Most of the time, the swing trader cannot swing trade that effectively, especially in fast markets. Several problems arise as to determining the high-probability setups, how to manage risks, and knowing when to take up or close positions. Amidst all those different factors that could affect price movements, it may become quite overwhelming for a relatively new swing trader. Of course, fortunately, there is a way one can simplify everything and increase his probability of success.
Swing Trade Stocks like a Proprietary Trader
Mike is one of the best at sniffing out opportunities and riding momentum. Here’s his approach in the Tesla trade he made last week, with every step broken down for the takeaway any trader can use:
1. Spotted a Setup with High Potential:
In Tesla (TSLA), Mike spotted a breakout long idea on his watchlist. However, he also recognized that this setup was somewhat crowded, and it didn’t feel as simple as it did. This caution prevented him from putting the long trade on but still didn’t take it off the list because technically, the setup looked promising.
Instead of blind follow-through, Mike was flexible and open-minded. This enabled him to switch his strategy in the short trade when the long trade did not trigger as he used information gathered about the behavior of the stock.
Lesson: Flexibility in trading is important. Always have to readjust in line with changing conditions of a market and modify appropriately.
2. Going Short on Momentum:
When Tesla failed to trigger on the long side, Mike traded on to a short. This was because, with the level of eager long traders trapped inside, he did not think he had any opportunity but to exploit a momentum short given the broken support levels.
He came in at the lows of yesterday for a breakdown momentum trade, then layered as it continued lower following that lead.
Lesson: There are opportunities in the market place for lots of momentum trades. At times it may pay to be flexible enough to reverse direction.
3. Trade management
Mike ran the trade with a system. He was set up to cover and scalp out as it broke down more. He took incremental profits on weakness, allowing the trade to run without being too aggressive or emotional.
Once Tesla broke past 232 support, he grew his position. And he had the wisdom of placing a stop just above the most recent high on his position so that in case of some sharp movements up in the market, he never had to see a loss from the trade.
Lesson: It’s all about risk management with swing trading. Protect your trades using stops always, and then scale out and collect your profit while leaving some more on the table.
4. Exit the Trade:
He discovered that his personality changed about 11:30 AM after holding on the trade and covering on weakness. The stock broke out of its downtrend. He found that there is a trend reversal. This could be determined with a volume spike and large bullish candle formation. Mike knew it was a price action that is telling him he needs to cover his short.
Lesson: Be prepared to exit when market conditions change. A good way to maximize profits and minimize losses is by reacting to price action and understanding when a trend is shifting.
Real-World Setup: Tesla (TSLA) for Swing Long
As a result, taking a glance at his watchlist for the week, Mike becomes bullish on Tesla after this stock failed in a move lower to shake out some weak hands. Tesla took back its key moving averages and has held above 247 resistance. And the close is above 250, indicating a setting-up position for a potential swing long.
Mike’s strategy for this trade is to look for higher lows and consistent support above the 250 level for a long entry. He would place his stop below Friday’s low and target a move up to 260 for a partial profit-taking and then possibly to 270.
Lesson: Trend reversals and failed moves are usually fast and powerful in the opposite direction, which makes them good swing trades.
More Swing Trade Ideas for the Week
Mike also mentions several other stocks that are on his radar, and they have big potential for this coming week:
- Upstart (UPST): Mike will watch for a breakout above Friday’s high. It has high short interest and very good momentum; if it breaks above Friday’s high, it might have a way towards $50.
- CCCC: This stock broke out big-time last week, so it can have a bounce. Mike’s looking for the stock to break down on a failed intraday move into the $5.50 to $6 range to be short, trading down to the low fours.
- Liquidation Plays: Stocks like EJ and ZJYL are stocks Mike is interested in for liquidation. That often involves huge price moves on those stocks in the short run.
Lesson: Always have a list of secondary setups in case your primary trade doesn’t trigger. Market conditions change, and having multiple opportunities to watch can increase your chances of finding success.
Conclusion
Swing trading stocks, much like a prop trader, demands discipline and technical analysis, momentum trading, and risk management. Flexibility in staying alert to price action and always adjusting the strategy according to market conditions increases the chances of success.
Mike Bella Fury’s example shows that swing trading is not about blindly following popular setups but about being able to adapt and react to changing market conditions. Whether you’re trading stocks like Tesla, Upstart, or others, remember to stay systematic, manage your risk, and always have an exit plan in place.