TLDR;
This YouTube video features an interview with Hiren, a full-time swing trader, who shares his swing trading strategy, focusing on the Volatility Contraction Pattern (VCP) and the importance of timing. He discusses when swing trading is most effective, how to identify low-risk, high-reward setups, and provides numerous examples from his own trading experience. Hiren emphasises the need to master one strategy, manage risk effectively, and adapt to market conditions.
- Hiren's swing trading strategy focuses on catching momentum in small and mid-cap stocks, typically aiming for 25-40% moves.
- Timing is crucial; Hiren uses the Episodic Pivot (EP) setup, buying stocks after positive news or earnings announcements, focusing on pullbacks near the 10 and 20 EMA.
- He uses a combination of fundamental and technical analysis, along with volume analysis, to identify potential trades.
Introduction to Swing Trading [0:00]
Vijay Thakkar introduces Hiren, a full-time swing trader who began his journey in 2019. The video will explore Hiren's swing trading strategy, which centres around the Volatility Contraction Pattern (VCP) for low-risk, high-reward trades. A key focus will be on identifying optimal and suboptimal times for swing trading, recognising that market conditions significantly impact trade outcomes. The podcast will cover Hiren's strategy, various swing trading setups, numerous examples, and trade management techniques.
Hiren's Early Trading Journey and Initial Mistakes [4:11]
Hiren began trading in 2019, influenced by his father's commodity trading but using technical analysis instead of intuition. He initially made the mistake of starting with options trading without proper knowledge, leading to a significant loss of ₹80,000 and subsequent depression. After a break, he returned to the market, experimenting with intraday trading in cash during the COVID-19 pandemic but found limited success with various strategies.
Turning Point: Discovering Swing Trading and Mark Minervini [6:36]
In 2021, Hiren discovered swing trading through a trader on Twitter, Manas Arora, who traded in cash with a focus on timing. Inspired, Hiren read Mark Minervini's "Trade Like a Stock Market Wizard," which he found comprehensive for both beginners and advanced traders. The book covered fundamentals, swing trading, timing, risk management, and adapting to market conditions. Hiren studied Manas Arora's trades from 2018 to 2021, analysing charts, entries, and exits to refine his understanding.
Building a Swing Trading System and Managing Risk [8:28]
In 2021, Hiren started with ₹22,000, aiming to develop a skill rather than immediate profit. He experienced initial success but faced a drawdown in July 2021, leading him to implement strict risk management. Drawing from Minervini's advice, he limited drawdowns to a maximum of 5-7% and stopped trading when this threshold was breached. By 2022, he gained confidence and increased his investment, achieving returns of 145% in 2023 and 68% in 2024. Hiren credits Manas Arora and Mark Minervini for their guidance and emphasises his hard work in studying winning stocks from 2013 to 2025.
Defining Swing Trading Strategy and Adapting to Lifestyle [11:32]
Hiren's strategy is centred on swing trading, chosen for its alignment with his lifestyle and desire for freedom. He contrasts it with other trading styles like scalping, intraday, and positional trading, noting that the key is to find a method that suits one's psychology and mindset. Hiren emphasises the importance of mastering one strategy and sticking to it, rather than jumping between different approaches when the market becomes challenging.
Mastering One Strategy and Avoiding Style Drift [13:21]
Hiren stresses the importance of mastering a single strategy and avoiding "style drift," which he describes as a slow poison. He advocates for sticking to swing trading and focusing on making money in good markets, while sitting out during bad or choppy markets. Hiren highlights that the Indian market's dynamics differ from the US market, with average winning stocks giving 25-40% moves before consolidating.
Momentum and Avoiding Dead Time [16:10]
Hiren's strategy involves staying in a stock as long as there is momentum and exiting when the momentum ends, regardless of potential future gains. He avoids getting stuck in consolidation phases, which he refers to as "dead time." The goal is to catch the initial 25-40% move and then move on to other opportunities, ensuring that capital is continuously working.
Time is Money and the Importance of Churning [18:38]
Hiren emphasises that "time is money" in a bull market, as opportunities are abundant. He uses Mark Minervini's RBF calculator to illustrate the importance of frequent trades. To achieve a 100% annual return with a 35% accuracy and a 1:4 risk-reward ratio, 133 trades are needed. Therefore, reducing dead time and increasing the number of trades is crucial for maximising returns.
Timing the Market and Avoiding Euphoria [21:36]
Hiren stresses the importance of timing in the market, using the example of RPower to illustrate how buying at the right time can yield the same profits as buying earlier but without the extended period of stagnation. He uses an "EP setup" (Episodic Pivot), buying stocks after positive earnings or news announcements, but only on pullbacks and within a specific structure.
Scanner and Stock Selection [26:45]
Hiren uses three main scanners: monthly 20% gainers, 3-monthly 30% gainers, and stocks within 25% of their 52-week high, all with a 200 EMA condition. These scanners help him track flags, medium-term bases, and stocks with less supply near their highs. He combines these scanners to identify stocks meeting any of the three conditions, providing a broad view of potential opportunities. He manually adds IPOs to his tracking list and avoids overly specific criteria to scan the entire universe of stocks.
Understanding VCP (Volatility Contraction Pattern) [30:31]
Hiren explains the VCP concept from Mark Minervini's book, emphasising that it's a characteristic of the market rather than a precise pattern. The key rules include the stock being in an uptrend and selling pressure being absorbed in every contraction, with volume drying up. He illustrates this with examples like RVNL, showing how price and volume contractions indicate reduced supply and potential for a breakout.
Wyckoff's Domination Concept [35:59]
Hiren discusses Richard D. Wyckoff's concept of "domination," where the market runs on action and reaction. In an uptrend, strong action by buyers should be followed by a small reaction, indicating buyer domination. Conversely, in a downtrend, strong selling should be followed by a weak buyer reaction. Hiren bases much of his setup on this concept, aligning with Mark Minervini's emphasis on prior uptrends and absorbed selling.
Importance of Context and Avoiding Blindly Following Patterns [38:14]
Hiren stresses the importance of context when using patterns like cup and handle, which should be continuation patterns within an uptrend. He provides examples of patterns failing in downtrends due to high supply. Drawing from Mark Minervini, he highlights that using patterns without understanding the context will lead to failure.
Setups and Avoiding Downtrending Stocks [41:52]
Hiren outlines his trading setups, including big base, continuation base, flags, Episodic Pivots (EP), pullbacks, IPOs, and shakeouts. He avoids reversal setups and intraday trading, focusing solely on swing trades within these setups. He emphasises the importance of trading stage 2 stocks, avoiding downtrending stocks, and learning from experience and books to refine his approach.
Pullback Setups: Key Conditions [43:43]
Hiren focuses on pullback setups, highlighting common mistakes and key conditions. He stresses the importance of a strong prior uptrend, with stocks not repeatedly touching the 10 and 20 EMAs. The stock should be in stage 2, with a rising 200 DMA and strong volume. Pullbacks should be orderly, not steep, and within a 12-20% range.
Pullback Examples and Avoiding Hard Pullbacks [50:46]
Hiren provides examples of successful pullback trades, such as Dhani from 2017, illustrating the importance of orderly pullbacks and stage 2 confirmation. He contrasts these with examples of "hard pullbacks," such as Paras and Subros, where steep declines lead to increased selling pressure and delayed recovery.
Entry, Stop Loss and Position Sizing [1:03:06]
Hiren details his entry and stop-loss strategy for pullback trades. Entries are made on the high of the mother candle (inside bar), with a stop loss at the previous day's low. He uses a position size calculator to manage risk, allocating a larger size to trades with tighter stop losses. The maximum stop loss is 5%, and he prioritises stocks that respect the 10-20 EMA.
Trade Management: Risk-Free Trades and Profit Booking [1:21:44]
Hiren explains his trade management rules, starting with moving the stop loss to break even when the stock moves to 2R (twice the risk). In a bull market, he books 1/3 of the position at 4R and trails the rest with the 10 EMA, exiting when the price closes below the 10 EMA and breaches the low of that candle. In a bear market, he becomes more aggressive, booking 1/2 at 4R and trailing the rest with the 10 EMA.
Market Timing and Aggressive Profit Booking [1:32:10]
Hiren discusses aggressive profit booking, particularly in situations where a stock moves rapidly. He uses the example of Akums, an IPO stock, where he booked profits quickly due to the fast move. He also highlights the importance of market timing, using market breadth indicators to identify bear markets and adjust his trading strategy accordingly.
Market Breadth and Identifying Bear Markets [1:35:11]
Hiren uses market breadth indicators, such as the percentage of stocks above the 200 SMA, to identify bear markets. A decline in this percentage indicates increased selling pressure and a shift to a defensive strategy. He emphasises that the market moves in cycles, alternating between easy and hard money environments, and traders must adapt to these changes.
Timing the Market and Adjusting Swings [1:43:11]
Hiren compares swing trading to cricket, where a batsman adjusts his swings based on pitch conditions. He stresses the importance of recognising when setups are not working and reducing trading activity. By monitoring breakouts and market breadth, he determines when to be aggressive or defensive. The key is to time the market, recognise different phases, and adjust the trading strategy accordingly.
Conclusion and Final Thoughts [1:52:06]
Vijay Thakkar thanks Hiren for sharing his swing trading strategy and emphasises the importance of practice. Hiren reflects on his experience and expresses gratitude for the opportunity to share his insights. The video concludes with a call to action for viewers to share their favourite parts of the video and ask questions in the comments.