Today’s topic is going to cover stock swing trading strategies that assist traders in locating market reversals.
During the last few days the market has been selling off a bit and if you watched financial news channels you would have noticed that whenever the market slides off a bit, there’s always talk of doom and gloom.
It’s the way the news media has operated for as long as I can remember.
The truth is no one knows if the market is peaking out or not, there’s no crystal ball and there’s no trading strategy that can predict long term market tops.
What I can offer you is a few simple stock swing trading strategies that do a wonderful job of locating short term market peaks. I will show you the first one today and next week will show you the second one.
These two stock swing trading strategies are not the Holy Grail and both use stop loss and profit targets so that if and when the market goes against your position you will be protected.
The first strategy is called the 1-2-3 bounce and it works well with stocks, index futures and commodities as well.
Before I give you the rules and show you some examples of the 1-2-3 Bounce strategy I want to remind you that this is a chart pattern so there is some degree of subjective analysis involved.
Unlike technical indicators that are based on mathematics, chart analysis involves visually looking at the chart.
- Find Stocks that are trading above 50 day high (point 1)
- Monitor Stocks and wait for a pullback down (point 2)
- Stock must rally within 15 trading days and come close to matching the high price (point 3)
- Sell 2 ticks below (point 2)
- Place protective stop (buy stop) 2 ticks above (point 1)
- Profit target is 4 times your risk level
I will show you a few demonstrations so you get a real good idea of how the 1-2-3 bounce looks like when it’s setting up.
Here Is Another Example Of Trading 1-2-3 Bounce Strategy
I think this will provide you with a good idea of how to locate and trade the 1-2-3 bounce strategy. I tend to utilize this strategy with low volatility stocks.
I find that since markets drop so much faster than they rise, I can use the lack of volatility to make tighter stop loss levels.
Remember protection of your capital should be your first priority when learning new stock swing trading strategies.