An algorithm is a step by step chronological procedure. We will present here simplified day & swing trading algorithms which are almost identical, except that in swing trading a few extra considerations must be taken into account before opening a position. Notice that the first step is analysis of market trend (i.e. by watching the ETF SPY). When trading stocks in accordance with market trend, the chances of winning are maximized.

Day trading algorithm

 

Swing trading algorithm

 

In swing trading we must have a clear picture about the important matters of the stock that might affect our position. The most important is step 7, the date of quarterly results because we don’t want to be in a swing trade that day. In quarterly results dates, all the stocks might jump up or down from 2% to 50% depending on the results, analysts’ expectations and what will be said on the relative conference call. Having already a position in a stock in that case is pure gambling, not trading. Someone have to use other instruments, like options, in order to trade in this case. 

Excluding quarterly results, other company announcements might have a great impact on the position, like a guidance for the next year or announcements of new products. We don’t want to be in a swing trade in that case, so we must watch closely the company for news. Fundamentals are not of concern in short term trading. Even the best stocks can fall sharply and even the worst can rally under the right circumstances.