Understanding profitable strategies is crucial for success in swing trading. Whether you’re a beginner exploring swing trading or an experienced trader refining your approach, mastering the art of market planning is essential. Today, a professional swing trader shares his exact strategy for the week, offering two distinct approaches: a long-side consolidation breakout and short trades focused on small-cap stocks.
An Edge: Long and Short Play
The trader explains how his edge initially stemmed from shorting small-cap stocks but later evolved to include both long and short positions across large-cap and small-cap stocks. This progression highlights the importance of mastering one setup before gradually expanding to build a more sustainable and versatile trading strategy. The key takeaway: start simple, perfect your approach, and then scale up.
1. Consolidation Breakout: Long Play with NVDA
One of the key strategies discussed today is the consolidation breakout, best illustrated by the NVIDIA (NVDA) chart. The trader highlights how NVDA displayed relative strength in the market during the year’s first week, making it a significant opportunity if the broader market gains momentum. Here’s what to expect with NVDA:
Entry: Long position near $500 if the stock confirms a breakout over this critical level.
Stop-Loss: Put at the low of the previous day to protect against a false breakout.
Target: The first target will be a 1 ATR move, approximately $510 to $512, for a partial exit. After this, the trader will trail the remaining position for a maximum of three days, using hourly higher lows to adjust the stop.
This strategy is built around tight risk/reward parameters, aiming for a multi-day momentum move following a confirmed breakout. It integrates technical analysis with critical psychological levels to define precise entry and exit points.
2. Short Plays on Small Caps: AIMD and BNZI
The second part of the strategy focuses on short plays in small-cap stocks, including AIMD and BNZI. Both stocks experienced abnormal volume recently, which tapered off by Friday, potentially signaling resistance at these levels. Below are the breakdowns and short setups for each:
AIMD:Â The trader is targeting a push toward the $3.50 level, anticipating a potential failure at that point. This approach involves shorting the stock upon a clear reversal, supported by confirmation from intraday price action, with the expectation of a probable decline to lower levels.
BNZI:Â Like AIMD, BNZI shows significant overhead resistance. The trader is watching for a push toward the $2.83 level, aligning with the two-day VWAP. Once this level is tested, a failure is anticipated, prompting the trader to take a short position.
In both cases, the trader waits for confirmation before taking action. When shorting small-cap stocks, he remains cautious of volatility and potential squeezes. If these stocks recover to their VWAP, the trader will avoid the short and pass on the trade, demonstrating excellent discipline.
Risk Management: A Significant Factor
Risk management is crucial in each of the trader’s strategies. By employing clear and well-defined risk/reward setups, he minimizes losses while maximizing potential gains. This approach leads to low emotional trading and helps maintain a disciplined mindset.
On a long position, he makes use of a clear stop-loss against the breakout and lock gains incrementally by a move of 1 ATR.
For short positions, the trader monitors supply zones and volume spikes. If the stock demonstrates unexpected strength, he exits the trade to avoid unnecessary losses.
Psychology and Execution
The trader emphasizes the psychological aspect of trading when implementing these strategies. It’s easy to become attached to a position when the market doesn’t behave as expected. However, successful traders understand that planning the trade and sticking to the plan are key. If the trade fails to confirm the setup, it’s crucial to move on to the next opportunity.
Keeping a Trading Career
The trader concludes by emphasizing that a long-term trading career is more valuable than relying on a single successful strategy. By refining setups, understanding market psychology, and maintaining flexibility, traders can develop a consistent and profitable swing trading approach.
Join a Trading Firm for Further Growth
For those looking to elevate their trading, he also highlights an excellent opportunity with S&B Capital, one of the top proprietary trading firms. This provides traders the chance to learn, grow, and trade using the firm’s capital. It offers high profit potential without risking any personal funds. A great firm invests in training and developing its traders, making it an ideal opportunity for aspiring traders.
Conclusion
Swing trading can be highly profitable when approached with discipline and strategic thinking. Mastering consolidation breakouts and the intricacies of shorting small-cap stocks can lead to significant market opportunities. Whether you’re a beginner or an experienced trader, the right strategies and a refined edge will pave the way for success in the market.
