Swing Mapping Part 2: Trade Entry Techniques
Welcome to part 2 of our 3-part series on swing mapping – a highly underestimated technique that can be applied to any market on any timeframe.
In Swing Mapping Part 1 we outlined the key principles of swing mapping which involved identifying potential swings, monitoring them, and drawing conclusions about market structure as swings levels are held or broken.
Today, we will take this a step further and look at how swing mapping can be used to identify trade entry setups without the need for any additional indicators. We will showcase four simple entry setups that have the potential to unlock a plethora of trading opportunities.
Swing Mapping Entry Setups: Breakouts and Reversals
Swing mapping entry setups fall into two broad categories: breakouts and reversals.
Breakouts involve entering with momentum as the market breaks above a swing that you have identified.
Reversals on the other hand, involve entering against the prevailing momentum on a certain type of reversal that occurs at a swing level.
The breakout and reversal swing mapping entry techniques that we will outline below can be applied to any market on any timeframe.
Breakout Entry Setups
1. Break & Retest
The break & retest setup can occur in a trending market structure or in a range bound market structure.
Entry Trigger:
Break and close above (below) a key level of swing resistance (support). This should be followed by a retest of the broken resistance (support) level. The entry trigger occurs when the market forms a small swing low (high) at the broken resistance (support) level.
Stop Placement:
Below (above) nearest swing low.
Example: S&P 500 5min Candle Chart
In this example the market breaks above a key level of swing resistance. This is followed by a retest of the broken resistance level during which the market formed a cluster of small swing lows – indicating that broken resistance had become support.
Past performance is not a reliable indicator of future results
2. Cluster Breakout
The cluster breakout setup should only be taken when a clear trend has developed. During pullbacks in trends, a market tends to form clusters of small swings. The cluster breakout setup looks to enter on a breakout above (below) a cluster of swing highs (lows). The breakout should occur in the direction of the prevailing trend.
Entry Trigger:
Breakout above two or more small swing highs (lows) that have formed during a pullback in an established uptrend (downtrend).
Stop Placement:
Below (above) nearest swing low.
Example: S&P 500 5min Candle Chart
Sticking with the same example, shortly after the break & retest entry setup occurred a strong uptrend developed during which the market formed a cluster of swing highs as the trend consolidated. When the market broke through the small cluster of swing highs, our entry setup was triggered.
Past performance is not a reliable indicator of future results
Reversal Entry Setups
1. Fakeout
A fakeout occurs when the market breaks above a swing level only to reverse within the same or following two candles – trapping those traders who had anticipated a breakout.
Entry Trigger:
Break above (below) swing resistance (support) level followed by a close back below (above) the swing resistance (support) level within the same or following two candles.
Stop Placement:
Below (above) fakeout low (high)
Example: Tesla Daily Candle Chart
This example from Tesla’s daily candle chart highlights the plethora of trading opportunities the fakeout entry setup can offer. We see multiple instances of long and short opportunities when the market threatens to break above (below) a swing level only to fakeout.
Past performance is not a reliable indicator of future results
2. Hot Touch: Double Top/Bottom
The ‘hot touch’ is a specific variation of the classic double top/bottom. The market must touch and reverse from a swing level within the same candle like a cat that’s just touched a hot tin roof!
Entry Trigger:
An exact double top/bottom forms from a single candle.
Stop Placement:
Below (above) the double bottom (top).
Example: EUR/USD 5min Candle Chart
In the below example a hot touch double top forms in a range bound market – causing prices to reverse sharply and retest the bottom of the range. It is also worth noting the two fakeout patterns that also occurred.
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
In Swing Mapping Part 1 we outlined the key principles of swing mapping which involved identifying potential swings, monitoring them, and drawing conclusions about market structure as swings levels are held or broken.
Today, we will take this a step further and look at how swing mapping can be used to identify trade entry setups without the need for any additional indicators. We will showcase four simple entry setups that have the potential to unlock a plethora of trading opportunities.
Swing Mapping Entry Setups: Breakouts and Reversals
Swing mapping entry setups fall into two broad categories: breakouts and reversals.
Breakouts involve entering with momentum as the market breaks above a swing that you have identified.
Reversals on the other hand, involve entering against the prevailing momentum on a certain type of reversal that occurs at a swing level.
The breakout and reversal swing mapping entry techniques that we will outline below can be applied to any market on any timeframe.
Breakout Entry Setups
1. Break & Retest
The break & retest setup can occur in a trending market structure or in a range bound market structure.
Entry Trigger:
Break and close above (below) a key level of swing resistance (support). This should be followed by a retest of the broken resistance (support) level. The entry trigger occurs when the market forms a small swing low (high) at the broken resistance (support) level.
Stop Placement:
Below (above) nearest swing low.
Example: S&P 500 5min Candle Chart
In this example the market breaks above a key level of swing resistance. This is followed by a retest of the broken resistance level during which the market formed a cluster of small swing lows – indicating that broken resistance had become support.
2. Cluster Breakout
The cluster breakout setup should only be taken when a clear trend has developed. During pullbacks in trends, a market tends to form clusters of small swings. The cluster breakout setup looks to enter on a breakout above (below) a cluster of swing highs (lows). The breakout should occur in the direction of the prevailing trend.
Entry Trigger:
Breakout above two or more small swing highs (lows) that have formed during a pullback in an established uptrend (downtrend).
Stop Placement:
Below (above) nearest swing low.
Example: S&P 500 5min Candle Chart
Sticking with the same example, shortly after the break & retest entry setup occurred a strong uptrend developed during which the market formed a cluster of swing highs as the trend consolidated. When the market broke through the small cluster of swing highs, our entry setup was triggered.
Reversal Entry Setups
1. Fakeout
A fakeout occurs when the market breaks above a swing level only to reverse within the same or following two candles – trapping those traders who had anticipated a breakout.
Entry Trigger:
Break above (below) swing resistance (support) level followed by a close back below (above) the swing resistance (support) level within the same or following two candles.
Stop Placement:
Below (above) fakeout low (high)
Example: Tesla Daily Candle Chart
This example from Tesla’s daily candle chart highlights the plethora of trading opportunities the fakeout entry setup can offer. We see multiple instances of long and short opportunities when the market threatens to break above (below) a swing level only to fakeout.
2. Hot Touch: Double Top/Bottom
The ‘hot touch’ is a specific variation of the classic double top/bottom. The market must touch and reverse from a swing level within the same candle like a cat that’s just touched a hot tin roof!
Entry Trigger:
An exact double top/bottom forms from a single candle.
Stop Placement:
Below (above) the double bottom (top).
Example: EUR/USD 5min Candle Chart
In the below example a hot touch double top forms in a range bound market – causing prices to reverse sharply and retest the bottom of the range. It is also worth noting the two fakeout patterns that also occurred.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
