Swing trader tales: trading on the fly with Michele Koenig

Koenig is an independent retail trader and avid angler whose talent for fly-fishing has influenced a powerful swing trading strategy – from identifying the strike zone to managing the drift and eventually landing a big catch.

After graduating with a degree in finance from the University of Montana and following a stint in software sales, she decided to start swing trading full-time in 2001.

It didn’t take Michele long to build up a strategy that was heavily focused on charts and technical analysis, and after making $545,000 in trading profits in 2013 she decided to start a blog dubbed Trade on the Fly. 

Two years later, Koenig started launching services such as a trade watch list, ledgers, webinars, and since then has built an engaged community of 200 traders that she regularly provides consulting for.

What initially attracted Koenig to the markets was the “ability to be in charge of my own destiny, to not be limited by an hourly salary and to be able to do that from wherever I chose to live”.

She focuses on keeping things simple. “A good setup is a good setup,” she tells Opto. “It can come in many forms, from a specific chart pattern to a breakout through key resistance to pullbacks in key moving averages or support areas.”

Over the years, Koenig’s learnt from her mistakes – one of which she says was forcing trades that were not ready – and has since built a strategy that is focused on being patient. Her strategy is 95% technical analysis and 5% fundamental analysis.

“The only thing constant in the market is change,” she explains. “Throughout the year there will be times I trade less and other times when I step on the gas, depending on what the market is doing and how that fits in with my trading style. Learning to have the ability to recognise that and more discipline to make those adjustments has helped me over the years.”

“A good setup is a good setup. It can come in many forms, from a specific chart pattern to a breakout through key resistance to pullbacks in key moving averages or support areas”

 

Here’s a look at Koenig’s typical trading day.

 

Before the markets open: Twitter and news

Mornings are the busiest time of the day for Koenig. Most start with her checking Twitter [TWTR] using TweetDeck for any market news. “For me, it’s a great way to organise the way I see information and news that’s coming through,” she says.

She usually turns on CNBC, but this has become more and more like background noise, as updates tend to come through much faster online. What she’s listening out for during this time is anything that might be moving stocks in premarket trading and why.

“I pick through those [stocks] and narrow it down to a few that I may watch for intraday setups, however, since I focus primarily on swing trading I may or may not always trade intraday.”

She will also check through the market’s biggest and smallest percentage gainers to see what’s moving well on that particular day and depending on her criteria, she will add it to her watchlist.

“I pick through those [stocks] and narrow it down to a few that I may watch for intraday setups, however, since I focus primarily on swing trading I may or may not always trade intraday”

 

Early trading: setting up alerts

By mid-morning Koenig has analysed about 400 to 600 charts that are stored across a range of platforms. She readies those charts on her platform by setting up alerts for swing trades. And the platform in question, a premium bit of software called Thinkorswim, created by Nebraska-based brokers TD Ameritrade. 

“I use ideas from pre-market, which I put into my platform and chart those to see how they act and how they set up. If the chart sets up by intraday into a setup I can make sense of then I can take the trade, if not I just pass on it,” she says.

By this time Koenig usually has more than circa 50 charts in view, which she watches regularly using StockCharts, Finviz and more recently TrendSpider. Some of these charts are for the market, some are for swing, and some for intraday ideas.

“ I place orders when my setup triggers based either off a specific price or off a trend line, or support or resistance line,” she says. “I set my risk within risk tolerance levels I am comfortable with, based on where I feel like I am wrong in my thesis for the setup, a specific price, support line or trend line that should hold on any normal pullback.”

“I set my risk within risk tolerance levels I am comfortable with, based on where I feel like I am wrong in my thesis for the setup, a specific price, support line or trend line that should hold on any normal pullback”

 

Afternoon trading: chart analysis

Since a lot of what Koenig is doing involves and centres around market swings, she’s not glued to her computer screen all day and usually takes a break around midday to give her eyes a rest.

By late afternoon, Koenig will come back to her desk to spend the last few hours while the market is still open checking back in.   

“I look for charts that have spent the day consolidating at the high end of the day’s range that may follow through and break higher into the close, or for setups that had early moves and have pulled back mid-day that may bounce into the close,” she explains.

“I look for charts that have spent the day consolidating at the high end of the day’s range that may follow through and break higher into the close, or for setups that had early moves and have pulled back mid-day that may bounce into the close”

 

After the markets close: journaling and setting up tomorrow’s watch list  

Once the markets have closed, Koenig uses Evernote to journal her thoughts on the day’s trading and the market’s performance. She also uses Tradelog software for tracking her trading performance and reporting her taxes on each of the trades.  

When Koenig’s not trading, she’s often found among the many rivers near her hometown Whitefish fly fishing.

The art of fly fishing draws many parallels with trading, as it requires an understanding of river conditions (the overall market) and the ability to use the right fly to increase the odds of catching a fish (the right strategy for the market).

Her advice to traders just starting out is to find their niche: “Focus on consistency and steady gains, they add up over time.”

“Focus on consistency and steady gains, they add up over time”