The Box Trade-Brian Heyliger’s Favorite Swing Trade Setup!

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For you swing trade traders out there, I like to share with you my most valuable setup in emini S&P 500. I call it the ‘box trade.’ As with many things in trading, the more simple, the better. I live by that principle both in my personal life and in my trading career as well. And I think you’ll be hard pressed to find a more simple trading setup than my ‘box trade.’ So whether you’re new to trading, or you’ve been trading for years, this setup is right for you. To fully understand the methodology behind the setup, you first need to understand how markets work. And what I’m about to tell you is true of all markets.

Markets trend and they consolidate, they expand and contract. It’s just the nature off all markets, and it has been for as long as man began trading goods. When a market is trending (or expanding) it is making new highs and new lows. It’s at times like this volatility is a at a premium, and traders stand to make a good deal of money on the bigger moves. However, trending markets only occur a small percentage of the time. The rest of the time, markets consolidate. And it’s during this consolidation time as traders we must be prepared to catch the next big move. In the S&P 500, these big moves normally occur after it’s been consolidating in a range for at least two weeks – this forms the box. See below:

That movement back and forth forms the box, and we need to pay very close attention to where the market trades, and where it closes. For this setup to be valid, the S&P 500 much touch both the top, and the bottom of the box at least twice while consolidating in the range. As you can see here, the range of this box was approximately 30 points from 1170 – 1200. And the price action ‘kissed’ both the top and the bottom of the box on more than one occasion. It was a text book box trade:

Now, after this occurs, it’s our job to watch for the break. Usually within a few weeks the break will occur – the market will stop consolidating, and begin trending. However, there really isn’t a way to know which way the market will break, so we wait. The direction of the break really doesn’t matter, because we can take either side and profit. So we wait for the break to occur and then take the trade.

Here’s when you take a position: after the S&P closes either above the top of the box, or below the bottom of the box, the trade is on. If we break to the upside, we go long. If we break to the downside, get short, and that’s it. In this case the S&P 500 broke to the upside:

Once the break occurs, you can expect the market to move a distance equal to the height of the box – in this case 30-points (1200-1170 – 30 points). Once you’re in the trade, the only other thing you need to watch is your stop loss. And I close out the trade if the market ever closes back inside the box –because that would invalidate the break.

And there you have it my ‘box trade.’ This trade works 75% of the time, and occurs about 3-4 times per year. As I mentioned earlier I use the setup to trade the S&P 500 emini. However, the beauty of the setup is that you can use it to trade any instrument that tracks the movement of the S&P 500 – So if don’t trade futures, you can trade ETF’s like SPY, SSO, and the like… Just remember to watch the action of the emini futures contract for the signal to take the trade.

So the next time you feel the market is range bound, pull up a daily chart, and see if the emini is forming a box. If it is, there may be a profitable trade right around the corner…

Brian Heyliger

Six Figure Trader

P.S. Brian just shared with us one of the setups he uses as for swing trading,  but Brian makes the majority of this money as a day trader. To learn more about how Brian day trades the futures markets you may want to take his FREE 7-Day Professional Traders e-Course.