Overview
This seminar covers trend-following swing trading in US equities: trend vs counter-trend, moving averages, watchlists, orders, stops, pivots, routines, and risk scaling, all while avoiding style drift.
Trend Trading vs Counter-Trend
• Trend traders trade with the prevailing trend, avoiding buying dips or range trading as core methods.
• Counter-trend trades are lower probability and higher risk.
• Mixing conflicting strategies in one account causes confusion and weaker results.
• Use separate accounts for different timeframes or purposes to reduce bias (e.g., hold long-term positions separately).
Strategy Focus
• Core: trend-following swing trades with multiple timeframe alignment in US equities.
• Excludes commodities, complex options, leveraged ETFs, and other derivatives.
• Avoid style drift by sticking to proven methods.
Moving Averages & Timeframes
• Use a single 5-day moving average as the key intermediate-term trend indicator.
• Anticipate MA direction by comparing current prices to prices rolling out of the MA using a vertical line tool.
• Use intraday timeframes that divide evenly into 390 minutes (like 1,5,15,30 minutes), avoiding arbitrary periods.
• Declining 5-day MA signals seller control; rising/flattering MA plus higher highs show buyer control.
Options Usage
• Use simple long calls or puts to add leverage with defined risk.
• Avoid complex spreads; exit quickly if wrong.
Order Book (Level II)
• Generally avoid Level II data as it can be misleading and mentally taxing.
• Focus on price, volume, and moving averages instead.
Watchlist & List Management
• Maintain a manual master list (~1000 stocks), refined weekly to ~200 candidates.
• Add/remove stocks manually based on volume and news.
• Use a single list for longs and shorts to avoid bias.
• Evaluate each stock objectively on its own merits.
Order Types
• Use market orders for liquid, tight-spread stocks; use limit orders for others to control fill price.
• Leading limit orders allow some price slippage while capping maximum price.
• Check spreads and depth before entering.
Stops & Open Rules
• Do not place stops overnight; openings are noisy and can trigger stops prematurely.
• Wait at least 5 minutes after the open before setting stops.
• If a gap crosses a stop level, wait for the 5-minute bar close before acting.
• Treat stops as day-only orders and reset daily.
Intraday Pivots (R1, R2, S1, S2)
• Focus on daily R2 and S2, where ~85% of daily trading occurs.
• Use these pivots as reference points for partial exits and risk management, not as trade triggers.
Daily Routine
• Start early: check platforms and open positions, watch for gaps.
• Use headlines for context but avoid over-relying on news or opinions.
• Set multiple alerts (~30) on key levels for candidate stocks.
• Ignore early alerts for 10–15 minutes post-open; reassess and reset alerts afterward.
• Around midday, review and report; afternoon focus on managing trades and scanning for next day.
• Minimal formal journaling; recommended if valuable.
Trade Management
• Stops based on volatility and chart structure, not fixed distances.
• Enter trades at the onset of new momentum (e.g., transitioning from declining to flat/rising 5-day MA).
• Exit if price fails to confirm higher highs and lows.
Risk Units & Scaling
• Use fixed dollar risk units ($10, $50 etc.); scale up gradually as confidence grows.
• Adjust risk based on trade quality (A, B, C setups).
• Psychological barriers to scaling risk common; coaching can help.
Trading Psychology
• “Hard to buy” often signals strength; “hard to sell” often signals further weakness.
• Missing trades is acceptable if decisions align with rules; avoid chasing late moves.
• Stick to clear entry, sizing, and stop rules.
Sector Analysis
• Bottom-up approach: start with individual stocks, then assess sector strength.
• Leaders tend to move before sector ETFs.
• Avoid waiting for sector breakouts that occur after components are already extended.
Key Concepts
• Trend trading aligns with dominant trend; counter-trend trades run against it and carry higher risk.
• Multiple timeframe alignment confirms trend.
• 5-day MA defines intermediate trend.
• Use pivots for exits and risk control.
• Avoid style drift and rely on tested methods.
• Shakeouts flush weak holders before reversals.
• Bottom-up analysis beats top-down ETF timing.
Practical Tips
• Keep tools simple, prioritize price and 5-day MA.
• Choose order type based on liquidity and spreads.
• Avoid overnight stops; set stops after 5-minute open.
• Maintain manual watchlist without scans.
• Use pivots and intraday signals for exits.
• Scale risk methodically.
• Seek coaching if needed for psychological obstacles.
