作者：David Landry

Dave Landry on Swing Trading — Complete Implementation Specification

Based on David Landry, Dave Landry on Swing Trading (2000)

Overview
Swing Trading Philosophy
Trend Identification
Pullback Entries — The Core Method
The Bow Tie Pattern
The 2/20 EMA Breakout
Momentum Entries
Gap Strategies
Sector Analysis
Money Management
The Importance of Waiting for Setups
Trade Management
Common Mistakes
Key Quotes

1. Overview

Dave Landry is a trader, educator, and founder of DaveLandry.com, who has been actively trading and teaching swing trading methodology since the 1990s. His approach is distinguished by its simplicity, its emphasis on trend-following pullback entries, and its insistence that the best trade is the one that comes to you — not the one you go hunting for.

Dave Landry on Swing Trading (2000) is a practitioner's guide to systematic swing trading. Unlike many technical analysis books that catalog dozens of patterns and indicators, Landry focuses on a small number of high-probability setups, executed within a disciplined framework of trend identification, entry timing, and risk management. The book reflects the philosophy that trading success comes not from finding the perfect indicator or pattern, but from applying a simple, robust methodology with discipline and patience.

1.1 What Is Swing Trading?

Swing trading occupies the middle ground between day trading and position trading:

Dimension	Day Trading	Swing Trading	Position Trading
Holding period	Minutes to hours	2-10 days	Weeks to months
Time commitment	Full-time, during market hours	Part-time, evenings for scan	Periodic review
Number of trades	Many per day	2-5 per week	2-5 per month
Profit per trade	Small (0.5-2%)	Medium (3-10%)	Large (10-30%+)
Primary timeframe	Intraday (1-min to 15-min)	Daily	Weekly
Analysis focus	Tape reading, level II	Chart patterns, trends	Fundamentals + technicals

Swing trading is ideal for traders who have a full-time job because the analysis is done after market hours, orders are placed before the open, and positions require minimal intraday monitoring.

1.2 Landry's Core Principles

Trade with the trend. Never fight the prevailing direction.
Enter on pullbacks. Buy when a trending market temporarily retreats.
Keep it simple. A few reliable patterns are worth more than a hundred mediocre ones.
Manage risk first. Every trade must have a predefined stop loss before entry.
Wait for the setup. The market does not owe you a trade every day.
Let the sector confirm. Individual stocks move with their sectors; trade stocks in strong sectors.

2. Swing Trading Philosophy

2.1 Why Trends and Pullbacks

Landry's methodology is built on two empirical observations:

Observation 1: Trends persist. Markets that are trending tend to continue trending. A stock in a strong uptrend is more likely to continue higher than to reverse. This is not speculation but statistical fact — momentum is one of the most well-documented phenomena in financial markets.

Observation 2: Trends don't move in straight lines. Even the strongest trends experience temporary pullbacks as short-term traders take profits and as the market pauses to consolidate gains. These pullbacks create the optimal entry point for swing traders.

The combination of these two observations produces the core strategy: identify trending stocks, wait for a pullback, enter as the trend resumes, and exit when the trend shows signs of ending.

2.2 The Edge

The swing trader's edge comes from:

Entering at temporary weakness within a persistent trend. This provides a favorable entry price and a natural stop loss (below the pullback low).
Trading in the direction of the dominant force. Trend-following aligns the trader with momentum, institutional flows, and the path of least resistance.
Keeping risk small per trade. Pullback entries allow tight stops, which limit losses when the trade fails.
Letting winners run. When the trend resumes, the profit potential is significant relative to the tight risk.

3. Trend Identification

3.1 Visual Trend Assessment

Landry favors simple visual assessment over complex indicators:

Uptrend characteristics:

Higher highs and higher lows.
Price above the 20-day and 50-day moving averages.
Moving averages are sloping upward.
The 10-day EMA is above the 20-day EMA, which is above the 50-day SMA.

Downtrend characteristics:

Lower highs and lower lows.
Price below the 20-day and 50-day moving averages.
Moving averages are sloping downward.
The 10-day EMA is below the 20-day EMA, which is below the 50-day SMA.

Sideways (no trade):

No clear pattern of higher highs/lows or lower highs/lows.
Price oscillates around flat moving averages.
Moving averages are intertwined and directionless.

3.2 Moving Average Configuration

Landry uses three moving averages as the primary trend filter:

10-day EMA (Exponential Moving Average): Short-term trend proxy.
20-day EMA: Intermediate trend proxy and the key pullback reference.
50-day SMA (Simple Moving Average): Longer-term trend proxy.

Trend confirmation for longs: The 10 EMA > 20 EMA > 50 SMA, and all are rising. This configuration means that short-term, intermediate-term, and longer-term momentum are all aligned upward. This is the ideal environment for long swing trades.

Trend confirmation for shorts: The 10 EMA < 20 EMA < 50 SMA, and all are falling. All timeframes of momentum are aligned downward.

3.3 ADX as Trend Strength Confirmation

Landry uses the Average Directional Index (ADX) as a secondary confirmation:

ADX > 25: Strong trend. Good environment for swing trades.
ADX 20-25: Moderate trend. Acceptable but be selective.
ADX < 20: Weak or no trend. Avoid swing trades in this stock.

The ADX measures trend strength regardless of direction. A rising ADX means the trend (whether up or down) is strengthening. A falling ADX means the trend is weakening, regardless of whether price is moving up or down.

4. Pullback Entries — The Core Method

4.1 The Anatomy of a Pullback

A pullback within an uptrend is a temporary decline that:

Does not violate the overall trend structure (higher highs and higher lows).
Brings price back toward the 10-day or 20-day EMA.
Occurs on declining volume (no panic selling, just profit-taking).
Sets up a natural entry point with a defined stop loss.

4.2 Pullback Entry Criteria

Landry's pullback entry requires ALL of the following:

Trend confirmation. The 10 EMA > 20 EMA > 50 SMA, and all are rising.
Pullback depth. Price has pulled back to or near the 20-day EMA. Shallow pullbacks (to the 10-day EMA) are acceptable in very strong trends.
Pullback character. The pullback has occurred on declining volume and/or consists of relatively narrow-range bars. This indicates orderly profit-taking, not trend reversal.
Setup bar. A bar that shows the pullback may be ending: a reversal candle (hammer, bullish engulfing), a narrowing of range, or an inside bar.
No overhead resistance. Price should not be directly below a major resistance level that could cap the advance.

4.3 Entry Mechanics

Entry trigger: Place a buy stop above the high of the setup bar. If price trades above this level, the trend is resuming, and you are filled.
If not triggered: Lower the buy stop to the high of the next bar each day. If the pullback continues for more than 3-5 bars without triggering, the setup is invalid.
Stop loss: Place an initial stop below the low of the pullback. This is the natural protective level — if price violates the pullback low, the trend structure is broken, and you want to be out.

4.4 The Perfect Pullback

Landry's ideal pullback has these characteristics:

The preceding rally was strong (multiple consecutive up days, wide range bars).
The pullback is shallow (retraces 38-50% of the preceding advance).
The pullback is brief (2-5 days).
Volume declines noticeably during the pullback.
The pullback ends with a narrow-range bar or doji near the 20-day EMA.
The stock is in a strong sector.

5. The Bow Tie Pattern

5.1 What the Bow Tie Is

The Bow Tie is Landry's signature pattern — a moving average crossover pattern that signals the transition from a pullback to a trend resumption. It gets its name from the visual appearance of three moving averages converging and then diverging, resembling a bow tie.

5.2 Pattern Structure

Bullish Bow Tie:

Convergence phase. During the pullback, the 10 EMA, 20 EMA, and 50 SMA converge — they come together as the pullback brings the shorter-term averages down toward the longer-term average.
Cross. The three averages cross within a narrow range, ideally within 1-2 days. The 10 EMA crosses below the 20 EMA (this is the pullback in action).
Divergence phase. As the trend resumes, the 10 EMA crosses back above the 20 EMA and both begin to diverge upward from the 50 SMA. The three averages fan out, resuming the proper trend configuration.

Entry: Buy when the 10 EMA crosses back above the 20 EMA and price closes above both. Alternatively, buy on a break above the high of the bar that completes the Bow Tie.

Stop: Below the low of the convergence zone (the lowest point of the pullback).

5.3 Bearish Bow Tie

The mirror image for short trades:

The three MAs converge during a rally within a downtrend.
The 10 EMA crosses above the 20 EMA briefly.
The 10 EMA crosses back below the 20 EMA as the downtrend resumes.
Short when the 10 EMA crosses below the 20 EMA and price closes below both.

5.4 Bow Tie Filters

Not all Bow Ties are created equal. Landry recommends filtering for quality:

The preceding trend should be established. The Bow Tie should occur within a clear trend, not in a choppy, directionless market.
The convergence should be tight. If the three MAs spread too far apart during the convergence phase, the pullback was too deep — the trend may be broken.
Volume should decline during convergence and increase during divergence.
The pattern should occur at a meaningful chart level (near support, at a previous breakout point, at a round number).

6. The 2/20 EMA Breakout

6.1 Pattern Description

The 2/20 EMA Breakout is one of Landry's simplest and most effective setups. It identifies stocks that have pulled back to the 20-day EMA and are resuming their trend.

Setup requirements:

Stock is in a clear uptrend (above 50 SMA, all MAs rising).
Price has pulled back to or slightly below the 20-day EMA.
A bar makes a 2-day low (the low of the current bar is lower than the lows of the previous 2 bars). This is the final flush of the pullback.
Entry: Buy stop above the high of the 2-day low bar.

6.2 Why It Works

The 2/20 EMA Breakout works because:

The 20-day EMA is a widely watched dynamic support level. Many institutional traders use it as a reference point.
The 2-day low represents the final capitulation of short-term sellers within the pullback — the moment of maximum short-term pessimism.
The buy stop above the high of the setup bar ensures you only enter if the trend actually resumes — you are not trying to catch the bottom of the pullback.

6.3 Variations

2/20 EMA for shorts: In a downtrend, look for a 2-day high bar near the 20-day EMA. Short on a break below the low of that bar.
3/20 or 4/20: In less volatile markets, extending the lookback for the low can provide cleaner signals.
2/50: For longer-term swing trades, substitute the 50-day SMA as the pullback reference.

7. Momentum Entries

7.1 When to Use Momentum Entries

While Landry's primary approach is pullback entries, he acknowledges that some of the most powerful moves begin with momentum breakouts — price erupting to new highs on strong volume, with no pullback entry available.

Momentum entries are appropriate when:

A stock breaks out of a well-defined consolidation pattern (base, cup-and-handle, ascending triangle).
Volume on the breakout is significantly above average (at least 1.5x).
The breakout occurs in a strong sector.
The broader market is in an uptrend.

7.2 Breakout Entry Mechanics

Entry: Buy on a break above the consolidation high. Some traders enter on the breakout bar; others wait for a close above the level.
Stop: Below the breakout level, or below the low of the breakout bar. The stop is typically wider than on a pullback entry, so position size must be adjusted accordingly.
Target: Measure the height of the consolidation pattern and project it upward from the breakout point. This provides a minimum target.

7.3 The Follow-Through Day

Landry emphasizes that the breakout bar alone is not sufficient. The follow-through day — the day after the breakout — is critical:

Positive follow-through: Price continues higher on sustained or increasing volume. The breakout is confirmed.
No follow-through: Price stalls or pulls back on the day after the breakout. The breakout may be false. Tighten the stop.
Negative follow-through: Price reverses sharply and closes below the breakout level. The breakout has failed. Exit immediately.

8. Gap Strategies

8.1 Types of Gaps

Landry classifies gaps by their context and significance:

Breakaway gaps: Occur at the beginning of a new trend, typically out of a consolidation pattern. Characterized by very high volume. These gaps usually are not filled and represent the strongest type of gap signal.

Continuation gaps (measuring gaps): Occur in the middle of a strong trend. Confirm the trend's strength and can be used to estimate the remaining trend potential (measure the trend from start to gap, project same distance from gap).

Exhaustion gaps: Occur at the end of a trend, when the last buyers (in an uptrend) or last sellers (in a downtrend) make their final desperate move. Often accompanied by climax volume. These gaps are typically filled quickly.

Common gaps: Occur randomly within a trading range. No particular significance. Usually filled within a few days.

8.2 Trading Gap Strategies

Gap and go (continuation):

Stock gaps up on high volume in an uptrend.
Buy if the stock holds above the gap level for the first 30-60 minutes of trading.
Stop below the low of the gap day.

Gap fill (reversal):

Stock gaps up into resistance on high volume.
If the stock fails to hold the gap and falls back through the gap level, this is a potential short.
Stop above the high of the gap day.

Gap pullback:

Stock gaps up strongly (breakaway gap).
Wait for a pullback to the gap area (top of the gap becomes support).
Buy on a reversal near the gap level.

8.3 Gap Filters

Not all gaps are tradeable. Landry recommends filtering for:

Volume. Gaps on high volume are significant. Gaps on average volume are likely to be filled.
Context. Gaps at the beginning of a trend (breakaway) are the most powerful. Gaps after an extended run (exhaustion) are dangerous.
Size. Very large gaps (more than 5%) may be overextended and prone to reversal. Moderate gaps (1-3%) are typically more sustainable.

9. Sector Analysis

9.1 Why Sectors Matter

Landry is emphatic that individual stock selection is secondary to sector selection. Research consistently shows that a large percentage of a stock's price movement is attributable to its sector, not to company-specific factors:

Approximately 50% of a stock's movement is attributable to the overall market.
Approximately 30% is attributable to its sector or industry group.
Only approximately 20% is attributable to the individual stock.

This means that buying the best stock in a weak sector is far less profitable than buying an average stock in a strong sector. Sector analysis is not optional; it is the foundation of stock selection.

9.2 Sector Selection Methodology

Top-down approach:

Assess the broad market. Is it trending up, down, or sideways? If down or sideways, reduce exposure or go to cash. No sector selection can overcome a bear market.
Rank sectors by relative strength. Compare sector performance over the past 1, 3, and 6 months. Focus on sectors that rank in the top quartile across all timeframes. Avoid sectors in the bottom quartile.
Within strong sectors, find strong stocks. Apply the pullback entry criteria (trend confirmation, pullback to MA, setup bar) to individual stocks within the selected sectors.

9.3 Sector Rotation Awareness

Sectors rotate in a somewhat predictable pattern through the economic cycle:

Early recovery: Financials, consumer discretionary, technology.
Mid-expansion: Industrials, materials, energy.
Late expansion: Energy, materials, utilities (defensive).
Recession: Utilities, healthcare, consumer staples (defensive).

Understanding where the economy is in its cycle helps anticipate which sectors will lead and which will lag. This is not a timing tool but a bias tool — it tells you where to focus your attention.

10. Money Management

10.1 The Foundation of Survival

Landry considers money management the single most important aspect of trading:

"I know traders with mediocre pattern recognition skills who make money consistently because their money management is excellent. I know traders with brilliant analytical skills who blow up because their money management is terrible."

10.2 Position Sizing

Landry's position sizing method is straightforward:

Define the maximum loss per trade. Typically 1-2% of total trading capital.
Determine the stop loss distance. Based on the chart (below the pullback low, below the setup bar, etc.).
Calculate position size. Position size = Maximum loss / Stop loss distance.

Example:

Trading capital: $100,000
Maximum loss per trade: 1% = $1,000
Stock price: $50
Stop loss: $48 (distance = $2)
Position size: $1,000 / $2 = 500 shares ($25,000 position)

10.3 Portfolio Risk Limits

Beyond individual position sizing, Landry sets portfolio-level risk limits:

Maximum positions: 6-10 open positions at any time. More than this dilutes attention and reduces the ability to manage each position effectively.
Maximum sector concentration: No more than 25-30% of capital in any single sector. Sector correlation can cause multiple positions to fail simultaneously.
Maximum portfolio heat: Total open risk (sum of all positions' risk amounts) should not exceed 6-8% of trading capital. If you have 8 positions each risking 1%, your total portfolio heat is 8%.
Scaling in strong trends: When a trade is working, add to the position on subsequent pullbacks. Each addition should have its own stop loss and its own risk calculation. Never add to a losing position.

10.4 The Risk/Reward Requirement

Before entering any trade, calculate the risk/reward ratio:

Minimum acceptable ratio: 2:1. If risking $2, the realistic profit target must be at least $4.
Preferred ratio: 3:1 or better. Higher ratios allow a lower win rate while remaining profitable.
If the ratio is less than 2:1, skip the trade. Even if the pattern is perfect, a poor risk/reward ratio makes it unprofitable over time.

11. The Importance of Waiting for Setups

11.1 Patience as Edge

Landry returns repeatedly to the theme of patience. The swing trader's greatest advantage is the ability to wait — to sit in cash, doing nothing, until the market presents a high-probability setup on a silver platter. This is also the trader's greatest psychological challenge.

11.2 When NOT to Trade

When the broad market is directionless. In choppy, range-bound markets, pullback entries generate too many false signals.
When no setups meet all criteria. Forcing trades when setups are absent is the fastest path to losses.
After a series of losses. Taking a break after consecutive losses prevents revenge trading and allows emotional recovery.
When you are distracted, tired, or emotional. Trading requires focus. If you cannot give it your full attention, stay out.
When the news environment is unusually uncertain. Major events (elections, central bank decisions, geopolitical crises) can overwhelm technical patterns.

11.3 The Waiting Game

Landry estimates that the ideal swing trader is in cash 30-50% of the time. This feels wrong to most traders, who equate activity with productivity. But the math is clear: if you make 100 trades per year with a 40% win rate and 2:1 risk/reward, you are profitable. If you make 200 trades per year by forcing trades, your win rate drops to 30% and you are unprofitable — despite being twice as "active."

11.4 The Checklist Before Entry

Before placing any trade, Landry recommends this mental checklist:

Is the broad market supporting this trade direction?
Is the sector confirming?
Does the individual stock meet all pattern criteria?
Is the risk/reward ratio at least 2:1?
Is the position size appropriate for my risk limits?
Am I trading the setup, or am I trading my emotions?

If any answer is "no" or "I'm not sure," do not trade.

12. Trade Management

12.1 Initial Stop Placement

Every trade begins with a stop loss. Landry's stop placement rules:

Pullback entry: Stop below the pullback low.
Bow Tie: Stop below the convergence zone low.
Breakout: Stop below the breakout bar low or the consolidation low.
Gap entry: Stop below the gap day low.

The stop should be placed at a level where, if reached, the trade thesis is invalidated. It should never be arbitrary (e.g., "I'll use a 5% stop") — it must be based on the chart structure.

12.2 Trailing Stops

As a trade moves in your favor, the stop is trailed to protect profits:

After first target (1R profit): Move stop to breakeven. This eliminates the possibility of a loss.
As the trend progresses: Trail the stop below each new pullback low (for longs). This locks in progressively more profit while allowing the trend to continue.
Moving average trail: Some traders trail the stop below the 10-day or 20-day EMA. This provides a smooth, objective trailing method.

12.3 Profit Targets

Landry uses a combination of target approaches:

Initial target: 2x the risk distance (the minimum acceptable R:R). Consider taking partial profits here.
Extended target: A prior resistance level, a measured move target, or a Fibonacci extension.
Trailing exit: For the strongest trends, use a trailing stop rather than a fixed target. This allows participation in the occasional outsized move that produces 5-10R returns.

12.4 Partial Exits

Landry recommends scaling out of winning trades:

Sell 1/3 at the first target (2R).
Trail stop on the remaining 2/3.
Sell another 1/3 at the second target or at signs of trend exhaustion.
Trail the final 1/3 with a loose stop to capture any remaining upside.

13. Common Mistakes

13.1 Entry Mistakes

Trading against the trend. Buying pullbacks in downtrends or shorting rallies in uptrends. The trend is your friend until the very end.
Entering before the setup is complete. Anticipating the trigger rather than waiting for it. The pullback may continue further than expected.
Ignoring the broader market. Trading individual stocks without considering the market environment. Even the best stocks struggle in bear markets.
Chasing extended moves. Buying stocks that have already rallied far above the pullback entry point. The risk/reward is poor.
Ignoring sector context. Buying a stock in a weak sector, regardless of how good the individual chart looks.

13.2 Management Mistakes

Moving stops to avoid being stopped out. If the stop is reached, the trade thesis is wrong. Widening the stop is denial, not analysis.
Taking profits too early. Cutting winners short to "lock in gains" while letting losers run. This inverts the favorable risk/reward that makes swing trading profitable.
Adding to losers. Averaging down on a losing swing trade is a recipe for disaster. If the trade is wrong, get out.
Not using stops at all. "I'll watch it and get out if it goes too far" is not a plan. It is a prayer.

13.3 Psychological Mistakes

Over-trading. Forcing trades when setups are absent, driven by boredom, impatience, or the desire to "make something happen."
Revenge trading. After a loss, immediately entering another trade to "make back" the loss. This trade is driven by emotion, not analysis.
Risking too much per trade. Exceeding the 1-2% risk limit because you are "really confident" about this one. Confidence has no correlation with outcome.
Not keeping a trading journal. Without records, you cannot identify patterns in your mistakes or improve your process.
Changing systems after a losing streak. Every system has losing streaks. Abandoning a sound methodology during a drawdown is the single most common mistake among swing traders.

15. Key Quotes

"The best trade is the one that comes to you. Never go looking for a trade. If you have to squint at a chart to see the pattern, it's not there."

"Swing trading is not about being right. It is about managing risk. If you manage your risk correctly, being right 40% of the time is more than enough."

"The trend is your friend until the very end. Most traders lose money because they try to pick tops and bottoms instead of trading in the direction of the obvious trend."

"The single greatest edge a swing trader has is the ability to do nothing. The market does not require your participation every day."

"Position sizing is not sexy, but it is the difference between a trader who survives and one who doesn't. You can have the best entries in the world and still blow up if you size incorrectly."

"I would rather miss a trade than force one. Missed trades cost you nothing. Forced trades cost you money."

"A pullback within an uptrend is not a reason to sell. It is a reason to buy — provided you wait for the pullback to complete."

"Sector analysis is not optional. You wouldn't sail into a hurricane just because your boat is well-built. Don't buy a stock in a weak sector just because its chart looks good."

"The stop loss is not your enemy. It is your insurance policy. Every trade you enter without a stop is an accident waiting to happen."

"Most traders spend 90% of their time on entries and 10% on exits. It should be the reverse. The entry gets you into the game. The exit determines whether you win or lose."

"If you are consistently losing money, the problem is not the market. The problem is you. Either your methodology is flawed, your execution is undisciplined, or your risk management is inadequate. Fix one, and the others tend to follow."

This specification systematizes Dave Landry's swing trading methodology. The core philosophy is elegant in its simplicity: identify trending stocks, wait patiently for pullbacks to moving average support, enter as the trend resumes with tight risk and favorable reward potential, and manage the trade with trailing stops. The Bow Tie pattern and 2/20 EMA Breakout provide specific, repeatable entry triggers. Sector analysis ensures that individual stock selection is supported by broader market forces. Money management — position sizing, risk limits, and portfolio heat — ensures survival through inevitable losing streaks. And above all, the discipline to wait for setups rather than forcing trades is the edge that separates profitable swing traders from the majority who fail.