Swing trading is a more suitable strategy for capturing big moves in stocks over weeks, months, or even years.
Breakout strategy in swing trading involves identifying stocks with multiple legs higher and recognizing patterns of orderly pullbacks or sideways consolidation.
Combining momentum and chart patterns with fundamental analysis can provide an edge in trading by understanding the fuel behind a stock's momentum and capitalizing on trends.
Deep dives
Christian's journey from day trading to swing trading
Christian Colamage started as a day trader but eventually transitioned to swing trading. He discovered swing trading through social media and books on swing and position trading. He realized that big moves in stocks often took weeks, months, or even years to play out, making swing trading more suitable. Christian discussed the importance of identifying set-ups that show relative strength to the market and have strong absolute momentum. He also emphasized the significance of studying patterns, using moving averages as trailing stops, and learning to navigate different market conditions.
The breakout strategy and its goal
Christian focuses on breakout strategies in swing trading. The goal of this strategy is to identify stocks that have experienced multiple legs higher, with periods of consolidation or pullbacks in between. By recognizing patterns of orderly pullbacks or sideways consolidation, traders can pinpoint potential breakouts. Christian looks for large absolute and relative momentum, stocks that demonstrate strength compared to others. He explained that it is crucial to understand market sentiment and trade the right set-ups in favorable market conditions.
Challenges faced and lessons learned
Christian acknowledges two main challenges: overtrading and patience. He admitted being addicted to trading and often exceeding his planned activity. Additionally, he struggles with patiently following his exit rules and overriding them. He emphasized the importance of sticking to the method and not trying to outsmart the rules. Christian also mentioned scaling up his trading success but recognized the need to manage the risks associated with increased account size.
Importance of Trading Leading Stocks
Trading leading stocks is crucial in bull markets as they are the stocks that go up the most and are the most liquid. These stocks, mostly medium to large caps, have the ability to resist market downturns and consistently perform well. It is important to identify these leading stocks by focusing on price movements and market signals rather than relying on opinions or indicators from external sources.
The Role of Fundamentals in Trading
While momentum and chart patterns can be profitable trading strategies, combining them with a fundamental analysis can provide a significant edge. Identifying the fuel behind a stock's momentum, such as strong earnings and revenue growth, helps traders make more informed decisions and increase their conviction in a trade. Understanding the fundamental drivers of specific sectors or groups, like electric cars or lithium-related companies, allows traders to capitalize on trends and trade with a clearer strategy. By considering both technical and fundamental aspects, traders can enhance their profitability and reduce the reliance on speculation.
Since entering the U.S. equity market in 2011, Swedish swing trader Kristjan Kullamägi has attained a rare level of trading success; having realized ten’s of millions in trading profits. Which is only more impressive, given he’s a self-funded, independent trader…
During this episode, Kristjan breaks down the breakout strategy which has lead to his exponential returns over the past decade—and he shares valuable market knowledge he’s acquired along the way.
