Our Top Swing Trading Strategies for 2025
The feared sell off in early 2025 has turned into a 1 day affair so far. After a good year for the market you often see investors waiting for the first of a new year to sell to put off taxes on the winners for another 12 months.
So far our top swing trading opportunities for the new year are taking off despite this tendency. The price action looks very good so far in 2025.
We were pointing out to customers that its possible that taxes could be lower in the future given the election results. Plus its more likely now that the market will go higher in the years ahead with more pro-growth policies over the next four years given the election results.
So perhaps its far too early to sell leading stocks like normally happens early in a new year. Or, there is just too much buying demand just under current prices to have much of a pullback in early January given the improved economic outlook for the years ahead.
Today lets talk about how we will be taking full advantage of a bull market swing trading in 2025 and beyond. For as long as it lasts.
What Not to Do When Swing Trading in 2025 and Picking a Strategy
If we learned anything from 2023 and 2024, its that listening to financial media and using that to determine your swing trading strategy for the road ahead is a bad idea.
It sounds like a broken record but 2024 also reinforced the notion that macro expert and economist forecasts are right only about half the time at best. We never did see that small cap leadership really. Small caps barely had a double digit year and had less than half of the returns of large caps overall.
Another key lesson is that bad sentiment is often bullish and overly bullish sentiment can be bearish for the weeks ahead.
In any case, the year did not start with a big selloff. We could see sudden news that negatively affects the market, especially early on in a new administration and new congress and during negotiations on trade, but those should present buying opportunities for us when swing trading.
Fears That Held Investors and Swing Traders Back in 2024 and Again in 2025
The biggest argument right now for the bears is that valuations are stretched. The forward P/E ratio of the S&P 500 is close to 23 times earnings which is high compared to the historical average which is around 18 over the past 20 years.
However, there is a strong tendency for market P/E ratios to make higher lows and higher highs as a bull market wears on. We saw this in the 1950s and 1960s bull market. Also, in the 1980s to 2000 bull market. And we have seen this since the financial crisis as well.
Its true that high P/E ratios can be a bad sign for long-term investors but its actually a good sign for long swing traders in the shorter-term.
The best markets for our strategies tend to be those with high forward P/E ratios. The late 1990s is a good example along with 2020. The median P/E ratio of the S&P 500 is actually a lot lower and the big tech stocks that increase the S&P’s average P/E are actually growing earnings strongly in most cases.
The other trend not talked about in the financial media is that the max P/E ratio (before the eventual market top in each long-term bull market) in each 20 year cycle continues to grow. So its entirely possible we will see the forward P/E ratio of the S&P 500 top out at a much higher level ahead of a major market top. Meaning, a level higher than what we saw in 1999 which was around 35 times forward earnings.
So, yes, the market could become nearly twice as expensive over the next several years. If this were to occur, it would likely correspond with stronger productivity and much stronger earnings for a time. We saw this productivity acceleration in the late 90s.
We actually may be entering the best part of the cycle to swing trade. The later portions of the cycle are often when the most millionaires are made trading. Similar to what we saw in the late 1990s.
And keep in mind that the median P/E ratio for small caps is around 10 while the median is around 17 for the S&P 500. Normally, small caps sell at a premium to large caps.
So if small caps start to lead the market and their median P/E catches up to the long-term normal differential, we could see a profit bonanza for good swing traders in 2025.
The Top Chart Pattern We Will be Trading in 2025
Today we saw CRNC break out of the most bullish chart pattern. A high tight flag. The stock soared over 80% from one of the entry points taught in the new rapid account growth course the same day.
So, yeah, we will be trading high tight flags this year to be sure. Some of the best small caps will be gravy out of this pattern as long as the bull market continues. The course goes over how we determine when to move to cash.
We saw an incredible win streak over the summer on the high tight flag breakouts that met our strategy rules in the new rapid account growth course. Once a hawkish Fed pivot is complete and the bond market settles down, we could see another amazing period for the strategy.
Its not a pattern you want to trade without a good set of rules as to when to enter and exit the trade. Only about 25% of high tight flag breakouts will meet the course rules pre-market on the day of the breakout. The ones that do not meet the rules at that point have a less than 50/50 shot of being successful after looking at over 100 high tight flag breakouts.
Top Stock Trading Strategies to Start 2025
One of the biggest advantages of the strategy is that 75% of the time the trade is over within just over 1 trading day if you take the entire position off at the first profit target. If you take the entire position off at the first profit target, the average is over 5% per trade averaging the wins and losses in multiple back-tests over different market conditions.
So this allows you to take a profit more quickly and get ready to trade the next ideal high tight flag that come up more often this time of year. This is how to achieve exponential account growth during a bull market.
If you use the optimized exit strategy taught in the course, the average winner was around 10% with about a 3.5 day hold time on average. The best strategy we have tested by far.
Right now there are hundreds of these extremely bullish patterns setting up and nearing a good technical entry point.
At 5% per trade, averaging wins and losses, 15 is enough to double your account using the rule of 72. Pretty incredible potential while using a very tight stop-loss. We see about 1 ideal breakout per week on average. More during earnings season and fewer outside of earnings season. Earnings season starts later next week.
Given the first back-test about matched the results in the second back-test and based on our own trading every day, we will definitely be using this strategy in a bull market as long as the market holds up well enough in the months ahead. Until the Nasdaq is in a correction, this will be a go to strategy for us in 2025.
The strategy has a test for the current market trend and level of volatility that needs to pass in most cases before we use it. This test is easily being passed recently and we are seeing great price action on breakouts to start the new year.
Again, 75% of the time we will be back in cash in just over 1 trading day using this strategy per the recent test results.
This means we will likely be sitting mostly in cash or our favorite market etf half of the time or more waiting for the next ideal high tight flag breakout if the strategy continues to perform about the same as during the prior 2 back tests that were performed over time periods with multiple market corrections.
This reduces the time we are exposed to overall market risk while trading the most exciting opportunities with a ton of profit potential while using a very tight stop-loss on each trade. Its very tough to beat this strategy.
Another Great Strategy for 2025
As most real traders know, the big money in trading is made during earnings season. This is when investors get the most information about the health of a company in an earnings press release and conference call that usually occurs right afterwards.
The biggest earnings beats and guidance raise on the top growth stocks will often produce a large gap and go pattern. These top echelon earnings gap trades are the next area of focus for us in 2025.
The earnings eruptions strategy goes over how we identify these ideal setups. Recently, APP and UNFI met the rules in the course and were big winners using this strategy. Again, its a strategy where you are targeting an ideal opportunity on a trade that normally lasts just a few days or less.
Its also a very high percentage trade in our back-testing and in our own experience trading. It had the best win rate last quarter.
A Bread and Butter Swing Trading Strategy for 2025
Stocks setting up bullish chart patterns ahead of a big catalyst (such as earnings) are also an area of focus for us in 2025. Again, we are waiting until after the catalyst that is better than expected with a very good outlook before getting long. In a recent blog post we talk about why we favor getting in after the biggest beat and raise quarters on top stocks.
Another focus is stocks in an industry where money is rushing to currently. So stocks with a high industry relative strength is another bullish factor we will be looking for. AI-related stocks are still front and center.
Great double bottoms, cup with handles, flat bases, descending wedges, and flag patterns are on the menu right after a great catalyst. A new market catalyst, industry catalyst, trade deals, leaked progress on tax cut negotiations in Congress or even a drop in the risk-free yield and inflation could be a catalyst.
We will be identifying ideal technical entry points on a daily chart and have the choice to take profits in the first wave higher or keep it for a longer-term swing trade. Or, do a combination of both as commissions are still free with most brokers.
These opportunities come up more often during earnings season which starts up next Friday. Even financials, which dominant the stage during the first couple weeks of earnings season, are ones to watch. Usually, the fun really starts around the time NFLX reports.
A Simple, Effective and Less Time-Consuming Swing Trading Approach in 2025
The 3 Stocks to Wealth strategy on Investtobefree.com is our ranking system approach to trading. Its had an incredible run over the past 12+ years overall.
The first 2 days of 2025 have been terrific for the strategy and service. It had a record month in November ahead of the new year. And January is often one of the best months of the year for the strategy.
The service on investtobefree.com also now has regular videos on the best earnings breakouts we uncover during earnings season. These are potential long-term holds which are even better without the election overhang we had in 2024.
Shorting and Put Options in 2025
The long opportunities right now are doing too well to focus on shorting. However, the market trend could change at any time.
One of the best trades in my lifetime was essentially shorting fannie mae just before it was put into receivership in 2008. But this was only after the long-term downtrend in the market really got going with significant bearish news that kept getting worse.
Fighting the trend when shorting can be a real train wreck as the bears saw in 2024 again. However, if we see a strong bearish signal in the market, we will be looking for the best double tops, head and shoulders patterns and the best downward sloping channels to trade to the downside with fresh, surprising very bearish news.
Eventually the bearish signal will occur but bull markets often last many years as was the case in the late 90s after the last significant rate hike cycle that ended in mid-1995 with a mid-cycle slowdown and economic re-acceleration rather than a recession.
Perhaps they will re-write the economic and macro textbooks after the pandemic induced melt up and the big pullback on the other side. In the meantime, we will continue to trade the current market long-term trend. This is usually higher despite all the fear porn online that just seems to get worse every year.
