It’s most important to understand the profitable strategies. Both beginners who are interested in swing trading as well as seasoned swing traders are of great importance in the art of how to plan for market movements. Today, we have a prop swing trader revealing his exact strategy for the week. He offers two different strategies: a long-side consolidation breakout and short trades on small-cap stocks.
An Edge: Long and Short Play
The trader discusses how his edge initially came from shorting small-cap stocks but evolved over time to include both long and short positions across large-cap and small-cap stocks. This growth reflects a strategy of mastering one setup and gradually expanding upon it for a more sustainable and diverse trading career. Lesson learned: start simple, perfect, and then scale.
1. Consolidation Breakout: Long Play with NVDA
One of the main strategies presented today is a consolidation breakout. The best example for this strategy is the chart of NVIDIA (NVDA). The trader emphasizes how NVDA was showing relative strength in the market during the first week of the year. This is a big play if the general market takes off. Here’s what’s going to happen with NVDA:
Entry: Long position near $500 if the stock confirms a breakout over this critical level.
Stop-Loss: Put at the low of the previous day to protect against a false breakout.
Target: The first target will be a 1 ATR move, approximately $510 to $512, for a partial exit. After this, the trader will trail the remaining position for a maximum of three days, using hourly higher lows to adjust the stop.
This setup is based on tight risk/reward parameters where a multi-day momentum move is expected once the breakout confirms. This methodology combines technical analysis with key psychological levels to determine both entry and exit points.
2. Short Plays on Small Caps: AIMD and BNZI
Small-cap stocks plays with short moves, which constitute the second half of the strategy, include AIMD and BNZI. The abnormal volume in the recent past that faded into Friday may indicate resistance at these levels for both these names. Here are their breakdowns, short setups:
AIMD: The trader is looking for a push into the $3.50 area, where it will fail, hoping on a possible failure at that level. This is a way of shorting the stock on clear reversal, confirmation from intra-day price action, and a probable return to lower levels.
BNZI: Similar to AIMD, BNZI has displayed extreme overhead resistance. The trader is waiting for a push back into the $2.83 area, which will become the two-day VWAP. Once this level is tested, the trader expects a failure and will enter a short position.
In both scenarios, the trader seeks confirmation before he takes action. In the shorting of the small-cap stock, there will be a degree of caution for volatility and squeezes. As long as these stocks recover back to their VWAP, then the trader will have nothing to do with the short and pass, showing an excellent discipline process.
Risk Management: A Significant Factor
In each of the strategies used by the trader, risk management is vital. By making use of clear and defined risk/reward setups, he minimizes losses and maximizes possible gains. The result is low emotional trading, thus forcing the mindset to remain disciplined.
On a long position, he makes use of a clear stop-loss against the breakout and lock gains incrementally by a move of 1 ATR.
For short positions, the trader watches for supply zones and volume spikes. If the stock shows signs of strength against expectations, he exits the trade and avoids unnecessary losses.
Psychology and Execution
Discussing the mental aspect of trading, the trader will refer to the psychological factor in implementing these strategies. It is quite easy to fall in love with a position when the market fails to act as it is expected. The successful traders, however, understand that planning the trade and trading the plan are what matters. If the trade fails to confirm the setup, it is imperative to move to the next opportunity.
Keeping a Trading Career
The trader concludes by saying that a sustainable trading career is more important than a one-hit-wonder strategy. With refined setups, understanding the psychology of the market, and flexibility, traders can build a consistent and profitable swing trading approach.
Join a Trading Firm for Further Growth
For those willing to take it a notch higher, he also goes ahead to share an excellent opportunity through S&B Capital, which is one of the top proprietary trading firms there is. That’s an opportunity for traders to learn, grow, and trade using firm capital. This avenue opens up high profit-making avenues without risking a single penny of personal funds. A great firm always trains and develops its traders to their best and hence is considered a great opportunity for aspiring traders.
Conclusion
Swing trading can be very profitable if done with discipline and proper strategic thinking. Consolidation breakouts and understanding the nuances of shorting small-cap stocks will open up opportunities for large market moves. Whether you are a beginner or an experienced trader, the right strategies and honed edge will guide you to success in the market.