Now lets put everything together into a swing trading strategy. This trading plan is for discretionary traders. Your success will depend on how well you use your discretion!
After you understand the concepts, then modify this trading strategy into a strategy of your own.
Feel free to change things around a little. Maybe you want to add some other kind of technical indicator. Or, maybe you would like to incorporate some fundamentals into the mix. Whatever you decide, make it your own.
You will be far more successful with a trading strategy that YOU design, rather than just blindly following someone else's plan! Ok, lets get started with our trading strategy. We will begin by preparing for the week ahead.
Preparing for the trading week
On Sunday mornings, I get up early, grab a cup of coffee and head to the computer to get ready for the trading week ahead. I am wanting to know what types of trades I will be focusing on for the upcoming week (long or short). This part is easy. Using our market timing strategy, we look at the moving averages to determine if we will be biased to the long or short side of the market.
Remember that staying in cash (having no positions) and out of the market is a strategy. You do not have to trade!
Once we find out what type of trading we will be doing, it's a good idea to get a feel for what will likely affect the market for the week ahead. These are some of the things I look at:
Economic Calendar
Industry Groups
Charts
I look at the economic calendar to see what types of reports are coming out that could influence the market. I also look at charts for all the major industry groups to see which ones are strong, which are weak, and which ones have potential to make major moves.
Have a notebook handy next to your computer to jot down ideas about the upcoming week. When you are trading you will forget about your weekend research! Having you notes next to you will come in handy.
Scanning for stocks
Now we will run our scans to find some potential trades. Remember that we are looking for stocks that have pulled back into the Traders Action Zone. Here is an example:
- are in Stage 2 or Stage 4
- are in strong trends
- have relative strength or weakness
- are at a support or resistance level
Sift through your scan results and find the ones that show these specific characteristics. Add these to your watch list.