My swing trade system below is very simple however has been generating me consistent returns for some time. The key as with all systems is protect your capital, implement your stops...the rest is simple TA. Core trading Principles: 1) Do not let emotions fluctuate with the up and down of your capital. 2) Be consistent and even tempered. 3) Judge yourself not by the outcome, but by your process. 4) Know what you are going to do, when the market does what it is going to do. 5) Every now and then the impossible can and will happen. 6) Know each day what your plan and your contingencies are for the next day. 7) What can I win and what can I lose? What are the probabilities of either happening? "Every morning in Africa a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must run faster than the slowest gazelle or it will starve to death. It doesn't matter whether you are a lion or a gazelle. When the sun comes up, you better start running." Part A: Swing System: Notes: 1) The safer trade is with the trend. 2) Live by the 2% rule. 3) Never cancel a pre determined stop - ever. 4) Buy or sell on a pullback, in the direction of the larger trend. 5) Buy or sell near clearly defined support or resistance giving a clear entry point and a clear stop loss point. Always wait for a reversal day - let the market show you where it wants to go. 6) Where possible align your weekly and daily entry signals 7) Don't try and predict when a trend will end in order to take profits, rather move your stop up continuously and get stopped out of a trade than prematurely end a trade to take profits. 8) Focus on 5 shares/indices at a time - no more. 9) Follow the 6% rule when entering new trades. 10) Losing money is ok if you have followed the above rules. 11) Ignore all outside noise - it is irrelevant. 12) Never attempt to call a bottom or a top 13) Always trade the price - it is the only truth. Entry Trigger: 1) Reversal day off support or resistance.(Aggressive) Break of short term trend line - less aggressive. 2) Break of key support or resistance.(Continuation of existing trend - support now becomes resistance and resistance now becomes support for purposes of exit strategy.) 3) Reversal day at end of trend. (Confirmation of end of current trend and start of new short term market direction) 4) Fail point break on RSI Entry Confirmation (Indicators): A) Indicator support 1) RSI: Extreme Oversold or Overbought position. Convergence / Divergence with price Break of resistance Break of fail point in extended OB/OS situation. 2) Stochastic: Extreme Oversold or Overbought position. Convergence / Divergence with price Break of resistance 3) Momentum: Extreme Oversold or Overbought position. Convergence / Divergence with price 4) MACD: Extreme Oversold or Overbought position. Convergence / Divergence with price MACD crosses the signal line B: Price Confirmation: 1) If long needs to be green at 4.30pm following day. (And vice versa) 2) If red wait to see green confirmation following day at 4.30pm. 3) If price closes above (below) reversal day, trigger cancelled. 4) NB: If the price trigger (Eg: Dark cloud cover at top of rally) is strong enough at 4.30pm there is no need to wait for 2nd day confirmation as long as confirmation from indicators and market sentiment are aligned with your trade. This will give you a closer stop and limited risk. Exit Strategy: 1) Fail safe stop - the greater of 15% or 2 X ATR loaded in system at execution of trade. (trailing stop) 2) Trading stop: (Fixed Stop) a. Close above/below key support or resistance line or reversal day high/low. b. Close below/above previous significant high or low indicating the trend is reversing - take profits. 3) Trading stop needs to be calculated before execution of the trade. Once finalised this stop is non negotiable and must be implemented regardless of any other factors. 4) Trading stop is an end of day price, not an intra day price. Trading stop to follow price up, locking in profit at all trend pull back support/resistance levels. 5) Fail Safe stop can trigger on an intra day price. Discipline: 1) Do the right thing. 2) At the right time 3) For the right reasons 4) Discipline of the mind 5) Consistency of action
