Table of Contents
This approach focuses on repeatable swing setups found in liquid and volatile stocks. It is designed for holding trades over several days or weeks while managing risk tightly. The method emphasizes disciplined entry confirmation, small losses, and large trending winners.
Scanning Criteria
Each evening, the trader scans for stocks that combine high volume, wide daily ranges, and relative strength. Liquidity should be above roughly twenty to eighty million dollars in average daily traded value. The average daily range should be at least five to six percent, since narrow-range names rarely provide sufficient movement for a meaningful reward. From this group, only the strongest seven percent of performers over the last one to six months are shortlisted. Separate lists are kept for five-day gainers and five-day losers to isolate fresh breakouts and oversold candidates. Earnings proximity is always checked; trades are avoided within a few days of a company’s report unless the setup itself is an earnings-driven gap.
Scanning Criteria (Detailed)
1. Purpose of the Scan
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The goal of scanning is to identify liquid, volatile, high-probability setups that have the potential to move strongly within a few trading sessions.
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Scanning ensures you only focus on stocks that institutions and large traders are actively trading, avoiding slow, illiquid names that rarely produce meaningful trends.
2. Liquidity Filters
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Average Daily Dollar Volume (ADDV):
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Minimum threshold: $20 million to $80 million per day.
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This ensures there is enough liquidity for both entry and exit without large slippage.
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It also eliminates thinly traded stocks where price manipulation or erratic gaps are common.
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Why Dollar Volume, not Share Volume:
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Dollar volume combines both price and volume, providing a more accurate picture of real money participation.
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Example: A $10 stock trading 10 million shares = $100 million in dollar volume, which is highly liquid.
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3. Volatility Filters
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Average Daily Range (ADR):
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Minimum threshold: 5% to 6% or higher.
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Calculated as:
(Daily High – Daily Low) / Previous Close × 100. -
Higher ADR means better risk/reward potential and faster moves once a breakout or pullback triggers.
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Avoiding Low-Range Stocks:
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Stocks moving only 1–2% daily rarely offer swings large enough to justify the risk taken.
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High ADR names provide the momentum needed for 3R+ setups.
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4. Relative Strength and Performance Filters
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Relative Strength (RS):
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Focus on stocks in the top 7% of market performers over the past 1–6 months.
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RS measures how well a stock performs compared to the entire market or a benchmark index.
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Stocks with strong RS tend to attract continuous buying interest.
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Short-Term and Medium-Term Leaders:
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Use both 1-month and 6-month performance scans to catch emerging leaders early and established leaders continuing higher.
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Example: A stock outperforming its sector and index over multiple timeframes indicates institutional accumulation.
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5. Multi-Timeframe Scanning
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Weekly Scans: Identify long-term trends and breakout bases forming over months.
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Daily Scans: Highlight current consolidations or early signs of breakouts.
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Intraday Scans: Catch day-one momentum that might evolve into a swing trade.
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Multi-timeframe alignment ensures entries are taken in the direction of the dominant trend.
6. Gainers and Losers Scans
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Five-Day Gainers:
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Used to spot potential parabolic shorts or momentum continuations.
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Criteria: Stocks up more than 25% over the last five trading days, trading above the required volume and ADR thresholds.
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Five-Day Losers:
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Used to identify oversold mean-reversion candidates (potential parabolic longs).
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Criteria: Stocks down 25–50% or more in five days, preferably approaching prior support or long-term moving averages.
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7. Sector and Theme Filters
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Focus on market-leading sectors where institutional money is flowing.
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Example: Technology, biotech, energy, or AI during specific market cycles.
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Rotating capital into the leading theme maximizes the probability that breakouts follow through.
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Avoid lagging sectors or defensive plays unless the market trend supports them.
8. Earnings and News Filters
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Earnings Reports:
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Exclude stocks scheduled to report earnings within the next 2–3 days to avoid gap risk.
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Exception: When specifically trading an earnings gap breakout (a strategy variant).
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News Catalysts:
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Positive catalysts (product launches, FDA approvals, M&A) can fuel continuation moves.
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Avoid rumor-based or one-day hype moves without volume or structure.
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9. Volume and Range Confirmation
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Volume Spike Requirement:
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Confirm that stocks meeting price-performance criteria also show above-average volume (1.5× or greater than the 20-day average).
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Volume validates institutional interest and ensures momentum is real, not random.
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Clean Chart Structure:
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Eliminate stocks with erratic candles, inconsistent volume, or unclear trend direction.
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Prefer names with orderly pullbacks, flags, or consolidations.
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10. Output of the Scan
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After applying all filters, the final nightly scan should yield:
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30–70 liquid, volatile candidates with clear patterns.
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These are then manually reviewed and narrowed down to 5–15 A+ setups for the watchlist.
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Each candidate should have:
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Clear entry trigger (range high).
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Logical stop placement (below range or moving average).
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Favorable reward-to-risk potential (≥3:1).
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3. Indicators and Tools
Charts remain minimal. The only moving averages used are the ten-day, twenty-day, and fifty-day simple averages. Leaders often ride the ten-day line; momentum stocks respect the twenty-day; slower names build support near the fifty-day. Average True Range or Average Daily Range helps size stops and judge whether a move has already traveled too far. No oscillators or secondary indicators are applied, keeping attention on price, volume, and structure.
4. The Core Setup
A textbook swing setup follows a consistent rhythm. The stock has already advanced strongly, showing clear institutional sponsorship. It pauses in an orderly pullback or sideways base while remaining above the rising moving averages. Price compresses into a very tight range with higher lows and reduced volatility. When the upper boundary of this coil breaks on increased volume, the trader enters. The same pattern appears in many forms—high-tight flags, first bounces off the fifty-day line, or undercut-and-reclaim structures—but the underlying principle remains: a large prior trend, a controlled pause, and a confirmed breakout.
5. Entry Method
The trade is initiated as price pushes through the top of the recent range or the opening-range high of the day. The stop loss is placed below the low of the breakout candle or below the bottom of the consolidation if that level offers a cleaner structure. A candidate is rejected if the distance between entry and stop exceeds its normal daily range; this ensures that risk remains proportional. The trader never chases stocks that have already traveled more than a full day’s range before entry.
6. Managing and Exiting the Trade
Once the position moves in favor, the first partial sale occurs after roughly three to five sessions or when price extends sharply away from its averages. After this partial exit, the stop on the remaining shares is moved to breakeven. The balance is held until a daily close occurs beneath the ten-day average, which usually marks the end of a short-term swing. For slower trends that ride the twenty-day line, that average replaces the ten-day as the trailing reference. This method allows normal fluctuations but exits when momentum clearly breaks.
7. Position Sizing and Portfolio Design
No single trade should exceed a quarter of total account equity. The method does not rely on scaling into winners; each trade begins as a complete position sized to the predefined risk. The portfolio is diversified across several unrelated sectors so that weakness in one group does not drag down the overall result.
8. Common Mistakes to Avoid
Low-range, illiquid stocks are ignored even if they look technically clean. Chasing news-driven gaps without defined structure is also avoided. Trades are not taken directly into earnings events, and positions are avoided when the stock has already moved its full average range before the intended entry.
9. Daily Workflow
Every night the trader runs the scans, reviews the strongest results on weekly and daily time frames, and marks a small number of potential triggers. In the morning, the list is filtered for upcoming earnings and pre-market behavior. Opening-range highs and lows are marked, and entries are executed only on decisive breaks with confirming volume. During the session, failing trades are cut quickly while winners are left alone. After several days, partial profits are secured, stops are adjusted, and the remainder is trailed by the ten-day line until it closes beneath it.
10. Why the System Works
The method concentrates capital only where liquidity and volatility combine to offer real edge. It waits for price to confirm strength before committing, limits loss to a small, quantifiable distance, and allows the upside to remain open. Because losers are small and winners are allowed to compound, the expectancy remains positive even if most trades are modest or breakeven. The trailing rule anchored to the ten-day average ensures participation in the few exceptional moves that can multiply capital.
The swing strategy is simple: trade liquid leaders breaking from tight consolidations, define risk by the recent range, secure partial gains early, and hold the remainder until momentum fades. Consistency comes from applying the same pattern, risk structure, and daily routine again and again.
1. Core Concept: Repeatable High-Probability Setups
The trader focuses on a few setups repeated constantly—not random trades.
Each setup relies on specific price-action patterns, volatility behavior, and risk control rules.
2. Setup One – The Parabolic Short
Goal: Capture reversals after euphoric, overextended rallies.
Conditions:
- Stock surges 200–1000%+ in 3–10 days.
- The move is usually based on hype or speculation, not fundamentals.
- The trader waits until day 4 – 5 – 6, never shorting early.
Entry Rules:
- Watch the Opening Range Lows (ORL) — the first 1-, 5-, or 60-minute candle’s low.
- Enter short only after ORL breaks (confirmation of weakness).
- Confirm with VWAP (Volume-Weighted Average Price) rejection:
Price fails to stay above VWAP after testing it.
Exit & Management:
- Initial target = 20–30 % drop.
- Often hold for several days/weeks (swing style).
- Tight stop above VWAP or above previous intraday high.
Examples:
- INO: +300 % in 5 days, shorted on day 5 after ORL break.
- MRNA: +500 % large-cap move, faded after failing VWAP.
- GBTC (2017): after +700 %, shorted on first red day → –70 % in 5 days.
Key Indicators: VWAP, Opening Range Lows, Relative Weakness.
3. Setup Two – The Parabolic Long (Mean-Reversion Bounce)
Goal: Catch sharp oversold bounces after capitulation.
Conditions:
- Stock drops 40–70 % in 3–5 days on panic selling.
- Watch for washout gap-down on day 4–5.
Entry Rules:
- Wait for the first green candle on the 5-min or 15-min chart.
- Confirm VWAP reclaim and Opening Range Highs (ORH) break.
- Use the low of the first green candle as stop.
Exit & Management:
- Target 20–50 % or more rebound within 1–3 days.
- Example: GBTC 2017 – down 70 %, then +110 % in 2 days after VWAP reclaim.
Logic:
Same as parabolic short, but inverted — oversold exhaustion and mean reversion toward VWAP or 10-day EMA.
4. Setup Three – Breakouts and Earnings Gap-Ups
Goal: Ride momentum in fundamentally strong growth stocks.
Conditions:
- Multi-month consolidation (tight range ≥ 6 months).
- Catalyst: earnings beat, revenue growth, raised guidance, or strong sector theme.
- Gap-up on big volume (≥ 60 M USD daily turnover).
Entry Rules:
- Buy Opening Range Highs (ORH) breakout or multi-month range break.
- Prefer stocks showing relative strength (gapping up while market is flat or down).
- Check for volume confirmation—high-volume breakouts outperform.
Exit & Management:
- Hold for weeks or months if trend continues.
- Partial sell into strength; trail stops on rising 20-day EMA.
Examples:
- TDOC, DXCM, FSLY, MELI – each gapped on earnings and doubled or more.
- IPO breakouts like LVGO, PDD – same principle.
5. Scanning and Watchlists
He uses systematic nightly scans to find setups:
- Stocks trading ≥ $60 M daily volume.
- Average daily range ≥ 2.4 %.
- Top 7 % strongest or weakest by performance.
- Separate scans for:
- 5-Day Gainers (potential parabolic shorts).
- 5-Day Losers (potential parabolic longs).
- Earnings/Breakout Candidates.
Watchlists:
- “Strongest Growth Stocks,” “Strongest Momentum Stocks,” and sector filters (tech/software focus when leadership rotates there).
6. Risk Management and Psychology
- 70 % of trades are losses or breakeven, but small losses + big winners ensure large overall profitability.
- Never guess tops or bottoms; wait for confirmation (ORL/ORH + VWAP signal).
- Always sell losers early, trail winners.
- Trade liquid stocks with strong range and volume; avoid thin, flat names.
- Focus on relative strength/weakness for timing entries and adds.
7. Summary of Trading Philosophy
- Trade only a few high-probability repeating setups.
- Combine technical triggers (VWAP + range breaks) with context (momentum / fundamentals).
- Maintain a large research database of thousands of past examples to build pattern recognition.
- Swing trade focus: big moves come from holding winners, not constant scalping.
- Continuous improvement via journaling, database analysis, and self-study.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
