Transcription
When I first started trading, I tried to find every single shiny new object in the market to be able to make money. I would hop from strategy to strategy, from indicator to indicator, trying to find that thing that would actually finally make me profitable. But, what I didn't realize in all that is I was literally giving myself analysis paralysis.
I was putting on so many different things on my charts, looking for so many different indicators, that it just over complicated my trading. And when I studied the best traders in the world, I noticed the one thing all of them had in common. They don't trade any fancy strategy with the moon cycles, they don't trade any Elliott waves, they don't trade anything too complex. They all trade a simple, repeatable, and scalable system that they can use to trade for the rest of their life. And the reason why they do this is because that's pretty much all you need to make money in trading. You don't really need any fancy indicators, you need price action, you need volume, and you need the key moving averages, and that's pretty much about it.
And once I understood that, that's when my trading actually started to click. Now, when I started adding more things, that's actually when I started to remove a lot of things from my strategy, and I dumbed it down, and I made it more, quote unquote, boring, that's where the money came. And a lot of people think that a boring strategy actually means no money in trading. But, in trading, doing the boring things, like being disciplined, sticking to your system, and trading a system that is very simple, is actually what's going to make you money over the long run. Not adding a ton of fancy indicators, not trying all the different strategies under the sun, and trying to chase and look for new things that are going to make you profitable. And when I did that, everything in my trading started to change.
Now, in this video, I'm going to run you down through my seven-figure swing trading strategy, so that you can see exactly what I do, how it's so simple, it's so repeatable, and how you can scale your trading using this strategy. Now, to start, one of the most important things you have to understand about this strategy is that I am a momentum swing trader. That means what I'm looking to do is take advantage of strong trends within the market.
Now, the market doesn't actually move straight up or straight down like a lot of people think. It moves in phases called staircases. So, a stock will make a very strong move up like this, and then it will start going sideways and building a base. This is what most of the time the market is spending doing, and why the strategy is so boring is because during these times, you actually don't want to be doing much and not trading much. The reason why is because in strong trends, you can make so much money on that part of the year in that you don't have to do anything in the rest of the part of the year when the market is just consolidating and not really doing much.
And when I understood that, that's when my trading really started to take off, and I was able to step on the gas when I was trading a strong trend and get out of the market or at least limit my size a little bit and step away from the market when things started to consolidate. Now, zooming out on the market, you could see that the market moves in these stages. You'll make a move up, you'll go sideways, make a move up. You go sideways, you'll make a move up. You go sideways, make a move up. Sideways, make a move up. And you continue to do this until the trend eventually changes later down the line, but this is how the market moves.
And when I started to realize this, I was able to take advantage of these phases when the market went sideways because I realized when the stock market break breaks out of that consolidation or that staircase, that's when the next leg up in the market usually happens, and it's incredibly incredibly violent. Now, with that being said, another thing that we want to understand is you are looking to trade trends in the market. That means when the market is above the key moving averages and it continues to ride these moving averages higher, you actually want to be trading the upside or the long side. Whenever the market is below the moving averages like this, you want to be trading with the trend, and you want to be trading on the short side or completely avoiding the long side of the market. The reason why is because your probabilities of taking profitable trades within the trend are just increasingly much higher than counter trading against the trend.
This is where most new beginner traders actually mess up. They try to time the top, they try to time the bottom instead of actually just trading with the trend and being able to use the key moving averages to tell them when the trend is intact. Now, very simply to explain the exponential moving averages, they're basically going to be the average price of a specific day. So, I like to use the 8, 21, and 50 EMA. That means the 8-day is the 8-day average price of the stock that you're looking at.
Now, you can see in very strong markets and very weak markets, the moving averages can actually work like pretty much magic. Every single time the 8 EMA is touched in this trend, you could see that you get a new move up. Eventually, obviously, the 8 EMA is not going to be able to hold the support because the stock is so extended in its trend. It's going to start testing the 21, then the 50. That's going to be your last line of defense. So, as a swing trader and as a momentum trader, what I like to do is look for setups and look for stocks that are setting up within super tight patterns into these key moving averages because this tells me where new buyers are going to be stepping in because the stock market loves to ride these moving averages and every time we hold, that's going to be a confirmation that the trend goes higher.
Now, when we actually break under the moving averages like right here, you could see we lost the 50 EMA. You could see we have a very quick move lower and this is usually where the trend changes. At this point, you don't want to be long the market and you actually want to be looking for the short side. This simple system will make sure that you're trading with the trend instead of trading against it. So, whenever we're above the 8 21 EMAs, I'm always looking to long the market. The 50 EMA is the last line of defense, but longing when we're below the 8 21, even if we're above the 50, is always going to be a little bit tougher. When we're under the 8 21 EMA and under the 50 EMA, that's when you could be looking to short the market or completely avoid it trading the long side in the market.
All right, so for example, you could see right now the market is above the 8 21 EMAs and the 50 EMAs. This looks like we're going to be prioritizing the long side, meaning we're going to be looking to trade to the upside and look for stocks that are the strongest in the market.
Now, the first thing you always want to do is you want to start what's called a top-down approach and you want to start looking at the indexes first. So, the index is going to be like the S&P 500 or the Nasdaq. This is going to be a conglomerate of the market, meaning a ton of different stocks within that index, and that's going to give you an idea of what the overall market is doing. That is why it's so important to look at the overall market before you start looking at individual stocks.
Once you know the overall trend of the market, for example, tech is uptrending, now we can look to potentially trade tech stocks to the upside. Now, one of the most important parts of the strategy is understanding that we are not necessarily trading the market directly. We're using the market to give us an idea of how the overall market looks like and where we could trade. We're actually looking to trade individual stocks because even if the market goes sideways, a lot of different stocks can actually go higher and break out of their bases because individual stocks move off of their own news. They move off of their own catalysts, and they don't necessarily always have to follow the market in a sense.
So, when the market is strong and you have a stock that's really strong that's leading the market higher, now you have basically a double whammy where you can catch a massive move higher in one of the leading stocks in the market. So, to outperform the market, you realistically need to be trading the best stocks in the market, and these are called our liquid leaders.
Now, to be able to find these leaders, you first want to find a theme narrative in a sector that these liquid leading stocks are in. This could be like the AI trade that has been incredibly strong, so this could be semiconductors, data centers, and many other names. This could also be new emerging sectors that have been strong, for example, biotechnology has been incredibly strong over the last few weeks, and this is likely due to the fact the artificial intelligence trade is trying to catch up into other sectors like the biotechnology sector that they can use artificial intelligence to research and develop new drugs, new kind of cures for potential diseases, and a lot of new potential catalysts for that sector.
Now, with that being said, we want to start scanning for some of the strongest sectors, so I'm going to show you exactly how to do that. All you're going to do is on TradingView, you're going to go right here and click the home button. Now, that's going to pull up this home tab, and from there what you want to do is you want to go to markets, and then you want to go to stocks, and then sectors and industries. This is going to pull up the list of all the sectors and all the industries within the market.
From there what you're going to do is you're going to start with the sectors, and you're going to click on performance right here, and you're going to start sorting these down by the strongest sectors over the last month. So, right here you can see we have health services, health technology, and producer manufacturing as your strongest sectors over the last month.
Now, with that being said, what I like to do from here is I like to click on the strongest sector, and what that's going to do is that's going to pull up the whole sector, and from there I want to go down and look at the exact industry that these stocks are in. When you click industry, you'll see that you'll have a list pulled up. Sometimes it's four industries, sometimes it's a lot more, depending on the sector that you're looking at. From there what we want to do is head over to performance, and we want to look at the strongest performances over the last month as well on the leading industries of the health services sector.
Now, from there you'll see we have hospital nursing management, medical nursing services, and services to the health industry. Now that we have those top three, what we want to do is go back into TradingView, and we want to start scanning for these stocks. So, we're going to go on TradingView, and we're going to click this section right here, which has our screeners.
And from there what we're going to do is we're going to input these settings right here. We're going to look for price over three USD, market cap over 300 million USD, EMA 21 and 50 sets above price, average volume over 500k, and then ADR sets 2%. What this does is basically filter down to the strongest stocks in the market that are above their moving averages, and also the most liquid stocks in the market. And from here we can start adding the industries that we're looking to scan through.
So, we're going to click on industry right here, and now we're going to type those three industries that we just talked about in the strongest one of the strongest sectors in the market in the healthcare services. So, now you can see I added all these industries, so we have about three industries in here, and we have about 32 stocks. But, we don't want to just limit ourselves to trading only this industry. What we want to do is go back and look at the next two strongest sectors.
So, we go back to sectors, you can head again over to performance and you go to performance over the last month. You can click on the health technology sector, which is the next sector moving forward. When you click on the health technology sector, then you're going to go to industries again and you're going to see you have the top five industries here. You're going to click performance and then sort this by the last month and you're going to do the exact same thing and add these to your scan the top three ones.
So, now you can see you have about 239 stocks. I'm going to add the last sector with the strongest industries in that sector. All right, so once I do this, you can now see I have nine industries in the market in the strongest sectors and I have about 267 stocks to go through.
Now, remember what I'm looking for is price action that looks like this. I'm looking for a tight base within the market. It could be any type of pattern. That's not incredibly important. Too many people stress over what pattern to look at, what the name of the pattern is. The most important thing is to look for coiled price action. This means that the stock should have been making a strong move higher like this and from there it's been consolidating. So, whether it's a pennant like this or if it's a flag, it doesn't really matter as long as you look for tight price action like this because this tells you the stock is getting ready for the next leg up. Remember, you have a move up staircase and then another move up after that.
As I'm going through the scan, you can see that I'm starting to find some really nice setups that look exactly what I just described. You had a massive move up in the stock, then it started to build sideways and build you a base. The moving averages start to catch up and then the stock makes a move higher. You can look for either a stock that is just now breaking out of the base and making its next leg up like this or a stock that's just about to break out and is at the top of the range. For this example, we're going to use this stock right here, which is just now breaking out. But you can see it's building a mini base right outside of its breakout, meaning that it was able to hold the retest of the breakout into the 8 EMA and now it's setting up in a super tight flag with this key level of resistance. All we're looking to do is wait for the stock to break that resistance level so we can set an alert like this. And the moment the stock breaks that level, that's going to be our entry.
Here's an example of a trade that I took using this exact entry model. Right here, you could see the stock was making a massive move higher, then it started to build a beautiful base like this. It wasn't making any new highs, and it wasn't making new lows. No, setting up in this beautiful base. Now, I knew from here that all the stock had to do is break its key level of resistance right here. And the moment it did that, it was most likely going to break out. So, this is why it's important to use the bigger time frames and start with our top-down approach. You look at the daily time frame, you look at the weekly time frame, and see if any setups are setting up before you go down to the lower time frames to get your sniper entry.
Once you have your key level set, which is going to be right here for this example, then you're going to go down to the lower time frames using the 5-minute or the 15-minute time frame. This is where I like to get my sniper entry. Now, the big edge and the alpha of this actual strategy is that you get a daily magnitude setup with the risk of the smaller time frames. Meaning, you have super small risk, you can catch an absolutely massive winner using the bigger time frames.
So, for this example, you could see that I took my entry when it broke the highs of the range right here. And all you're looking to do is wait for that break to happen on the lower time frames like this, and enter right as the stock is breaking that key level. One thing you can use to confirm your entry is using the volume and looking to see if there's enough volume as the stock is breaking out. What I usually like to do is add a volume moving average on my volume indicator and look to see if the volume is above average. So, you could see this cloud right here. Anytime the volume is above that cloud, that tells me that the volume is high, and that to me confirms that the breakout is strong and there's a lot of buyers that are stepping in to catch and potentially push this thing incredibly higher.
Now, with that being said, once my entry is taken, again, there's no hesitation when the break of the level happens. I'm not waiting for anything else to happen. I'm not waiting for any confirmations. As long as volume and price confirm, that's going to be my entry. From there, what I'm looking to do is put my stop loss at the low of the day. This is incredibly important because you want to protect yourself in case of a downside reversal. In case the stock doesn't end up breaking out or if there's a reversal that happens, low of day stop is going to protect you because if the stock is ready to go, there's no reason it should break below its low of day and from here it probably should go higher. And again, the reason why this strategy works so well and why it creates such a good consistency in terms of big winners is that your risk is incredibly, you know, small. You're only taking a 1% risk on a potential failure of the move and you can catch a massive move higher because you're trading the daily magnitude for a move higher. So, just in one day you made about 11R on the trade.
Now, with that being said, the big biggest part of the strategy is being able to hold your winners for a long period of time because you're swing trading and you're using momentum in the market to keep your position for as long as you can to catch a big move in the market and not sell too early. So, our exit strategy is almost just as important as our entry strategy so that we're able to catch these winners and we're able to hold them for a long period of time.
So, the exit strategy looks something like this. This is called a trimming strategy and what this means is that instead of selling the full position on the first trim, you actually trim and scale out of the position. You sell partial profits instead of taking the whole position off. So, how do I do this is basically what I look to do is I take my entry here, I put my stop loss at the lows, and I look to target a first level of resistance that the stock is kind of struggling to break over.
So, for this example, you could see this is clearly a level of resistance. We rejected this multiple times. We rejected it here. We rejected it here. And this is a good spot to take some initial profits into strength. And I usually take about 20 to 30% of the position off to take some profits and pay for my risk. Now, an important idea to understand is the first target needs to be at least over a two risk to reward for it to make sense. So, for example, you could see this first target was a five risk to reward, meaning when I took a loss on this trade, I would have lost, let's say, a dollar, but I made $5 on the potential trim because of the fact that it's a five-risk reward.
Now, with that being said, as long as the target makes sense within its risk reward and it satisfies the risk reward, you're going to be trimming some of the position here. So, again, you take off about 20 to 30% of the position as it hits that first level of resistance.
Now, from there, all you're looking to do is use those key moving averages that we were talking about to trail the position. You don't want to sell too early, and you don't know if the stock is inherently going to top or if you're going to sell, you know, the potentially a early part of the move. This is why you're going to use the moving averages to tell you if the stock is ready to go higher or if it's going to start rolling over and the trend is going to break.
So, what I mean by that is you're going to use this 8 EMA, which is this blue line, to basically trim the rest of the position and use that to give you an idea on if the trend is going to hold or not. So, what I look to do is use the EMA and see if the stock is able to hold above it using the daily timeframe. So, I'm on the daily timeframe right now, and you can see the first close under the 8 EMA on the daily timeframe is going to be the level where I take another 20 to 30% of the position off right here. The reason why I do this is because, again, this tells me that the trend is starting to weaken a little bit, and it probably needs a little bit more time to set up for the next leg up.
Now, you can take a little bit of profit as the stock gets a little extended from the moving averages, right? So, you can trim about 5, 10% as it continues to make new highs, but the goal is to hold of your position as you can into the moving averages and then sell into the weakness because, again, you don't know if the stock's just going to continue to ride the moving average and go higher because in a strong market, the moving averages are literally going to be like these magic lines that are going to work and continue to bring the stock higher and higher and higher.
Now, after you take your second trim using the 8 EMA, from there, you're going to trail the rest of the position using 21 EMA, which is this line right here. You can see this held multiple times when the stock was making a strong move like this, but eventually here it ended up closing under it and breaking below, which would have been a 20-30% trim, and you would have sold about 20-30% of that position. Now you have about 20% of the position left, and the rest you're trailing using the 50 EMA. So so far you could see the 50 EMA actually has not broken, meaning we haven't had a close under the 50 EMA. So that means my 20% position from this breakout right here is still active and I'll only close the stock if it breaks under the 50 EMA.
Now the reason why I do this is because again, remember, the 50 EMA is going to be our last line of defense in the trend, meaning as long as that 50 EMA holds, there's a good chance we'll probably continue to go higher and this will set up higher. Even though it doesn't look like it right now, it could easily set up in a big base and continue to go higher and hold the 50 EMA. And now all I have to do is, let's say if it does set back up, I can add back into the position and then trade it again as it, you know, sets up and breaks out and goes higher, if that's what the stock does want to end up doing.
And you can see the reason why this strategy works so well, it's another example here on SNDK. This stock made a massive breakout higher through this level. Most people would sell too early, they would sell right here on this candle, on the first candle. They'd say, "Oh, really nice profits." But then they'd miss out on absolutely monster move, and you could see the whole time this thing did not break under the key moving averages, and it actually gave you about a 500% move because it just held the moving averages the whole way up. Held the 8, 21, 50 EMA, and you would have still had about 20-30% of the position left all the way up into the 500% area.
Now to understand the full strategy, your goal is to find these setups, and I like to find about four, five, six of these stocks every single night, or at least every single week, so that way I know exactly where to focus on in the market. So for another example, you could see I found this tight setup on the ticker LLY. You could see it just broke out of a tight base. Now it's actually setting back up after retesting that base, and it's getting very tight in the spike. Again, the actual pattern doesn't really matter much, the most important thing is the stock is consolidating, and this is going to be a stock in a very strong sector because we know we already went through and we reduced down the market to the strongest sectors and we're trading in the direction of the market using the strongest sectors and then we're finding the strongest stocks in those sectors. So, we're giving ourselves that inherent edge in the market.
From there, all we have to do is execute, look for a key level where we can buy the stock once it breaks that level, put our stop loss at low of day creating a super tight risk to reward, and then continuing to trade the stock as it holds its trend. For another example right here, you can see the stock has been trending for the last few months and never broke under the 50 unit and never broke under the 21 EMA. You can see it just continues to trend higher and higher and higher because this is how leading stocks move. They continue to move higher as long as they hold their key levels.
Here's another example of a stock ticker that I found using this exact scan. You can see the stock setting up in a super tight base like this. It has a very, very nice looking flag and all I'm looking to do is wait for it to break this key level very similar to the ARM trade that I just recapped. If it breaks over, this is going to be my entry. My stop loss will be at the low of day and I'm looking to target at least somewhere around these highs for my first trim and from there see if it continues to go higher and hold the key moving averages.
Now, this is literally one of the simplest strategies in the world and this is why it works so well. I've made it multiple seven figures trading this strategy and I've learned it from some of the best traders in the world and I've realized the simpler the strategy is usually the better that it actually is because it's repeatable and it's scalable and that's what creates longevity in trading.
Now, if you enjoyed this video and got some value from it, make sure to leave a thumbs up and subscribe. If you have any other videos that you want me to go over or that you want me to make, please comment them down below and I'll definitely look to make those in the future. Hope you guys enjoyed this video and I'll catch you in the next one.