"The trend is your friend."  We've all heard it, but is that 5-word philosophy enough to lead you to great trades and help you avoid the disasters?

Hardly.

When looking for swing trades, I always look at the trend first. It is a very simple technical analysis tool that helps determine where a stock is likely headed in the near future. However, trend channels are often overlooked by novice traders--usually resulting in disastrous results. Let's take a look at a real-time example:

BEA Systems (BEAS), currently trading just over 13. Here is the 6-month chart:

Notice the solid uptrend (marked by higher lows). But also notice the uptrend channel--this is marked by consistent higher highs, forming a parallel line with the uptrend. These two lines make up the channel.

The idea is simple: Buy at the bottom of the uptrend channel, sell at the top. Beginners will often see that BEA Systems is zooming higher and eagerly jump on board, not noticing that it is at the top of the uptrend channel.

Another key ingredient I've included on this chart is the RSI (relative strength index). This is a functional indicator used to determine when a stock is oversold or overbought. Low is oversold, high is overbought. The accuracy of RSI varies with each stock, so you have to look on the RSI chart to see how well it 'reads' this particular stock.

On this chart, notice the last time the RSI was this high was at the top of the trend channel--sure enough, it came crashing down to the uptrend line before resuming higher. Now the RSI is high and the stock is at the top of the uptrend channel...

So what should you do?  Should you short sell?  No. Never go against the trend (remember, it is our friend ;)  Instead, you should put BEAS on your watch list, and check it at least once a day. Once it retraces to the bottom of that uptrend channel, hit your buy button like there's no tomorrow.

Andy Swan is co-founder and head trader for DaytradeTeam.com.  To get all of Andy's day trading, swing trading, and options trading alerts in real time, subscribe to a one-week, all-inclusive trial membership to DaytradeTeam by clicking here.