BEST Swing Trading Strategy If You Have A 9-To-5 Job - YouTube

If you have a 9 to 5 job, becoming a trader in your spare time can be quite a challenge.

Many people have an interest in trading but don't want to pursue it as a full-time career

or to give up their day job to do it.

And you don’t have to quit your job because many traders only trade part-time, for one

or 2 hours per day.

So if you have other time commitments but you still want to trade part-time, the following

strategy can help you to maximize your efforts in the least amount of time and record consistent

results over the long term.

So let’s get started!

The strategy involves trading price extensions in 3-wave patterns, using only price action

and the Fibonacci 161.8 level.

Our aim is to trade price action that takes place primarily in the third wave of a 3-wave

pattern.

A 3-wave pattern is a simplified Elliot wave cycle.

If you are familiar with Elliot wave theory, you probably know that trying to trade it

in real time is quite difficult, especially for beginners.

The major problem is that you cannot really recognize an Elliot Wave until it has already

passed.

So, I decided to focus only on the first 3 waves of the cycle.

And let me explain how I do this.

Prices within all major financial markets tend to move in a fairly predictable manner.

Essentially, the market is composed of impulsive price moves, and corrective price moves.

Elliot wave cycle is a 5-wave pattern.

Three of those waves (1, 3 and 5) move in the direction of the underlying trend, while

the two waves (2 and 4) act as countertrend interruptions, or retracements.

Well, because Elliot waves are subjective, I decided to focus only on the first 3-waves:

an impulsive wave, a corrective price move and another impulsive move, which is the price

movement we will trade.

The 3-wave pattern is used as a continuation trading setup that is designed to take advantage

of the second impulsive move of the market.

In any up trending market, there is a pattern of higher highs and higher lows.

In order for the trend to the upside to remain active, each successive impulse swing must

take out the point B in the formation.

When price surpasses the price at #2 swing, you can use this as confirmation that the

3-wave pattern is present.

This is a chart that explains the concept of the 3-wave trading pattern.

In an uptrend market situation, price will make 3 points

Point A is the lowest low point, which forms a support level.

Point B will be the highest point, and forms a level that we consider as potential resistance

Point C will be the 2nd low point, a support level (which must be higher than point A).

The breakout of price above point B signals the continuation of the uptrend.

In a downtrend market, the 3-wave pattern forms when:

Point A becomes the highest point when price finds resistance and moves down.

Point B becomes the lowest low point (and forms a level that we consider as potential

support) and Then price moves up and finds another resistance

at point C. When price breaks the point B support level,

it indicates that the market is most likely to continue downward

The most important variable in this strategy is the swing size, the first AB wave, because

our risk to reward ratio will depend on the strength of the first impulse wave.

A swing size that is too small can reduce profit targets to such narrow margins that

it becomes difficult to execute them.

If the swing size is too big, it could take weeks or even months to reach the target price.

The trading strategy requires the following steps:

• Defining a minimum swing size, meaning the first wave of the 3-wave pattern

• Applying the Fibonacci tool, with a small twist, to find the 1.618 ratio.

• Taking a trade at the 50% Fib level.

Now, stay with me for the next part because it’s important.

In order to find the 1.618 ratio, you could use FIB extentions.

But I like to do it in another way.

The correct way to apply a FIB retracement is from a swing low to the swing high in an

uptrend (from Point A to Point B), and from the swing high to the swing low in a downtrend.

To find the 1.618 ratio, I add the FIB retracement from Point B to point A, so the other way

around.

I know it might seem weird or incorrect, but this is how I like to find the 1.618 ratio.

Here are the main conditions in order to find the best signals:

1.

Trend line breakout A trendline acts as a support for the price

when applied to consecutive higher lows in an uptrend, and as a resistance when applied

to consecutive lower highs in a downtrend.

Once a rising trendline is broken, that trendline becomes a resistance for price.

Similarly, once a falling trendline is broken, that trendline becomes a support for the price.

Basically, the first wave, AB wave must be the wave that breaks the trendline, like in

this example.

If this sound complicated, don’t worry, we’ll have plenty of examples later.

2.

Point C must be higher than Point A for an up move and lower than point A for a down

move When AB wave ends, it will lead to a price

move lower in BC wave, that will retrace a portion of the wave one move.

However, the second wave must not fall below the start of wave one.

This is an extremely important rule.

The second wave must retrace to the 38.2 Fib level at most.

If it retraces to 23.6 Fib level, I personally ignore the setup.

The buy or sell zone, depending on the setup, is the area between 38.2 and 50 Fib level.

3.

If price fails to retrace to the 50% Fib level, ignore the setup.

In some cases, the trendline will be broken, but the price action won’t make a decent

retracement.

Sometimes it will retrace to the 61.8 level and then resume its move.

For this setup, we want price to retrace to the 50% level.

If it doesn’t, we find other opportunities.

So, trendline breakout, find the AB wave, apply FIB retracement from point B to point

A, and try to take a trade at around the 50% Fib level, targeting the 1.618 ratio.

It’s easy, and most important, price-action based.

Here we have the setup on the pound dollar on the 4-hour time frame.

We have a clear trendline breakout.

Point A is the lowest point in the chart, starting the AB wave.

Also the AB wave breaks the trend line.

Point B indicates a possible bullish trend.

A possible, because we don’t know yet, the price may reverse in the opposite direction.

So we apply the Fib retracement, remember, the other way around, from point B to point

A. Point C indicates the pullback, in this case

to the 38.2 Level, which is a valid condition.

If price stalls and rejects the level, you could switch to a lower time frame to time

your entry My preference is to enter the trade at the

50% FIB level, with a stop loss below the 23.6 level and targeting the 1.618 ratio.

If price starts moving upwards, then the breakout of price at point B would add fuel to our

position.

Most trades would enter right here, at the breakout of point B, but we had a better,

a smarter entry.

At the moment of the breakout, we would be already in profit.

When price breaks point B, you could move your stop to break even.

I personally do it every time.

Sometime the prices retraces to the entry point, leaving us with a breakeven trade and

sometimes goes right to our target.

In this example, the price continued its upward direction and reached the 1.618 ratio.

Here we have Euro dollar on the daily time frame.

We have the trendline breakout.

Point A is the highest point in the chart starting the AB wave and this wave breaks

the trend line.

Point B indicates a possible bearish trend.

Then we apply the Fib retracement from point B to point A.

Price retraced to the 38.2 Fib Level, forming a pin bar, a reversal pattern.

We enter the trade at the 50% FIB level, with a stop loss above the 23.6 level and targeting

the 1.618 ratio.

After the breakout of price at point B, price came back to retest the level, which then

became a strong resistance area.

When price breaks point B, we moved our stop to break even

And the price continued its downward direction and reached the 1.618 ratio.

And look how powerful that level was.

As price reached that level, it immediately bounced back.

Another long position, this time a continuation trade.

Here’s the trendline breakout, with AB wave as the first impulsive move.

Price retraced more that 50%, remember, almost reaching the 38.2 level.

We enter at the 50% level, with a stop loss below this area and targeting the 1.618 ratio.

Observe once again, that after price broke the B point, that level became a support area.

Price retested the level, new traders enter the market, and took the price to our final

target at the 1.618 ratio.

The reward to risk ratio is maybe the most important metric in this trading strategy.

By entering at the 50% level and targeting the 1.618 level, you get at least 3:1 risk

reward ratio, at minimum, in most cases over 4:1 risk to reward ratio.

Remember the rules we discussed before.

If the price retraces all the way to the 23.6 level, ignore the setup.

And if the price doesn’t reach the 50% level, again, look elsewhere.

We need those conditions, for the highest probability setups.

IN this example, price retraced and even closed above the 38.2 level, which invalided the

setup.

And the price did retrace, most likely because of the initial trendline breakout, another

important condition.

And even if the price managed to close below the B point, it failed to reach our final

target.

You could try to trade this scenario, and squeeze some points, maybe to the 100% level.

The best part of this strategy is that you only have to spend 30 – 60 minutes each

day, which makes it perfect if you have a busy program and don’t have time to trade.

Make sure you analyze the Daily, 4H and 1H timeframes and avoid narrow range markets,

with too much or not enough volatility, and other bad conditions.

And yes, you could also use this strategy for day trading, on lower timeframes.

Here are other example of valid trades.

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Until next time.