Ed Heath s Guerilla Swing Trading Plan (as of 1/22/13)

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Junior Briggs
8 years ago
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1 Ed Heath s Guerilla Swing Trading Plan (as of 1/22/13) Synopsis: I call my trading style Guerilla Swing Trading. I trade upward momentum stocks that have pulled back for a buying opportunity and my goal is to hit a profit target in 1-2 days. Otherwise, I ll hold for a short term swing of usually 3-5 days. My goal is to make $200-$300+ profit in 1-2 days off a $20,000 position (which is only a 1% - 1.5%+ gain). I hope to make more if I hold after the 2 nd day for a longer swing. I hold 5-6 positions at the most and have a reserve of cash to buy at least 2 more positions. I don t trade volatile stocks or stocks with low volume (less than 300,000 shares daily). My trading motto is, A bird in the hand is worth two in the bush! My bird is $200+ and I don t want to let it go to possibly capture more because you can t predict what the markets will do in the future. I found that greed is a killer of profits! Broker and Trading screen: I use Scottrade as my broker and Scottrade Elite for my charts. My watch list: I get my watch list from a free scanner I use from Scottrade called Trade Ideas. Each day I run it during market hours looking for good pullback swing trade set-ups to put on my watch list to either buy now or watch for the next couple of days. My criteria is: 1) Just out of oversold on the 60 minute; 2) >300,000 shares; and 3) price over $10. It produces both bottom fishing set-ups (which I don t trade), and my pullback opportunities (which I do trade). Market direction: Depending on what market we are in, will determine how I will trade. I use the moving averages on the S&P index to determine the general market direction. If the 2 EMA is above the 5 EMA on the daily chart, we are in a short term up-trending market and I will swing trade long. However, if the 2 EMA is below the 5 EMA on the daily, we are in a short term downtrend. During this period I will either do nothing, trade some of the ultra-short (inverse) ETFs, or day trade an up-trending stock, but I will usually not hold the stock overnight unless the market turns up-trending. I use the 2EMA over the 5EMA of the S&P on the 13min chart as an intraday indicator during the day for a trading direction. My charts: I use candlesticks, a Bollinger band (13 SMA/ 2 Std. Dev.), 2 EMA (thin yellow line), 5 EMA (black line), 8 EMA only on the daily (lime line), 13 EMA (red line), 34 EMA (green line), 50 SMA (blue line), 89 EMA (orange line), 200 SMA (gray line), Slow Stochastic (13/3) with a Williams %R (13) in the same window, and volume. I have my screen set-up with 4 linking windows and a scanner. I have a daily chart (3 months) on the left, 60 minute (1 week) in middle top, a 3 minute chart (.5 day) and put scanner on its left side, and a 13 minute chart (2 day) on the right. See what my screen looks like below:

My goal is to make $200-$300+ profit in 1-2 days off a $20,000 position (which is only a 1% - 1.5%+ gain). I hope to make more if I hold after the 2 nd day for a longer swing.

2 The buy set-up and signal: Below is how a perfect buy set-up would look on my screen (of course without the rectangles). On the daily chart below, I like to buy upward momentum stocks where the 13 EMA is over the 50 SMA, and the 50 SMA is over the 89 EMA. I prefer price to be above the 50 SMA, but not below the 89 EMA unless price is coming back up and there is a higher low. I usually don t buy a stock that is below the 200 SMA, unless it shows an upward trend with higher lows and higher highs. I also want to see the price at or near the bottom of the Bollinger Band, with Slow Stochastic and Williams at or near oversold and starting to flatten out or curl up. I also look for

I prefer price to be above the 50 SMA, but not below the 89 EMA unless price is coming back up and there is a higher low.

3 a daily bullish candlestick signal either forming or confirming: a Hammer, Inverted Hammer, Southern Doji, Piercing Pattern, Bullish Engulf, Bullish Harami, or Morning Star. Note: I want to enter the trade as long as price is not more than 1% above the low of the day! On the 60 minute chart below, I want to see the 2 EMA crossing up through the 5 EMA. I also want to at least the Williams rising up out of oversold, but best if also Stochastic follows it. The 60min chart is used mostly for guidance and I do not trade from it. On the 13 minute chart below, I want to see the 2 EMA (yellow line) cross up through the 5 EMA (black line), but best through the 13 EMA (red line). The best spot to enter is somewhere

I also want to at least the Williams rising up out of oversold, but best if also Stochastic follows it. The 60min chart is used mostly for guidance and I do not trade from it.

4 between the 13 EMA and the 34 EMA (green line) on the 13min. I usually don t enter if above the 89 EMA. More notes on the 13min: I try to enter the trade early with the LOD (low of day) being less than -1% below of the purchase price. I wait until after the first 13min candle (9:43am) to buy and want to see a higher 2 nd candle. Depending on the price and the market, I usually find it best to wait until after the 2 nd 13min candle (9:56am) to see a higher 3 rd candle as long as the LOD is still less than -1% from price. A lot of times there is a market reversal at 10:00am. I then want to see the 5EMA/50SMA cross on the 13 minute chart to confirm a good buy and an uptrend has started. I usually don t buy after 11:00am. The 13min chart is my main chart I use in following a trade! Stops: If you bought the stock less than 1% above the low of the day (LOD) as mentioned above, than a few pennies below the LOD would be your stop for the day of purchase. That would produce approximately a -1% ($200) loss on a 20k position. If I haven t reached my profit goal, or the stock hasn t stop out, and it looks like it may move higher; I ll turn it into a swing-trade by holding it overnight. I ll keep just under the LOD as my stop. Note: If you decide to turn the trade into a longer term swing trade, I d set the stop about -1% to -1.5% below price on some kind of support (low of the day, high/low of a previous candle that shows good support, or a MA, it s really a judgment call). I d then adjust my stops up as the stock up-trends. If you still have the stock after a few days, the 13 EMA on the daily provides a good guideline of where the stop should be if the trade turns into a longer term swing trade (days to weeks). If you want a tighter stop, I d use the LOD of previous day. When to sell the trade: On the day of purchase, I ll sell if the trade turns bad even before my stop is triggered if it looks like it may not recover and the market is heading down. It is better

I wait until after the first 13min candle (9:43am) to buy and want to see a higher 2 nd candle.

5 to take a small loss if the trade isn t going in the direction you want to preserve as much principal as possible. I ll give a trade about a -.5% to.75% (-$100-$150) mental wiggle room before making the decision to sell before my stop, or I ll just let it run the stop. Once the stock hits my profit target of at least $200+ (+1%) on the day of purchase on the 5 EMA of the 13min chart, I ll start to look for a sell signal (may not come for many minutes, hours, or even a day). If the price is inside the Bollinger Band on the 13min chart, I ll sell on the 2EMA/5EMA cross on the 13min chart on the first or second day. However, if price is thrusting up on the day of purchase, and is outside the Bollinger Band on the 13 minute chart, I ll use the 3 minute chart to sell on the 2EMA/13EMA cross keeping more profits. Note: If the market and stock are strong, before I sell for a profit trade, I ll consider if I want to turn this 1-2 day guerilla swing traded into a longer term swing trade of several days to a week. I ll look at the 60min chart to see if has plenty of room to run before being oversold. I may hold for a swing trade past the 2 nd day. I ll then sell somewhere on a 2 EMA/13 EMA to a 2 EMA/50 SMA downward cross on the 13min chart. This all depends on your risk tolerance level. Notes: Remember my trading motto: A bird in the hand is worth two in the bush!, and don t get too greedy! Trading style to consider: Do a guerilla swing profit trade with half of your position, and then swing trade the other half. Trading style to consider: Use the Guerilla Swing Trading style for an early entry in a swing trade. Then swing trade the stock using the Low of Day (LOD) of the previous day as your stop, or another trading swing style is to use the 2/5 EMA cross as an exit signal. Find the timeframe, indicators, and buy/sell signals that work the best for you and create your own trading style! Disclaimer: This document is my personal trading system and should only be used for educational purposes. I am not a professional financial advisor and all investing/trading comes with risks!

Once the stock hits my profit target of at least $200+ (+1%) on the day of purchase on the 5 EMA of the 13min chart, I ll start to look for a sell signal (may not come for many minutes, hours, or

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