The entry and exit swings in swing trading always happen incompletely in a volatile market. A search for the perfect setup can become frustrating because of its lack of follow-through with trades. Most traders fear entering a position or staying too long before exiting, which is more than one should. The absence of a defined strategy leads to being bogged down by market noise and price changes.
A proprietary prop swing trader, therefore, develops strategies that reflect multi-day moves relative to relative strength, momentum, and high-probability setups. Prop traders are trained to handle firm capital, execute disciplined strategies, and consciously take advantage of the market conditions. Unlike most retail traders, they have constant coaching, a collaborative environment, and a risk management structure so that they can think of the process rather than worrying about losing money.
Let’s talk about strategies of prop swing trading, from identifying opportunities to managing risks and taking profits. The book is going to walk you through, step by step, how to look at the markets with the same professional mindset and techniques that have successfully enabled prop traders to consistently do well. Learn these strategies, and you will inculcate a disciplined approach, avoid emotional trading, and maybe increase your performance from ordinary to really good.
Key Elements of a Prop Swing Trader’s Strategy
1. Establishing Relative Strength and Momentum
The first part of this strategy is to find stocks that relatively stand stronger compared to the overall market. Using the above example where most major stocks declined or traded flat, a prop swing trader would pick up on stocks such as Apple, having established relative strength since they bettered or even advanced in price.
Apple is bright in the next week due to a bullish formation it took and relative strength recently. Hence, it is well-equipped for a momentum breakout. If a trader focuses on equities that are resistant or quickly recover from market declines, he has better chances of riding with a powerful breakout when the market senses a change in attitude.
2. Entry and Exit Plans
Any sound strategy starts off with an entry and exit plan. In this case, if Apple shows a pullback to a higher low, then enter at 191 or 192 by using the previous Friday’s low as the stop-loss level. This is an ideal risk-reward setup for a possible strong move higher if the stock continues showing strength.
Alternatively, the trader will wait for a breakout above $193 without any kind of pullback. Here, he places a stop right below the day’s low, and a full ATR move is his first target. Through the use of ATR, the trader can set appropriate profit targets not only based on stocks’ recent volatility but also by taking gains at appropriate levels.
3. Scaling Out of Positions
Once a trade begins to go in the direction of the trader, the focus then turns toward scaling out of the position at various price targets. For Apple, he planned to scalp out upon a large move of 1 ATR while moving his stop higher on higher lows using a 15-minute chart.
This strategy enables the trader to lock in some profits as the stock rises while still holding some of the position open in hopes that this momentum continues. Trailing stops allow for maximization because it prevents an early exit, which becomes vital for a multi-day or even multi-week move.
Other Trade Ideas for the Week to Come
Uber – Seek a Bounce
Uber is another bullish setup. The stock has been in a downtrend for so long now, but if this thing breaks out of its three-day range and gets above last week’s high of $65.40, there is a bounce possibility. Not fighting the trend is an important part of this trade; the trader waits for confirmation that the stock’s ready for a multi-day reversal.
Once the stock does start trading above last week’s range, the trader will go long with a stop set just below the low for the day. The first objective is its 20-day moving average. From there, a move to $68 is then the secondary objective. This strategy is to wait until the stock is showing strength before putting capital at risk, thus avoiding trying to “catch a falling knife.”
BNAAI – Day Two Squeeze
The stock that was very much price volatile intraday on Friday, BNAAI, presents a very interesting short opportunity on day two. The prop trader expects a squeeze back into the supply zone around $6 to $7. If the stock does not break higher within that zone and forms a lower high, then a short entry will be sought.
In managing the risk on this trade, one would place the stop just above the day’s high or the high of the recent move. The target for this trade is a drop back to the low $4 range, allowing for a solid risk-reward ratio on the short side.
Managing Risk Like a Prop Trader
The defining characteristic of prop traders is that they should be risk managers. It is well known that capital protection should be on par with revenue production. All trades are aligned with proper stop-loss levels, and a change in the position size is determined according to the trader’s tolerance level for risk and the volatility of the stock.
For example:
- If the price of Apple breaks low from the low of Friday, the prop trader will immediately close out the trade.
- This discipline defeats the inability of small losses to grow into big ones.
- Through trailing stops, as the stock moves up, one will not give up enough profit, thus ensuring that there is always room for stock to breathe.
Selectivity is also a vital component of risk management. Prop traders have been proven to become more selective in what they trade when markets are soft and volumes are low. For example, during the summer months, the prop traders do not want to get themselves caught up in choppy or low-conviction moves by taking too many setups that have lesser chances of success. Such factors help reduce the probability of getting caught in low-conviction moves.
Mindset and Discipline in Trading
Effective prop swing traders treat trading like a professional sport: they constantly hone their skills, refine strategies under various conditions, and learn from losing as well as winning trades. That is what keeps them sharp, disciplined, and primed for whatever the market throws at them.
Contrasted with the airs of glamorous lifestyles put across by multiple trading “gurus,” prop traders live for the grind. They put in the hours, working through their trade, and constantly fine-tune it to meet changing market conditions. This is what sets them apart from the vast majority of retail traders seeking to win by luck over the long term.
Conclusion
Strategies this prop swing trader uses include:
- Relative strength identification
- Precise entry and exit
- Effective risk management
Whether Apple is showing momentum for the next week or Uber is bouncing, here is the hitch — discipline applied on top of good technical analysis.
What these strategies do for retail traders who want to trade better is the essential difference between being professional and not. Focusing on getting the right setups, managing risk, and then proper positioning and scaling out, you could start trading with the same mindset and techniques as professional prop traders while still making consistent profits.
Is it time for you to fine-tune your swing trade strategy and push your game into another sphere of performance? Then get ready to assimilate some of these prop trading skills into your regimen and see how they make all the difference.