In this blog, I delve into the intricacies of swing trading by dissecting a recent trade setup in NELCO. The aim is to provide you with a firsthand account of the thought process and technical analysis involved in executing successful swing trades.
Understanding the Historical Trades
NELCO has been a highly profitable stock with repeated swing trade opportunities showing up in a timely mannner, let's get into the details of how the swing trade set up looks on NELCO's charts. Executed in May, July, and August. Each trade, meticulously timed and executed, yielded profits of 12-13%, 16.5%, and 9%, respectively. The holding periods ranged from 2 days to a month, showcasing the importance of timing and strategic exits.
The Chart Analysis
The foundation of our swing trading strategy lies in comprehensive chart analysis, beginning with identification of the stock's primary trend direction using the largest possible timeframe like the weekly or the monthly. The weekly chart serves as our compass in most cases when it comes to analyzing the Indian Equities. This is crucial because we only want to trade 'with the Trend' all the way from the largest to the smallest. The biggest mistake naive traders make is betting against the trend of a larger time frame. You can't cross the ocean without timing the tide. Aligning the trends unfolding on multiple timeframes, including daily, 75-minute, and 15-minute charts, ensures the foundation for coherent and robust trading strategy.
Identifying Entry Points and Risk Management
My analysis involves detecting potential trend shifts from correctionary to impulse in a smaller timeframe to align with a larger timeframe. This helps me find optimised entry points. I deploy a combination of 3 studies to achieve this result-
Momentum Analysis - Relative Strength Index (RSI)
Price Analysis- Exponential Moving Averages (EMA)
Volume Analysis- Histograms of 20day and 100 day average volume's difference.
This analysis is performed on all the 6 timeframes to define and refine our entries.
The next goal is to reduce the risk to capital deployed by deploying effective risk management strategies.
The Art of Trailing Stop Loss
One of the key aspects of successful swing trading is the art of trailing stop losses. I demonstrate how to dynamically adjust stop loss levels based on changing market conditions and evolving price action. This not only safeguards profits but also prevents unnecessary losses during market fluctuations. The practical demonstration of adjusting stop-loss levels based on changing resistance zones and evolving price action brings the concept to life. It not only serves as a risk management strategy but also highlights the adaptability required in the dynamic world of swing trading. Watch the Video here: https://www.youtube.com/watch?v=dOFSvxIKSxQ&t=2s
Conclusion
Mastering swing trading requires a combination of technical analysis, risk management, and the ability to adapt to evolving market conditions. By sharing insights into our NELCO trades, we hope to empower you with the knowledge needed to navigate the complex world of swing trading successfully.
If you're eager to delve deeper into the world of swing trading and receive real-time trade setups, join my Telegram channel by clicking on link : https://t.me/tradewithkavita
Watch past webinars for more technical analysis and swing trading knowledge sharing https://www.youtube.com/@EXP_Invest
Thank you for reading!
-Kavita Agrawal CMT CFA
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