# Trend-Following Swing Trading Plan — Large-Cap US Stocks (Daily Chart) > **Assumption flag:** This plan is a *process framework*, not a backtested system. Every rule below (pullback depth, indicator settings, stop distances, holding periods) is a starting hypothesis and must be validated on historical and/or simulated data before being traded live. No win rates, expectancy, or return figures are stated or implied anywhere in this document. --- ## 📊 Trading Plan Overview **Approach:** Trend-following swing trading on large-cap US equities, daily timeframe. **Core objective:** Systematically identify established uptrends, enter on low-risk pullback re-entries after confirmation of renewed upward momentum, and stay with the trend using a trailing exit mechanism — while controlling risk per trade and per portfolio at all times. **Philosophy in one sentence:** *Trade with the dominant trend, buy weakness within strength, cut losers fast, let winners run, never override risk limits.* **Holding period:** Several days to several weeks (swing, not intraday, not long-term buy-and-hold). **Key process pillars:** | Pillar | Rule Source | |---|---| | Directional bias | Only long, only with the established trend | | Entry timing | Pullback + confirmation, not prediction | | Risk per trade | Fixed at 1% of account equity | | Portfolio risk | Max 5 concurrent open positions | | Trade avoidance | Earnings week, illiquid names, broken trend structure | --- ## 📥 Entry Rules **Step 1 — Confirm an established uptrend (trend filter, *assumption: parameters need testing*):** - Price trading above a rising long-term moving average (e.g., 150-day or 200-day) — *exact MA length to be validated* - Higher swing highs and higher swing lows visible on the daily chart over the recent trend leg - Stock is not in a prolonged sideways or distribution range **Step 2 — Identify a qualifying pullback:** - Price retraces from a recent swing high toward a defined support reference (e.g., a shorter-term moving average, a prior breakout level, or a Fibonacci retracement zone) — *specific reference and depth threshold to be defined and tested* - Pullback occurs on decreasing or average volume (no signs of aggressive distribution) - Pullback does not violate the established higher-low trend structure **Step 3 — Require bullish confirmation before entry:** - A bullish reversal/continuation signal on the daily chart (e.g., bullish reversal candle, break above a short-term pivot high, or a momentum indicator turning up) — *specific trigger to be selected and validated by the trader* - Confirmation candle/bar closes in the direction of the resumed uptrend - No entry is taken purely anticipatorily — confirmation must close before an order is placed **Step 4 — Confirm the trade qualifies under filters and no-trade conditions** (see below) before submitting the order. **Entry order type:** Defined at order placement — see Execution Rules. --- ## 📤 Exit & Trade Management Rules Every position must have a predefined exit plan *before* entry — profit exit, invalidation exit, and time-based review are all set at trade initiation. ### 1. Initial Stop-Loss (Invalidation Exit) - Placed at a level that technically invalidates the pullback thesis (e.g., below the pullback low or below the higher-low structure) - This distance, combined with account risk %, determines position size (see Risk section) - Stop is a hard rule — not moved further away once set ### 2. Trend-Invalidation Exit - Exit if price closes below the trend-defining moving average or breaks the established higher-low structure, even if the hard stop hasn't been hit - This is a discretionary-but-rule-bound exit tied to trend structure, not emotion ### 3. Trailing Stop (Profit Protection) - Once trade shows an open profit, trail the stop using a predefined method (e.g., swing-low trailing, moving-average trailing, or ATR-based trailing) — *method and parameters to be selected and tested* - Trailing stop only ever moves in the direction that locks in more profit, never loosens ### 4. Partial Profit-Taking (Optional Module — *to be tested*) - Trader may define a rule to scale out a portion of the position at a predefined R-multiple (e.g., 1R or 2R) and let the remainder run under the trailing stop - If used, this rule must be fixed in advance, not decided trade-by-trade ### 5. Time-Based Exit / Review - If a position has not progressed meaningfully within a defined number of weeks and shows no trend continuation, review for exit regardless of stop status - Maximum holding period ceiling should be set to keep capital from being tied up in stagnant trades — *specific week count to be defined by trader based on typical swing duration for this universe* ### 6. Earnings Exit Rule - If an open position approaches an earnings date, decide in advance (before the week arrives) whether to exit, reduce, or hold through — this decision must be pre-set, not made reactively the night before --- ## 🛡️ Risk & Position Sizing **Stated account rules (fixed inputs):** - Maximum risk per trade: **1% of total account equity** - Maximum concurrent open positions: **5** **Position sizing formula:** ``` Position Size (shares) = (Account Equity × 1%) ÷ (Entry Price − Stop-Loss Price) ``` | Variable | Definition | |---|---| | Account Equity | Current total account value at time of trade | | 1% Risk Amount | Account Equity × 0.01 | | Per-Share Risk | Entry Price − Stop Price (distance to invalidation) | | Shares to Buy | 1% Risk Amount ÷ Per-Share Risk (round down) | **Portfolio-level risk controls:** - With 5 max positions each risking 1%, **maximum theoretical open risk = 5% of account** if every stop were hit simultaneously — treat this as the portfolio risk ceiling, not a target - No new position may be opened if 5 positions are already active, regardless of setup quality - Consider correlation: multiple positions in the same sector/industry increase effective concentrated risk beyond the nominal 5% figure — *sector-correlation cap is an optional refinement to test* - No increasing size to "average down" into a losing position - No increasing risk per trade to "make back" a loss — 1% rule is fixed regardless of recent results --- ## 🔍 Trade Filters A candidate must pass **all** filters before entry is considered: | Filter | Rule | |---|---| | **Universe** | Large-cap US stocks only | | **Liquidity** | Sufficient average daily dollar volume to allow entry/exit without significant slippage — *specific minimum threshold to be defined by trader* | | **Trend** | Price above rising long-term trend reference; higher-high/higher-low structure intact | | **Volatility** | Stock's normal daily/weekly volatility range is compatible with the stop-distance and position-sizing approach — avoid abnormally erratic price action | | **Earnings calendar** | No open earnings date within the coming week — see No-Trade Conditions | | **Market/sector backdrop** | Broader market (e.g., major index) and relevant sector are not in a confirmed downtrend — *optional macro filter, define rule if used* | | **Chart clarity** | Trend and pullback structure are visually and mechanically clear — ambiguous setups are skipped | --- ## 🚫 No-Trade Conditions Skip the setup entirely — no exceptions — if any of the following apply: - ❌ Company has an earnings release scheduled within the current or upcoming week - ❌ The stock does not meet the liquidity threshold - ❌ The 5-position portfolio limit is already reached - ❌ Trend structure is broken, unclear, or the stock is range-bound/choppy rather than trending - ❌ Pullback has already violated the prior swing low (structure invalidated) before confirmation appears - ❌ Required 1% risk position size would round to zero shares or an impractically small size - ❌ Confirmation signal has not closed/completed — no entering in anticipation of a signal - ❌ Trader is in an emotionally compromised state (revenge trading after a loss, overconfidence after a win streak, fatigue, distraction) - ❌ Broader market/sector filter (if used) is in a confirmed downtrend --- ## ⚙️ Execution Rules **Order placement:** - Entry order type and trigger level defined in advance based on the confirmation signal (e.g., stop-entry above confirmation bar high, or market/limit entry on next open after confirmed close) — *specific order mechanics to be finalized and tested by trader* - Stop-loss order placed **immediately** upon fill — never left unprotected, even briefly - Profit target / trailing mechanism defined and, where the platform allows, entered as a working order rather than tracked mentally **Stop placement:** - Always at the pre-defined technical invalidation level, never at an arbitrary round number or "gut feel" distance - Never moved to increase risk once set; may only be tightened (trailed) in the trade's favor **Adjustments during the trade:** - No adding to a losing position - Adding to a winning position (pyramiding), if used, must follow a predefined rule set in advance (trigger level, size, revised stop) — *optional module, define and test separately* - Any trailing-stop adjustment follows the pre-set trailing method — not discretionary tightening/loosening based on emotion **Order hygiene:** - Confirm sufficient buying power and that the position doesn't breach the 5-position or 1%-risk limits before submitting - Log the intended entry, stop, target/trailing method, and size *before* placing the order --- ## ✅ Pre-Trade Checklist Run through before every entry: - [ ] Stock is a large-cap US equity with adequate liquidity - [ ] Established uptrend confirmed (price structure + trend reference) - [ ] Valid pullback identified without breaking trend structure - [ ] Bullish confirmation signal has closed/completed - [ ] No earnings release in the current/upcoming week - [ ] Broader market/sector backdrop is acceptable (if using this filter) - [ ] Fewer than 5 positions currently open - [ ] Stop-loss level identified and technically justified - [ ] Position size calculated using the 1%-risk formula - [ ] Profit-management plan (trailing method / partial-exit rule) defined before entry - [ ] No emotional or discretionary override of any rule above - [ ] Trade idea, entry, stop, size, and plan logged in the trading journal --- ## 📝 Post-Trade Review Complete after every closed trade: | Review Item | Notes | |---|---| | Entry rule followed exactly? (Y/N) | | | Exit rule followed exactly, or was there discretionary override? | | | Was position sized correctly per the 1% formula? | | | Was the stop honored without being moved against the plan? | | | Did the trade pass all filters and no-trade conditions at entry? | | | What was the actual R-multiple outcome (profit or loss ÷ initial risk)? | | | Any process deviation — and what caused it? | | | Lesson or adjustment for the process (not the outcome) | | **Review cadence:** - Trade-by-trade log entry immediately after close - Weekly review of all closed trades for rule adherence - Monthly/quarterly review of aggregate process metrics (below) and any rule refinements — refinements should be tested before being adopted, not applied retroactively to open trades --- ## 📈 Performance & Discipline Metrics Track the following over time. **No target figures, win rates, or expected values are assumed — these are measurement categories only, to be populated with the trader's own actual, unfabricated results.** **Process/discipline metrics:** - % of trades where entry rules were followed exactly - % of trades where exit rules were followed exactly (no premature or delayed exits) - % of trades where position sizing matched the 1% formula - Number of rule violations per month, and category of violation (entry, exit, sizing, filter, emotional override) - Number of setups skipped correctly under no-trade conditions **Outcome metrics (record only, do not predict):** - Realized R-multiple per trade (profit/loss ÷ initial dollar risk) - Average holding period (days) vs. the stated several-days-to-several-weeks target - Maximum concurrent open risk actually reached vs. the 5% theoretical ceiling - Maximum drawdown experienced (account-level, actual) - Distribution of trades by sector/industry (to monitor concentration risk) **Review outputs:** - Identify whether losses cluster around specific rule violations vs. normal process variance - Identify whether the pullback/confirmation criteria need refinement based on a sufficiently large, honestly-recorded sample — *no rule change should be based on a small number of trades* --- ## 🎯 One-Page Trading Plan (Session Summary) **Strategy:** Trend-following swing trading — large-cap US stocks, daily chart, holding days to weeks. **Entry:** Established uptrend → pullback to support without breaking structure → bullish confirmation closes → enter. **Exit:** - Hard stop at technical invalidation (set at entry, never widened) - Trend-invalidation exit if structure breaks - Trailing stop locks in profit as trade develops - Time-based review if trade stagnates beyond the defined ceiling - Pre-decide earnings-week handling before it arrives **Risk:** - 1% of account risked per trade — no exceptions - Max 5 open positions — no exceptions - No averaging down, no size increases to chase losses **Skip the trade if:** earnings week, illiquid, broken trend, portfolio already at 5 positions, unclear structure, or emotionally compromised. **Before every order:** run the Pre-Trade Checklist. **After every close:** complete the Post-Trade Review. **Discipline rule:** The plan is only as good as its consistent execution. Deviating from entry, exit, or sizing rules — even after a win — is a process failure to log and correct, not a strategy to repeat. **Reminder:** All indicator settings, thresholds, and time windows marked *(to be tested)* above must be defined and validated through backtesting or simulated trading before being used with real capital.