Estimated Duration: 1 Day

Notes: You should know how to identify trading triggers for Swing Trades after this lesson (The only differences between swing trading and day trading triggers are highlighted in red, otherwise they are the same).

Understanding how to identify trading triggers for Swing Trades using our system

This lesson is designed to teach you how to find Swing Trades using our system. This lesson will incorporate the instructions already provided in lessons 1-5 and it should allow you to start to acquaint yourself with the efficacy of our system.

All of our Trading Recommendations are based on appropriate Market Timing. We NEVER trade unless the Market is telling us to do so. Therefore, in order to find Swing Trades we must first follow these simple steps:

1. We first must know when to trade
2. We then need to know what to trade
3. We then need trading plans for those trades.
4. And finally we need to execute our trades.

You'll be happy to know that....

1. We tell you when to trade
2. We tell you what to trade
3. We give you trading plans for those trades.
4. But you need to execute your own trades.

All you need to do is to watch the Market, and to execute your trades when you are alerted to do so. Let's take this step-by-step:

We first need to know when to execute our Swing Trades. This is exactly what the Swing Trading Parameters provide us. These Parameters are found on the Swing Trading Analysis Page referenced in the previous lesson. Remember the link: http://www.stocktradersdaily.com/clubsite/Club/ In the Swing Trading Analysis Page specific support and resistance Parameters are provided to you. When one of those Parameters is tested, a trading signal occurs. When a trading signal occurs, we are alerted to execute trades.

Let's use a specific example. The following Parameters are provided in a typical format; take a look:

• Initial Swing Trading Parameters exist between 1900 - 1940
• If 1900 breaks lower expect expect 1800
• If 1940 breaks higher expect 2023
• Otherwise expect 1900 - 1940 to hold

From there Parameters we can assume a few things:

1. We expect to hold every swing trade for more than 1 day. We have some occurrences where a support level and a resistance level for Swing Trades will be tested during the same session. This will happen, but for the most part, we should expect to hold every swing trade for more than 1 day.
2. We can assume that the Market was somewhere between initial support and initial resistance when these Parameters were published. This lies somewhere between 1900 and 1940 in this example.
3. We can assume that the Market will either head higher and test resistance first, or it will decline towards support. In either case we need a plan

TRADING PLANS

There are 2 types of plans. Each of the plan types have a series of dynamic possibilities, which should be rather obvious. These possibilities will be discussed in detail for each plan type. Here are the initial plan types:

• Support Plans
• Resistance plans.

If the support level is tested first the Market could either hold support, or support could break. If the resistance level is tested first, resistance could either hold or break as well. However, upon each test, and each subsequent break, trading signals occur. Let's take a look at the support plans:

If support is tested first a trading trigger occurs which recommends a long trade. This is SUPPORT MODE. Support Mode occurs as soon as a support level is tested. By rule, an official test of support comes when the Market is within 3 points of stated support.

Once in Support Mode, 2 things can happen.

• Support can hold.
• Support can break.

If Support holds, the trading plan is simple:

• Buy near support, target resistance. In our example that would be: Buy near 1900, target 1940. (Near means within 3 points, so 1903).

If support breaks a second trading trigger occurs.

• If a level of support breaks, a trading trigger comes which recommends a short position for balance. Balance means that there is 1 open long position and 1 open short positions at the same time. Balance is required because the Market is threatening a break of support in this instance. When balance is required after a support level is tested, we consider the Market to have triggered SUPPORT BALANCE MODE.
• Immediately after the Market gets into Support Balance Mode the 5-point rule should be implemented. This tells us to overweight longs or shorts if the Market moves 5 points away from our Parameter. Here's an example using the sample Parameters above: Let's assume the Market tests support at 1900 first. This would mean that a long signal occurred. However, let's assume that 1900 broke slightly lower. This would require balance, and the 5-point rule would be implemented. Because 1900 was our Parameter, if the Market moved to 1905 after having balance we would overweight longs (2 longs and 1 short). However, if the Market moved down instead and breached 1895 we would have a signal to overweight shorts (2 shorts 1 long).

If we are in an overweight short position (2 shorts 1 long) we are considered to be in a SUPPORT BALANCE SHORT MODE. In this mode we should be expecting the shorts that were triggered to work for us as the Market declines to the next lower level of support. In our example we would have a trading plan as follows: Overweight shorts under 1900 target 1800.

If we are in an overweight long position (2 longs 1 short) we are considered to be in a SUPPORT BALANCE LONG MODE. In this mode we should be expecting the Market to increase to the next level of resistance. In our example that would be 2023. In our example we would have a trading plan as follows: Overweight longs above 1900 with a target of 1940.

In support balance short mode 2 things can happen:

• The Market can test the next level of support. If the Market tests the next level of support, our downside target will have been reached and we should close all trades and start over. We would expect to make money from 2 shorts and we should expect to have had 1 stop from the long which was initiated for balance.
• The Market could turn higher. If the Market turns higher and triggers the 5 points rule on the upside too (after having already done so on the downside), the Market goes into SUPPORT BALANCE SHORT LONG MODE

In Support balance short long mode the Market will either decline to the next lower stated levels of support, or the market will increase to the next higher level of resistance. In either case, no more positions will be initiated until one or more of the current positions are closed. In this instance we would have 2 longs and 2 shorts at once. Therefore there would be 4 trades called at the same time. This is our position limit. We will never have more than 4 positions called at once.

Expected results after being in Support Balance Short Long Mode:

• If the next level of support is tested first we would expect to lock in gains from the shorts that were in place, but we could also expect the stops that occurred from the 2 longs that were in place to offset those gains somewhat.
• If the next level of resistance is tested first we would expect to lock in gains from the 2 long positions that were in place, but we could also expect to have those increases offset somewhat from the 2 shorts that were in place for balance.
• In either case, after these positions are closed, we should look for new trading ideas based on the Parameters that have been provided for that session.

Take a look at this graphic for an easy to understand interpretation:

In support balance long mode 2 things can happen as well:

• The Market can test the next level of resistance. If the Market tests the next level of resistance, our upside target will have been reached and we should close all trades and start over. We would expect to make money from 2 longs and we should expect to have had 1 stop from the short which was initiated for balance.
• The Market could turn lower instead. If the Market turns lower and triggers the 5 points rule on the downside too (after having already done so on the upside), the Market goes into SUPPORT BALANCE LONG SHORT MODE

In Support balance long short mode the Market will either decline to the next lower stated levels of support, or the market will increase to the next higher level of resistance. In either case, no more positions will be initiated until one or more of the current positions are closed. In this instance we would have 2 longs and 2 shorts at once. Therefore there would be 4 trades called at the same time. This is our position limit. We will never have more than 4 positions called at once.

Expected results after being in Support Balance Long Short Mode:

• If the next level of support is tested first we would expect to lock in gains from the shorts that were in place, but we could also expect the stops that occurred from the 2 longs that were in place to offset those gains somewhat.
• If the next level of resistance is tested first we would expect to lock in gains from the 2 long positions that were in place, but we could also expect to have those increases offset somewhat from the 2 shorts that were in place for balance.
• In either case, after these positions are closed, we should look for new trading ideas based on the Parameters that have been provided for that session.
• The 2 graphs below may help you better understand these concepts. The first graphic shows you the breakdown of Support Balance Short Mode. The Second shows a breakdown of Support Balance Long Mode:

Take a look at this graphic for an easy to understand interpretation:

The illustrations above walk you through support mode. However, we still need to address resistance mode. Basically this will be the opposite of support mode.

If resistance is tested first a trading trigger occurs which recommends a short trade. This is RESISTANCE MODE. Resistance Mode occurs as soon as a resistance level is tested. By rule, an official test of resistance comes when the Market is within 3 points of stated resistance.

Once in Resistance Mode, 2 things can happen.

• Resistance can hold.
• Resistance can break.

If Resistance holds, the trading plan is simple:

• Short near resistance, target support. In our example that would be: Short near 1940, target 1900. (Near means within 3 points, so 2037).

If resistance breaks a second trading trigger occurs.

• If a level of resistance breaks, a trading trigger comes which recommends a long position for balance. Balance means that there is 1 open short position and 1 open long position at the same time. Balance is required because the Market is threatening a break of resistance in this instance. When balance is required after a resistance level is tested, we consider the Market to have triggered RESISTANCE BALANCE MODE.
• Immediately after the Market gets into Resistance Balance Mode the 5-point rule should be implemented. This tells us to overweight longs or shorts if the Market moves 5 points away from our Parameter. Here's an example using the sample Parameters above: Let's assume the Market tests resistance at 1940 first. This would mean that a short signal occurred. However, let's assume that 1940 broke slightly higher. This would require balance, and the 5-point rule would be implemented. Because 1940 was our Parameter, if the Market moved to 1945 after having balance we would overweight longs (2 longs and 1 short). However, if the Market moved down instead and breached 1935 we would have a signal to overweight shorts (2 shorts 1 long).

If we are in an overweight short position (2 shorts 1 long) we are considered to be in a RESISTANCE BALANCE SHORT MODE. In this mode we should be expecting the shorts that were triggered to work for us as the Market declines to the next lower level of support. In our example we would have a trading plan as follows: Overweight shorts under 1940 target 1900.

If we are in an overweight long position (2 longs 1 short) we are considered to be in a RESISTANCE BALANCE LONG MODE. In this mode we should be expecting the Market to increase to the next level of resistance. In our example that would be 2045. In our example we would have a trading plan as follows: Overweight longs above 1940 with a target of 2023.

In resistance balance short mode 2 things can happen:

• The Market can test the next level of support. If the Market tests the next level of support, our downside target will have been reached and we should close all trades and start over. We would expect to make money from 2 shorts and we should expect to have had 1 stop from the long which was initiated for balance.
• The Market could turn higher. If the Market turns higher and triggers the 5 points rule on the upside too (after having already done so on the downside), the Market goes into RESISTANCE BALANCE SHORT LONG MODE

In Resistance balance short long mode the Market will either decline to the next lower stated levels of support, or the market will increase to the next higher level of resistance. In either case, no more positions will be initiated until one or more of the current positions are closed. In this instance we would have 2 longs and 2 shorts at once. Therefore there would be 4 trades called at the same time. This is our position limit. We will never have more than 4 positions called at once.

Expected results after being in Resistance Balance Short Long Mode:

• If the next level of support is tested first we would expect to lock in gains from the shorts that were in place, but we could also expect the stops that occurred from the 2 longs that were in place to offset those gains somewhat.
• If the next level of resistance is tested first we would expect to lock in gains from the 2 long positions that were in place, but we could also expect to have those increases offset somewhat from the 2 shorts that were in place for balance.
• In either case, after these positions are closed, we should look for new trading ideas based on the Parameters that have been provided for that session.

Take a look at this graphic for an easy to understand interpretation:

In resistance balance long mode 2 things can happen as well:

The Market can test the next level of resistance. If the Market tests the next level of resistance, our upside target will have been reached and we should close all trades and start over. We would expect to make money from 2 longs and we should expect to have had 1 stop from the short which was initiated for balance.

The Market could turn lower instead. If the Market turns lower and triggers the 5 points rule on the downside too (after having already done so on the upside), the Market goes into RESISTANCE BALANCE LONG SHORT MODE

In Resistance balance long short mode the Market will either decline to the next lower stated levels of support, or the market will increase to the next higher level of resistance. In either case, no more positions will be initiated until one or more of the current positions are closed. In this instance we would have 2 longs and 2 shorts at once. Therefore there would be 4 trades called at the same time. This is our position limit. We will never have more than 4 positions called at once.

Expected results after being in Resistance Balance Long Short Mode:

If the next level of support is tested first we would expect to lock in gains from the shorts that were in place, but we could also expect the stops that occurred from the 2 longs that were in place to offset those gains somewhat.

If the next level of resistance is tested first we would expect to lock in gains from the 2 long positions that were in place, but we could also expect to have those increases offset somewhat from the 2 shorts that were in place for balance.

In either case, after these positions are closed, we should look for new trading ideas based on the Parameters that have been provided for that session.

Take a look at this graphic for an easy to understand interpretation:

This lesson tells you when trades are triggered. The next lesson will tell you how to find trades once a trigger occurs.

If you do not understand when trades are triggered, please review this lesson.