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Swing Trading Strategy – Part 5 – Moving Average & Stochastic Indicator

– Hi, guys. Welcome to the part five of Swing Trading series. So up til now, we have seen the building blocks of swing trading, and now we will be taking the information that we saw in part one, two, three, and four, and that will be applying now in the strategy section. So, in case you haven’t’ watched part one, part two, part three, and part four, before proceeding forward, kindly watch those parts because a lot of what I’m gonna explain here will be more relevant then. So let’s get started. – In this channel, we talk about trading, investing, and market analysis to help you become a better investor and trader.

So if you are new here, consider subscribing. – So, the learning objectives for this part is as follows. So I’ll be showing you a basic swing trading strategy which works extremely well. All you need in this strategy is price, either it can be a bar chart or candlestick chart, simple moving average and stochastic indicator. I’ll be covering up some basics of stochastic indicator and how to use it. For this particular strategy, I have two fundamental criteria which have to be fulfilled. Remember, I had given other criteria as well, in part three, so those apply as well. And I will be taking those briefly in later slides. Then we’ll be moving to the top down approach, where we’ll analyze the broader market first.

Then we’ll move to sectors and then we’ll short list stocks. So entry, exit, and stop loss, with respect to this trading strategy, I’ll be covering towards the end. So this our basic top down approach. We start with the market, move to the sector, then within the sector, we move to the individual stocks, and then we apply the strategy. So whatever framework that we are going to discuss here, that will be applying first on market, then we’ll be moving to sector, and then we’ll be picking out individual stock as a trade. So for this particular strategy, stocks should be the preferred instrument. Kindly avoid futures, options, or any other derivative instrument. By the time I finish off this video, you will know why stocks is the best instrument for this particular strategy. What we are looking to do in this strategy, especially if you wanna go long, is we are trying to buy into temporary weakness in an already established uptrend.

On the flip side, in case we wanna go short, we would want to short sell into temporary strength while the trend remains down. Also, do remember one thing, that our holding timeframe is very limited here because this is swing trading, and we’ll be only holding our trades from few weeks to, let’s say, one or two months. And the whole idea behind this strategy is to target growth stocks in order to get about 5 to 10% return. So, in this previous slide, I’ve shown you that you need three things, that is price, moving average, and stochastic indicator. The moving average, we’d require to determine the trend, so the trend reference would be a simple 200 day moving average. Just remember one thing, that my trading revolves around extremely simple things. So which is why most of my videos, you’ll find just one to two indicators, or mostly I trade with price action. The stochastic indicator that is mentioned here, that is for timing purpose. So precisely timing the trade, I’ll be doing it through stochastic indicator. And for this particular strategy, you can either use a web-based charting platform or a proper technical analysis software.

My bias is always towards technical analysis software and there are some free softwares available, so it’s not that costly, also. So let me first come to the stochastic indicator. So stochastic indicator is just a momentum indicator that was developed by George Lane. Now this typically indicates overbought or oversold level in a stock. So what it basically does is that it compares the closing price to a range of its price over a certain period of time. So the default setting for stochastic is 14, 3, 3, that is for stochastic D, and for stochastic K, it is 14, 3. But for this particular strategy, the default indicator preference would 8, 3, 3 and 8, 3 for stochastic K. So this can act as a wonderful timing indicator, that is what I’ll be showing you in this strategy. So what we need to do is that we don’t need to use this indicator as a trigger or as a reason to buy something. We just need it as a trigger that, yes, this is the precise time to enter a trade.

So there’s a subtle difference in this. You can experiment with the parameters I have given that completely varies from trader to trader, and I would definitely encourage you to try out various parameters so that you can see which parameters actually best fit your overall psychological makeup as a trader. So now I’ll be moving to the fundamental scan. What I need for this particular strategy is that we need to short list growth stocks. Now, I have three fundamental criterias here. Number one, peg ratio has to be greater than two, then, debt to equity should be less than 0.5, and market cap should be greater than 5,000 crows. Now peg ratio is nothing but a ratio that measures growth of a company, which is why I’ve short listed this. And debt equity is less than because no matter what sort of trading you do, you don’t want to be caught up into companies that have too much debt.

Rather, I am targeting companies that have very little debt. And market cap should be greater than 5,000 crores because, personally, for swing trading, I don’t like microcap or small cap stocks. So these parameters, you have to enter in I’ll be entering this in front of you in a slide later. So these are the conditions that we need to put, that is peg ratio should be greater than two, and debt to equity should be less than 0.5, and market capitalization should be greater than 5,000 crores.

After you enter this query, just click on this button and you will get a list of stocks. I’ll be showing you how to do this in just about a minute. So, apart from the previous criteria that I’ve shown here, that is peg ratio, debt to equity, and market cap, remember in part three, we had a checklist where we defined beta value, and average volume, ROCE, ROE, and institutional ownership. This ROCE and ROE would automatically get covered in stocks that are growing at a rapid rate, so these two filters you can kind of remove it. But this beta value, we need to have a stock which is trading at the beta value to be more than or 1.2.

The average volume over a period of 252 days should be greater than this figure. And institutional ownership should be 15% or more. So one thing I wanna say is that for this particular strategy, this fundamental scan is more important. So in case you find average volume about 20, 30% lower than this figure, do not reject the stock. Similarly, if you see beta values somewhere near 1.1, it’s fine. So the thing that I’m trying to tell you is that don’t be too rigid with figures. Try and be flexible. As far as a stock is broadly satisfying all the conditions that I’ve mentioned, you should select it for a swing trade, provided it meets the criteria set in the top down approach that we discussed in earlier parts. So I’ll just show you on how to run this fundamental scan. So this, you can enter it in your website. So now, what I’ll do is that in the query sections, what I write is peg ratio is greater than two. So just browse below and select peg ratio. So this criteria should be put as greater than two.

Then, we are gonna put debt to equity, you select it here, should be less than 0.5. Then you need to move to market capitalization. This should be greater than 5,000 crores. Now once you have entered this criteria, simply click on run this query and you will get a set of results. So we’ve got 86 stocks here. Let’s sort it based on market capitaliztion. So this is the list of stocks that you’ll see. These are high-growth companies which are low in debt.

Let me just put 50 results per page. Yeah, so these are the top 50 stocks that are high-growth companies that are low in debt with market cap greater than 5,000 crores. Let us move to page two. So these are the remaining 36 stocks. So this is the basic fundamental scan that you have to run on Again, this website is absolutely free and you just need to type You need to login, create an account, it’s free, and then you can run this query. So once you have the list of stocks, the next thing that we move to is our strategy screen. Now this how you need to set up your screen. So what I have here is price with 200 day moving average. This is stochastic with parameters 8, 3, 3 and 8, 3. And this is the beta indicator plotted over 252 days. So let us revisit our top down approach method. So this is the market here, then the sector, then stocks.

So what we need to do is first we need to move to the broader market. So the broader market trend would simply be defined by 200 day moving average. That is where the price is above the 200 day moving average or below it. Then once the market trend is established, we will move to broader market trend. That is sector trend. For sector trend, again, simple 200 day moving average suffices. And then we get down to individual stocks where we have already discussed about the criteria that need to be fulfilled, along with high beta, volume, and institutional ownership. We are looking for the fundamental parameters that need to fulfilled, and that is companies should be low on debt, it should be a high growth stock, and market cap should be greater than 5,000 crores. So let me take a case study of 2009, 2010, and then I’ll be moving to a more recent example. So this particular case study is for Nifty. That is a broader market index. Then Bank Nifty, that is a sector, and individual banking stocks that I’ll be taking up in the subsequent slides.

So this is the Nifty 50 chart. Now if you see, I’m just using a 200 day moving average to determine whether the trend is up or not. If price is below the 200 day moving average, I am classifying the trend is up, and in this particular case, I’ll be only looking to trade on the long side. If price is below the 200 day moving average, the trend is down, and I’ll be only looking to trade on the short side. So why I’ve chosen this 200 day moving average is because it’s one of the most widely followed moving average. It represents the overall market sentiment well and it has stood the test of time. Not just in our market. You can actually go to any market and see how beautiful a 200 day moving day average has worked, which is why this is one of my favorite tools that I quite often check. One more thing that I wanna focus on is whenever you’re trying to identify trend, please keep it simple.

Don’t put on many indicators on the chart. Trends should be looked at in such a way that you can explain it to a five year old. That’s how famous traders have put it, and I totally agree with it. In case you have to explain someone about trend, then I think your overall methodology needs to chagne. What you need to simply do is you need to have one simple tool, one simple indicator. You can pick one, whichever you like, but the way you classify trend that has to be extremely, extremely simple. Trend reference cannot be complicated. So keeping this in mind, let’s look at Nifty 50 because the next step is looking at Bank Nifty. Again it’s very similar to Nifty. Variable price has been above the 200 day moving average. There’s a trend in place and the trend is on the upside.

Whenever it’s down, the trend is down, and you only need to take short trade. So look at this classical example, the price is above 200 day moving average, there is a lot of uncertainty that happened over the last few weeks. But had you followed this simple indicator, And this has been consistently mentioning in my weekly market videos that both Bank Nifty and Nifty were actually extremely strong despite the broader market failing to rise. One of the reasons was that price was easily above the 200 day moving average in both these given indices and which is why trend was on the upside and eventually both Nifty and Bank Nifty have actually made new all time highs. So now we move to individual stocks. Now remember what we have done is we have identified trend of broader market, in this case it’s Nifty 50. Then we have identified the trend for Bank Nifty which is the sector. And then now we are moving to individual stocks.

So we are in this phase that is 2009 and 2010. So Nifty 50 is in an up trend. Bank Nifty is in an up trend. Now we look for individual stocks. Now between 2009, there is much 2009 onwards, and between 2010, the stocks that qualified were SBI, Yes Bank, Axis Bank, and ICICI Bank. Similarly between 2011 and 2013, for the banking sector, the stocks which qualified were Yes Bank, ICICI Bank and Axis Bank. Since 2014, Indus Ind Bank, Kotak Bank, Federal Bank have qualified for Swing Trading. So what are the criterias that these stocks have qualified for? Volume, High Beta, Ownership, and the Growth criteria that we’ve seen for this specific video. Now there’s one thing I wanna tell you. Banking stocks won’t qualify for the debt to equity criteria. Usually debt in banking sector is a lot more, which is why when I was explaining the fundamental scan section, I told you that you need to be little flexible in terms of various sectors or individual figures as well, as in the volume criteria or the high beta criteria. You need to be a little bit flexible with stocks you shortlist and with stocks you pass by.

The concept of sister stocks that we discussed in the previous part, that would’ve led you to not participate in SBI between 2009, 2010. And because most of the PSU banks were not confirming the trend even then. Bank of Baroda, Punjab National Bank, and SBI were actually confirming the trend, but I think the smaller PSU banks were still sort of above the 200 day moving average, but still the trend was not that strong. So for a better explanation, I’ll just take up Yes Bank, Axis Bank, and ICICI Bank for the phase 2009 and 2010.

So this is ICICI Bank between 2009 and 2010. So as price moved above the 200 day moving average, we’re not entering the trade. What we are doing is we are waiting precisely for the point when stochastic 8, 3, 3 and 8, 3 touched 20 or dip below it. The moment you see the stochastic below the 20 level, I have marked it at the various points here. See the beta value between 2009 and 2011. It was consistently between and 1.6. So the beta criteria is satisfied as well. So all these points that you are seeing on this chart, these are accumulation point for a swing trade. So I’ll be showing you later which points you need to ignore or which points you need to actually place a trade in. So the next stock is that of Axis Bank.

Again, these points that I’ve marked on the chart, these are the point, accumulation points, where you need to enter a stock for a swing trade. When you would compare based on the data between ’09-‘010, when you would compare ICICI Bank, Axis Bank, and Yes Bank, you would find that in this particular order, the stocks that were extremely strong were Yes Bank, Axis Bank, ICICI, and then SBI. So trading in Yes Bank, this is the Yes Bank chart, so this has rallied more. This is ICICI Bank. It’s trend was up but it was kind of flattish and Axis was the next best.

Now this is, again, how I’ve classified Yes Bank as the best bank in terms of growth criteria. Yes Bank was growing at a more rapid pace than Axis Bank. Axis Bank was growing faster than ICICI, and ICICI was actually growing faster than SBI. So the crux of this strategy is to be into growth stocks and identify when those stocks will enter a period of weakness, and then kind of piggybacking on the trend.

That is what the strategy is all about. So this is Yes Bank. Now if you see this particular point, if you started Buying in here, this swing would’ve easily above 10% developed. If you see this point, this was sort of flattish for a few weeks then it took off. If you see this particular point, again, this immediately rallied about 10%. If you see this point, it actually kind of remained flat for a while, then it moved up. So you need to adjust your position sizing based on what you are seeing on the chart which is why if you see this particular chart, futures is actually not the kind of instrument that you should be trading the strategy with. Now just take up this particular case. In case you start buying here and the price moves down, what you’re essentially sitting at with a sizeable amount of position here, because do not forget in futures, lot size is defined.

So this can be 1,000 shares or 1,500 shares or 2,000 shares. So you’ll be compelled to hold on to those particular lots despite of price falling below your entry price. Whereas in individual stocks, you can actually buy one stock here, 10 stocks here, 20 stocks here, 30 stocks here, 40 stocks here. So the flexibility in terms of position sizing is to a large extent available with only stocks.

Not in futures, not in options because their lot size is actually fixed, right? So how do we enter a trade that I’ll be just covering up in a few slides? I just wanted to give you an overview that our basic step after completing broader market analysis, sector analysis, and then coming to individual stock, our basic criteria is price should be above the 200 day moving average with sector trend bullish, overall market bullish, then we are looking for a period of temporary weakness where the stock becomes extremely attractive to us in terms of Swing Trading, provided the fundamental criterias are fulfilled and the beta criteria is fulfilled, right? I hope by now the strategy part is clear to you. So now we come to entry. Now entry in this strategy can be taken in two ways. One is the aggressive entry, and another one is the conservative entry method. In case you are a beginner, start with the conservative first.

And as you learn the strategy more by trading it frequently, then you can move on to the aggressive part. So what is the aggressive entry method? The aggressive entry method is that as stochastic starts to dip to or below the 20 level, you start accumulating the stock. So every day you kind of buy little with final entry actually happening when stochastic enters the buy mode. Now when does stochastic enter the buy mode? Just take a look here.

If you see in this down move, the stochastic K is actually below the stochastic D. So whenever the stochastic D actually crosses the stochastic K from below, that actually is a confirmation signal to go along in terms of timing the trade, right? So what you can do is, I’ll just explain this video with an example, yeah. So this is an aggressive entry example. Again I’ve taken ICICI Bank because it was the weakest stock and I want to explain this on a weak stock first because in a strong stock things automatically get quite easy.

So this is the place where stochastic dips 20 level. I’ll just take you to ICICI Bank stock. So I think we are in July. This is the place where stochastic actually first time dips below 20. In this particular phase, stochastic did not dip below 20, it was just at 22 or 23, so our entry did not get triggered. Yeah, so this is the place. The prices 118.7. So in the aggressive entry method, what you need to do is as stochastic remains below 20, and the price falls, you keep on buying it.

Why you buy it, because for the later rise in the price, you kind of average your entry price. Now in this particular case, what you’re gonna see is that on 8th July price was at 118, on 9 July it was 115, on 10th it was 114. On 13th it was 115. So these four particular days, you should’ve bought into this stock when it was falling, that is weakness was setting in. This candle that you see, this was formed on 14 July, it was 123. Now this is precisely the point when the stochastic entered the buy mode, right? And then price moved from 123 to about 145. So this is the aggressive entry method that as weakness sets into the price in a strong trending price, what you need to do is as soon as stochastic dips to or below 20 level, you start buying the stock in a staggered manner.

And you keep buying till you get a rise of about 5 to 10%, or let’s say 15% over the next two, three months, right? So in the conservative entry method, what you do is you buy all the quantity that you want to buy at once whenever the stochastic crosses on the buy side. I’ll show you. This is the conservative part.

So under this, whenever the stochastic has crossed here, it has gone into the buy mode, that was at level 123. So at 123, you kind of enter all your positions, that is the conservative entry. Now why this is conservative is because at this candle when the price is at 123, the swing low automatically becomes your star plus, and your risk is very well defined. All right. And one more thing, whenever the stochastic enters the buy mode, most of the time, the trade works over the next few days only.

So if you take this particular example, there are three cases here. This is box one, box two, and box three. In box one and box three, if you see as soon as the stochastic has entered the buy mode, the price is actually rallied about 10 to 15%. Similarly here, the stochastic entered the buy mode and the price rallied about 10 to 15%. Whereas this particular case, what happened, the stochastic entered the buy mode but price remained flat.

And over the next one month it rallied more than 10%. So these are the two variants that actually play out. But this buy mode has actually happened on this candle, if you can see it. So this particular swing low becomes your stop loss. If you see all of the consolidation in the price has happened above the swing low, and then price eventually moves up. So, again, I’ll repeat one thing. In case you’re a beginner, do start with the conservative entry first, and then as you graduate to the next level, then you can move to aggressive entry because in aggressive entry, there is one advantage.

If you’re buying as the price is moving down, and you kind of sense that price is going to reverse, you sort of capture the move from the low point to the high point. So the percentage move that you capture in an aggressive entry is more when you compare it with a conservative entry method. But, again, if you’re a beginner, try and take small steps first and then eventually you should graduate to the next level. Yeah, so now we come to the exit and stop loss part. Now exit in the strategy is fairly simple, and it actually depends on how discipled you remain in terms of not being too greedy when the trade stocks start to work in your favor.

Again I’ll point to, I’ll point you to this fact that you are swing trading here, which is why a trade offering you about 8 to 15% return is fair enough because that return you’re getting over a short term period. So whenever you are taking entry in terms of aggressive entry method, then you should be expecting about 15 to 18% return, and you can start exiting positions bit by bit once you start crossing about 10 to 12% profit in your trade. For the conservative entry method, your expectation of profit should be somewhere around 8 to 12%, which is why you need to exit the trade as soon as you get about 8 to 10% in the next few days or one or two months. You need to remember one thing, that making 20% trading return in one year is a huge deal.

If you ask extremely experienced traders, they’ll be really happy if their overall trading portfolio or investment portfolio delivers about 18 to 25% return. That is really good because every four years, roughly four years, your money would double. Do not get into the habit of making quick gains because that only lasts for a very short amount of time. So stop loss, I’ve already discussed in the conservative entry method, this recent swing low at this point here.

And this point here, this becomes your stop loss. Stop loss for aggressive entry method is extremely difficult to determine on chart because it’s a judgment call. Do not forget one thing that when you are buying here, you do not know whether price is going to fall here till this level, or it’s gonna reverse here, which is why it becomes a judgment call based on your experience. You need to figure out whether the down move is going to end soon or it’s going to continue further. This particular stop loss for this aggressive entry, I cannot put it on presentation because it’s largely experience-driven which is why I come to the fact that in case you do not have enough experience, don’t feel bad.

Just focus on the conservative entry method first. And as you trade this method for let’s say few months, you will automatically know in individual trades whether you need to start trading based on aggressive entry and setting stop loss based on a judgment call, or in case you don’t do well with that, you can again revert back to conservative entry method, and keep doing it till you keep getting better. So now I come to the position size aspect. So position size should actually depend on the amount you wanna risk.

When you’re doing conservative entry, the calculations are fairly simple because your stop loss would be the recent swing low point that is I showed you a couple of charts back. The risk should be just 1% of the capital. This section I covered in part two I think. So assuming your capital is about one million, your risk will be 1% of one million, that is 10,000 per trade. So hypothetically if your entry is 280, and stop loss is 260, then your position size would be your 10,000, that is risk divided by 20, that is difference of entry and stop. So I’ve given out the formula here. So position size would be calculated by risk divided by the difference of entry and stop loss. Now there are many advanced position sizing strategies that exist. They’re out of scope of this video. But I would just like to put it this way that entry, exit is actually a journey that you have to take over a period of many years.

That is when you figure out your psychological makeup as a trader. And then you would know what sort of position sizing techniques, what sort of entry method, what sort of exit method kind of suits you the best which is why don’t try to emulate anybody else’s entry, exit, or stop loss because that is largely extremely trader specific. One book that I would like to recommend you guys is “Super Trader” by Van Tharp. If you can get hold of this book, do read it, it’s a wonderful book especially for all forms of trading, even from psychological point-of-view, position sizing, stop losses, how you should manage your risk. It’s a beautiful book, one of the best books that’s ever written on trading.

So do get your hand on this. The moment you finish this book, you will already feel a lot of difference in your trading which is why I strongly recommend this. So now I need to come to a trade management and psychological part when it comes to this trading strategy and the strategies that we are going to discuss in subsequent videos. So at each accumulation point that I showed you, do not forget to manage your risk. It’s not about potential profits. It’s not about the potential move that’s gonna happen. It’s only about protecting your capital, managing your risk well. Again, like I mentioned in the previous slide, that entry, exit, stop loss, it’s extremely a private thing for a trader. It depends on his psychological comfort. Be bold enough to experiment with either entry method or the position size or the amount of risk you take.

Don’t be too extravagant. Be conservative in the start. And whatever I’ve explained to you here, this basic strategy, treat it as a simple framework. And do not be afraid to customize this based on your preference as a trader or whatever limited experience you have right now in market. Why I selected stock as instrument? I hope it is clear till now. Because you never know when the reversal is going to kick in in a already strong up trend which is why through stocks, you can manage your position to, you know, you can scale in or scale out with as little as just one stock. You cannot have this liberty in futures or in options where lot sizes are clearly defined. The next important thing that I wanna focus on, realistic expectation that you set from your trades.

You might have heard many legendary investors or traders tell you in their interview that they’re extremely happy whenever their trading or investment portfolio gives them about 18 to 25% per annum. Now, it’s become a fashion these days that traders are getting used to making quick money. Let me tell you, that does not last for long. I’ve been in the market for long enough to see many such traders blowing up their account over a short term. Do remember that we are in this for the very long term. More than profits, learn to control your risk well. Be disciplined. And please don’t get into a habit of posting your profit and loss account statements online. I think trading is the only business where people come out and post their profit and loss statement for everyone to see.

I have never understood this because this directly impacts your psychological make up in your mind because once you post it, you get a lot of comments. People comment on what you are doing, some like it, some don’t. So why do you invite other’s opinion into your trading? That is something you have to guard just like any other relationship. See, your relationship with market has to be so pure that it is only between you and the market that things should be shared with. Let market be the judge of what you are doing. Don’t let anyone tell you whether you are a good trader or a bad trader.

Look at your account at the end of the day. If you have followed all the rules and still made a loss, it’s okay. Money is by product of whatever method you are going to apply over a long term. So it does not matter if in short term you kind of lose some money. Do aim for consistency. In our profession, don’t aim for fame. This is applicable in our social media world where you do see that a lot of traders share their PNL statements every day. I don’t wanna criticize anyone, but I don’t think that’s a healthy practice because that will eventually affect your psychological level. I have shared some entry and exit screenshots as well, but I don’t remember me sharing any profit and loss statements online because, again, that is extremely personal.

Once or twice you can do it, that’s fine, but please don’t make it a habit. That’s just my recommendation to you. So let me come to the current phase. By current phase, what I mean is up till now, what we saw is that we start with Nifty then we move to individual sector, then we have taken individual stocks. We have looked at ICICI Bank, Axis Bank, Yes Bank, in the phase 2009 and 2010. Well, what about now? So today is 7th August. So let us see if I have to pick out a trade in real time, how I would do it.

So this is Nifty 50. So what I see here is that prices above 200 day moving average. Stochastic is at 79, 80 level. Beta here is one because the Nifty is the benchmark index. So now I move to Nifty IT. Now I see that Nifty IT is well above 200 day moving average trend is up, stochastic is not in buy mode, beta value is not satisfied, it’s 0.45. Let’s move to realty. Beta valued is satisfied. Stochastic is not in the buy mode. Price is below 200 day moving average. Same with Infra, price is below 200 day moving average. Stochastic is not in the buy zone. Let’s come to FMCG. Its price is above 200 day moving average. Beta is 0.77. It does not qualify. Pharma, price about 200 day. Beta 1.02. Well, you can look at this. Auto, price below 200 day moving average. Stochastic is good but beta value is just about one. Media, price below 200 day moving average. Beta is not qualifying. Let’s move to other sector. Commodities, again, price below 200 day moving average. Beta satisfies though. This is consumption, beta 0.85. Price is above 200 day moving average.

This does not qualify. Let’s come to banking, yeah. So price is above 200 day moving average. Beta does qualify. Stochastic at present is not in buy mode, but look at individual stocks. So the first stock that we are gonna look at is Axis Bank. Price is above 200 day moving average. Stochastic is not in buy mode. Beta does qualify. Bank of Baroda, price is not above 200 day moving average, it does not qualify. Canada Bank, price is below 200 day moving average. Beta does qualify though. Federal bank, same thing.

Price below 200 day moving average. Beta does qualify. HDFC Bank is pretty interesting. It has a nice structure, stochastic is in buy mode, but the beta is 0.76, I’ll pass on it. ICICI Bank looks good but stochastic is not in the buy mode, beta is decent enough. Indus Ind Bank is getting into good structure, but again beta value is low. PNB does not qualify. It’s below the 200 day moving average. State Bank of India, well it’s above 200 day moving average, beta also qualifies but no entry yet.

Yes Bank actually looks good. Sort of we missed an entry here. Beta is good. Stochastic I’d given a buy mode and since then it has moved up about 6, 7%. Kotak actually looks really good. If you see stochastic is just about in the buy mode. Beta is not that great, but that’s okay. Price is above 200 day moving average. So we come to Yes Bank. So actually Yes Bank a couple of days back, there was an entry. Stochastic was good, so was price above 200 day moving average, and the beta value had also qualified. So this was actually a trade that was to be taken. You could’ve followed an aggressive entry where you’ve bought as soon as stochastic just touched about 20. It has just touched about 20. On a confirmation candle, you would’ve gotten entries somewhere in 370 and that was a valid entry. So based on whatever we have seen in this particular video, what I would say is that Yes Bank and Kotak Mahindra Bank actually qualified really well for a swing trade. Individual sectors that you see, you can also look at IT sector currently because prices, again, are trending above the 200 day moving average.

We are still waiting for a retracement. But Bank Nifty, based on the beta value, because IT sector does not qualify based on beta, so Bank Nifty is still the only index that is actually qualifying in terms of beta value, in terms of fundamental parameters, that is individual stocks. In terms of broader market trend, Nifty 50. And in terms of individual bank trend, Bank Nifty trend. So I’ll just sum up the key points for this particular video, again in case you have doubt and I’m expecting a lot of doubts because this is not something that you can master in the next few hours. You will have to spend your own tine and you have to research on these stocks, go back in time, take historical charts, and try and study this. Fundamental data is easily available that you can get it through So what I showed you for 2009 to 2010 that actually works even now.

Just three days back, a trade was there in Yes Bank to be taken. I think there is a trade in Kotak Mahindra Bank that is active as well. We need to see how that goes. So take this particular thing that I’ve shown you as a simple strategy or a framework. Try and build on it. You can add more filters to it. Don’t be afraid to experiment. One request that I have is that do not try to code this into a trading system because there are a lot of human element components in this strategy, that is you have to go through many charts to see which qualifies as a perfect buy signal which does not. For example, SDFC Bank, while it did not qualify based on beta parameters, you know what, SDFC Bank is actually looking really good.

Same with Kotak Mahindra Bank. Again, it does not fill the bill of high beta that is and above. But among the banking space, Kotak, HDFC, and Yes Bank actually look really, really good from swing trading point of view. So again this is a top down approach. By the time you reach to the end, that is to stocks, you will be only selecting extremely strong stocks.

So there is no need to worry about being in stocks which are not healthy or being in stocks which are not showing signs of moving up. So in this particular strategy, if you see stock selection is actually more important than entry, exit, or stop loss, or the method that I showed you through a simple indicator like stochastics, so focus more on stock selection, that is our beta criteria, volume criteria, ownership criteria, and ROE, ROCE which will automatically get covered in peg ratio. Those have to be satisfied. Be slightly flexible. Don’t be extremely rigid with particular figures. So the next swing trading strategy will be released only next month by the time I’ll be starting a new topic.

The thing is that whenever I will put out any strategy, I actually research on it, and that is why I require a few days to study the method well. I know this method works really well, so there are some changes that you can make based on your own psychological makeup, that is totally fine. So in case you have any query, and I’m sure you will have, do get back to me in the comments section below and I’ll answer them as soon as possible. Please prefer YouTube comment section for your queries. What happens is on email, I don’t check my email that often, so at times you might be getting a reply from me four or five days after you’ve posted the email, whereas the comments section, I am mostly online on YouTube, so I tend to reply to that within a few minutes.

So do let me know if you have any doubt, and thanks a lot for watching this video. See you next week. – Click on the Subscribe button and bell icon to get instantly notified when a new video is uploaded. Thank you for subscribing. .

Swing Trading Strategy – Part 5 – Moving Average & Stochastic Indicator

Fifth part of Swing Trading Strategy video series. Swing Trading is one of the most popular Short Term Trading method in Technical Analysis. In this Swing Trading series, I intend to cover Swing trading basics, Swing trading and Instrument selection, Swing Trading and Support And Resistance Trading, Swing Trading Strategies.

In this part, I have given out a Swing trading strategy framework which is focused on Top down approach in order to select stocks to Swing trade. This particular Swing Trading Strategy revolves around broader market analysis, stock analysis, sector analysis using Moving average as a Trend reference tool and Stochastic as trade timing tool. I have also touched upon some Fundamental criterion that have to be fulfilled while stock selection. In the end, I have covered some basic position sizing technique along with some points on Risk Management, Trade management and Trade Psychology.

In the first part, I have covered Swing Trading Basics. I have explained What is swing trading by starting with the very basics of this subject. Link to Part 1 is posted below along with other relevant links.

In the second part, I have covered Swing Trading Support and Resistance. Link to Part 2 is posted below.

In this third part, I have focused on Instrument selection. I begin by highlighting various instruments available for Swing Trader in our market and list out reasons as to why Stocks should be preferred as an instrument over futures and options especially if one is a beginner.

In the fourth part I have focused on Top Down Approach while Swing Trading. I have explained the concept of Top Down Approach and stated why it is better than Bottom Up approach.


Part 1 – Swing Trading Basics

Part 2 – Swing Trading Support Resistance

Part 3 – Swing Trading Instrument Selection

Part 4 – Swing Trading Top Down Approach


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