How to Swing Trade Near All-Time Highs

Swing trade at all-time highs? Of course!

But… Are you prepared for anything?

The market has lulled everyone into a post-financial crisis haze. For over two years the market has corrected mistakes or lack of discipline. The problem now is we expect it to happen.

Violent price declines on heavy volume “should” follow-through lower. It hasn’t happened. We are experiencing swing trading action that is as close to perfect as you can get.

But I will ask again; are you prepared for anything?

Swing Trade Game Plan: Aggressive

All good trading is the result accepting risk in relation to the potential reward. In the current market that means you should be buying pull-backs aggressively. Initiating new positions at new highs, otherwise known as break-out trades has simply not worked.

Institutions and their computer based competition are clearly waiting for selling to be a buyer. This means you should be using an indicator that measures when momentum to the down-side has slowed down so you can begin buying.

You can use stochastics, MACD or any type of oscillator that demonstrates price action has moved too far too fast. The smart swing trader will also combine a literal price action component for confirmation of the momentum indicator.

This is smart trading because indicators are a derivative of price, while valuable they are not exact for managing risk. I recommend waiting for a higher low on a daily chart to confirm a stochastic divergence, this will minimize risk and give you a quality stop-loss point.

The best profit target for this market is selling into new highs. When the birds are chirping feed-em. No reason to be a greedy swing trader, we have plenty of action to put the money back to work.

Swing Trade Game Plan: Cautious

How much higher can the market go without institutions buying?

Heavy volume on declines and light volume at new highs is a time-tested recipe for distribution. It’s like weight loss, it’s a math equation, you will move lower if you are accumulating less.

You can make a case that this was the scenario for the last 2 years but you would be wrong. The current price action is not a series of tight, worry-free consolidations. We are trading all over the place and it is driving experienced traders crazy.

This means you need to be disciplined with your stop loss. Do not cancel it just before it is about to get hit. Take the planned loss and re-enter if you still like the idea.

Types of Swing Trades to Look For

The scenario to be aware of is a slow grind moving lower. This can be tricky to spot but will be deadly to your account. Slow trends usually last longer. When we make lower highs on the monthly charts and volatility drops it will be time to start short-selling without expectation of new highs.

Remember: “The trend is your friend until the end when it bends.”

Interest rates are ticking up. it is coming. The free ride long is over but this will lead to some good two-way trading.

About the Author

Pete is a full-time trader and mentor since 2000. Author of Equity Trader 101 and the Order Flow Method. He is dedicated to help self-directed traders to bust through the six-figure level.

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