My Swing Trading Guide & Routine

Take advantage of rallies and sit out of corrections

Every trader must have their own trading guide- an objective system that they follow majority of the time, with only a few discretionary decisions. Without an objective system, your results will not be consistent. This is my trading system and routine.

Market Direction Guide

• Before the market opens every day, you must first decide if this is a day you will trade, or just sit back. Check the prior day close of CNXSMALLCAP and NIFTYEQUALWEIGHT100 index. These must both close above their 9 EMA. The 9 EMA must be higher than the 20 EMA. If either index has closed below, you will not take new trades- a sell signal has been generated.

• The second signal is to check how many stocks above 2000 Cr market cap are trading above their 10 day moving average. If it is less than 450, you will not take any new trades- This is also a sell signal. Until this number is above 450, you will not take new trades. (Create a screener on chartink for this, or just use mine) If you follow both of these signals, it will ensure that you are out of short term corrections and you stop increasing your risk at the end of a rally.

• Start taking new trades when all signals are fulfilled- This usually happens in a correction. It means the correction could be coming to an end. Take 2 trades, and as long as those two trades are net positive and market direction is still fulfilling the above criteria, you can keep taking additional trades till a sell signal is generated. Don’t take too many in a day- the maximum I would take is 2.

Buying Guide

• Stocks that you select for trading must first fulfill fundamental criteria - Revenue growth in the most recent quarter must be greater than 20% AND greater than the growth shown in the same quarter of last year. Earnings must be positive OR rapidly improving from big negative to 0. Promoters & FII/ DIIs must not be decreasing their holdings in the recent period. The quarterly earnings report must not be upcoming in the next 4 days.

• The stock must also fulfill technical criteria - Price should be above 200 DMA, 50 DMA, and 20 DMA, also 20 DMA should be above the 50 DMA. This makes sure we are not trading the losers.

Only trade these two setups, on the DAILY chart:

• Bullish Tight flag (a tight consolidation period after a rapid run up)

• Base breakout (A proper base structure with higher lows, also called a VCP or ascending triangle)

You can trade any setup that you are comfortable with. It can be moving average crossovers, etc. But the above setups work fine for me.

Selling Guide

• Initial stop loss below swing low if breakout candle is caught early. Initial stop loss should be below breakout day candle if the candle was caught late. If the closing on the same day is a big fail and ends in red, you can exit on the same day. 

• Once trade starts going your way up to 1R, start improving the stop loss little by little after every closing day to a level where you think it will not get hit by random price noise. Sometimes it can still be under break even but improved from initial level.

• When a trade is up 2R, sell half position, move stop loss to breakeven if you haven’t already. Trail the remaining position using a daily 9EMA on a closing basis. You can use first close to sell or wait for a second close below the first based on how much room you think the stock deserves.

• If today’s the day that the market looks like it's going to generate a sell signal, (cnxsmallcap OR  niftyequalweight100 are now trading under the 9EMA) then exit all trades which are in loss immediately, and set stop loss to previous day's low or today’s low (whichever is lower) to all other positions. If prices are already at that low, exit.

• Always sell before earnings day. Do not hold stock overnight when earnings will be out post-market.