How to 10X Your Swing Trading Results Over the Next 2 Years
We wrapped up our first trading boot camp and it was a big success!
In the pre-market and afternoon live streams each trading day we demonstrated in real time how just focusing on your top long strategy, with a careful set of qualification rules, can turn a rough period for your trading into a profitable one.
For instance, stocks like XPEV and ARQT met all the qualification rules in our top strategy for rapid account growth while marginal trades like PRCH and multiple other lower priced stocks would have led to losses or just spinning your wheels overall during a market pullback.
So just by raising the bar of what constitutes an ideal trade using your strategy, in this case by using our top strategy for rapid account growth taught in the course, turned a really rough period into a good one.
One of the Secrets to Swing Trading Success
In the boot camp we talked about one of the key things that successful traders do very well. Namely, they lose a lot less during choppy markets, market corrections and periods just before then.
In this case, you would have actually made money overall just by focusing on the first profit target in our #1 strategy for rapid account growth. The ideal high tight flag breakout.
Less than 10% of bull flags are high tight flags. Many high tight flags never break out. Of the ones that do, only about 20% of those will meet our course rules.
So by just focusing on your top strategy, you can cure the worst problem most traders face. Over trading at the worst times. Ideal high tight flag breakouts only occur about once per week on average. So sticking with just this one ideal bullish technical breakout not only lifts your win rate but also automatically keeps you from overtrading at the worst times.
In a stretched market, choppy consolidation or market downtrend we forget about the homerun trades and go for primarily the first profit target. The average time in the trade when doing so is about 1.5 trading days with ideal high tight flag breakouts.
So this keeps us in only the most ideal trades (and in cash most of the time) while the market has wild gyrations or falls. We just showed this in real-time during the 2 week boot camp. In the meantime, we build our watch list of other top technical patterns on great stocks so we are ready when the market trend starts to give us the green light again.
The stock market is just a series of market uptrends and market downtrends over the years as time goes by. We want to take full advantage of the markets coming out of correction or trending into new highs while focusing on just the very best opportunities and trading much less during market consolidations and larger drawdowns.
How to 10X Your Trading Results
In the boot camp we showed what a great traders equity curve looks like. One big difference is that great traders are drawing down less during more difficult, wild choppy periods for the market.
Most traders will over trade, trade multiple strategies that they are not an expert at yet, revenge trade and make other mistakes during a market period like this. The best traders are keenly aware of whether their strategy matches the current market conditions and are working well or not.
Top traders are busy working hard right now on finding great stocks for their watch list, reviewing past trades to clean up mistakes, making adjustments and are always prepared for the market turn. Focusing on just 1 strategy, such as ideal high tight flag breakouts or ideal earnings breakouts, can conserve limited time and can lead to much better results over the long-term.
One of the biggest benefits of this is that you are only trading the highest percentage trades (over the long-term) about once per week or less. This turns a large drawdown into a much smaller one just by trading less to begin with. The trades we focus on also have a higher percentage of big winners.
During the training we showed how turning a 40% drawdown into a 5% drawdown can make a 10x difference over the next couple years. If you double your account over the next really good period for the market, which might last several weeks or so, you are making great progress. With a 40% drawdown ahead of it, not so much. If you lose 50% you need a double just to get back to even.
Last year we had 3 really good periods where the market was trending into new highs or coming out of a large pullback or correction. These periods lasted several weeks or so. The top strategy for rapid account growth alone could have led to around a 150% gain from about early May to early August with no margin. And that was just one of the trending periods for the market last year.
But if you just draw down a lot less during the tough periods for the market with unpredictable wild swings up and down, you are set up to do very well during the next trending phase for the market instead of just trying to get back to even.
Stepping on the Gas
Two mistakes that most traders make trying to 10x their results has to do with stepping on the gas at the wrong time.
Due to the natural emotional reaction to a losing trade, many traders will quickly look for another trade to make their money back. They might revenge trade the same stock or force a trade on a lower priced, lower quality stock. Losing even more that day or week.
This turns a smaller drawdown into a larger one and again really hurts your long-term results as outlined above.
The other mistake is to look for some kind of VIX signal, oversold indicator or some other technical indicator and immediately get super aggressive. The problem with this is that the signal often fails to lead to a sustained uptrend. Or, there is still just too much volatility to achieve a higher win rate while using a tight stop.
Its better to scale once we have clear signs that the trend is switching to the upside and be aware of upcoming news announcements and see that we have a lot of clean breakouts on the types of stocks that we trade. In other words, signs that the top strategies are working with tight stop-losses holding.
Stepping on the gas should occur when we have a lot of great technical setups that are working with a market trend in our favor. Usually this is a market trending near or into 52-week highs with bad news already priced in and with likely good news ahead.
How Not to 10X Your Results
Some would say to just use margin or options to 10x your trading results.
The problem with that is the math behind trading. For instance, if you use margin to turn a 7% profit into a 70% profit, that’s great. The problem is that a 5% loss becomes a 50% loss (or more in the case of options).
Losing 50% on a trade turns $1,000 into $500. Now a 70% profit only brings that back up to $850. So you averaged a profit per trade (the average of 70% and -50% is +10%). However, you are going backward in your account.
If you lose 5% on the first trade, $1,000 turns into $995. A 7% profit on the next trade turns $995 into $1,016.50.
Nothing changed in the 2 examples other than margin. Same entry, same exit price. We turned a winning period into a losing period just by over position sizing.
Despite the reality of math applied to trading, many will go out and trade low priced stocks that have an inherently lower win rate when going long. And then take really large position sizes and even use margin in many cases believe it or not.
Options are worse because the option value is eroding over time all else being equal. The option premium decays over time. And it can be much more difficult to exit a trade near the current price of the stock.
What do Do Now
Now is a great time to do the research to find a great strategy that has worked over many years. It may take 6 months or more of researching 10s of thousands of charts. But its a necessary first step if you do not already have a proven technical strategy.
Its also the time to update your watch list with great stocks that are holding up well in bullish base formations ahead of a market turn. The ones closer to highs are generally better.
In fact, we have featured several of them this week in the alert service. This saves you a ton of time and allows you to be prepared to profit when the market begins its next sustained uptrend which will likely occur once the final key trade negotiations are near.
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