looking at daily setups and the ones that
look the best to you, also use a 60 min chart to have a look to see
if you can enter that setup earlier or have a tighter stop - daily
and 60 min charts go together well and are good time frame for
swing trades. Stay way from 5 min and 15 min charts as those
will be too fast for you
I've found after talking to a bunch of folks that they are doing
a combination of things that work against them when they are trying
to swing trade:
1. They are setting stops too tight and getting stopped out on
noise and getting frustrated by that, only to see the setups then
play out just fine. swing trades need to be giving enough
room to account for noise
2. their position size is too large and thus they cannot sit
through the noise the day to day movement needed to give the
position room - thus they need to reduce position size so that they
are not getting emotional and setting stops too tight based on
their emotion.
3. Best to avoid horizontal breakouts for swings, maybe unless
it has a nice long base and a good place for a tight stop.
Flags, wedges, bases, coils are allow for tighter initial
stops.
4. some attention needs to be paid to the market at times - for
example if the market has been up 5 days in a row, best maybe not
to enter a bunch of new swing longs.
5. use 60 min charts for better entries and to help filter out
setups.
again look at the vast majority of our long ideas over months,
the vast majority give trades lasting days and weeks. Most
are not simple one day moves.
Posted by bulf6285 on 24th of Jun 2020 at 10:38 am
This is very helpful, thank you. I find my biggest problem on
swing trades isn't getting stopped out for a loss... but rather I
don't hold the winner long enough. Do you have any guidance for
staying in the trade?
guys - especially those of you who work - read my sticky post
example on a swing trade setup and discussion. I'll add this
to education section and add to newsletter but also make sure to
read over it when you have time, I'll leave it up here on Sticky
for a while
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
Educational Example for workers, swing traders
Posted by matt on 24th of Jun 2020 at 10:16 am
Here's an educational example for those who are trying to swing trade and struggling with some things like entries but also mainly stops.
When you enter a position, your initial stop has to be wide enough to account for noise. You can't have it too tight where you simple get stopped out on noise basically. For horizontal resistance plays I find those myself harder to swing trade based on the daily chart because my stop has to be pretty wide, wider than I like based on my psychology. One thing that helps is make sure your position size is not too large so you can sit through the noise. Anyway another idea is to focus more on patterns where your initial stop can be tighter such as bull flags, falling wedge patterns, basing patterns, and coils. On those type of patterns your stop can be much tighter typically than on a horizontal breakout play. ALSO make sure to view a 60 min chart along with the daily because as I show, many times you can get an earlier trigger point and thus a tighter stop.
So here's a real example using one of the recent trade ideas ETSY, which has a textbook symmetry triangle pattern. Even if you only used the daily chart and you bought on the trendline break your stop needed to be at that 76.6 higher low, so let's say you entered at roughly 85 on the daily chart, well your initial stop needed to be that 76.6 based on the daily.
Next let's look at a 60 min chart, notice you see a fractal pattern here another triangle pattern. This gave you a tighter entry at roughly $80, or $5 points better! But again your initial stop needed to be placed at that higher low of $76.2. Now once the stock broke out you could have trailed your stop up to each new higher low - you could have now raised your stop FIVE TIMES!!!
Again not all trades will be this easy but this is a great example and something that you guys who work can do!
Really great info Matt. It
Posted by rfmathis on 25th of Jun 2020 at 03:55 pm
Really great info Matt. It helped me define the chart timeframes I should be looking at for swings, AND the patterns to play. Thanks!
thanks Matt. This is an
Posted by z0ned on 24th of Jun 2020 at 11:06 am
thanks Matt. This is an interesting example. Assuming that i am setting up trades the night before, and therefore ignoring all indicators except price, I would be looking at an almost 10% max loss between entry and the first stop. Assuming that my rate of winning trades is 60/40 I would have to make a minimum of 6.5% on a successful breakout just to break even over time. This serves to tell me that this ain’t easy!
Excellent example - notice the
Posted by steve on 24th of Jun 2020 at 10:26 am
Excellent example - notice the base ETSY formed prior to launch (30 days of coiling action). From contraction comes expansion
Also Steve - I showed
Posted by matt on 24th of Jun 2020 at 10:29 am
Also Steve - I showed the 60 min because it allowed one to have a $5 earlier entry price and have the same stop. $80 vs $85. The initial stop for a swing still needed to be set at around 76.6 the higher low.
again if you work a job and stuff, don't bother with 5 min and 15 min charts, but when looking at daily setups and the ones that look the best to you, also use a 60 min chart to have a look to see if you can enter that setup earlier or have a tighter stop - daily and 60 min charts go together well and are good time frame for swing trades. Stay way from 5 min and 15 min charts as those will be too fast for you
I've found after talking to
Posted by matt on 24th of Jun 2020 at 10:35 am
I've found after talking to a bunch of folks that they are doing a combination of things that work against them when they are trying to swing trade:
1. They are setting stops too tight and getting stopped out on noise and getting frustrated by that, only to see the setups then play out just fine. swing trades need to be giving enough room to account for noise
2. their position size is too large and thus they cannot sit through the noise the day to day movement needed to give the position room - thus they need to reduce position size so that they are not getting emotional and setting stops too tight based on their emotion.
3. Best to avoid horizontal breakouts for swings, maybe unless it has a nice long base and a good place for a tight stop. Flags, wedges, bases, coils are allow for tighter initial stops.
4. some attention needs to be paid to the market at times - for example if the market has been up 5 days in a row, best maybe not to enter a bunch of new swing longs.
5. use 60 min charts for better entries and to help filter out setups.
again look at the vast majority of our long ideas over months, the vast majority give trades lasting days and weeks. Most are not simple one day moves.
Thanks Matt
Posted by retirefire on 24th of Jun 2020 at 10:44 am
Thanks Matt
This is very helpful, thank
Posted by bulf6285 on 24th of Jun 2020 at 10:38 am
This is very helpful, thank you. I find my biggest problem on swing trades isn't getting stopped out for a loss... but rather I don't hold the winner long enough. Do you have any guidance for staying in the trade?
guys - especially those of
Posted by matt on 24th of Jun 2020 at 10:20 am
guys - especially those of you who work - read my sticky post example on a swing trade setup and discussion. I'll add this to education section and add to newsletter but also make sure to read over it when you have time, I'll leave it up here on Sticky for a while