Swing Trading Strategies
Swing trading allows you to make money when the market is bullish, or bearish, or just going sideways. That is why it has a distinct advantage over other approaches to investing. The goal is to make money, not to rest one's hopes on the future of a stock, a sector, or the economy.
All of the methods that are used to identify stocks that are appropriate for swing trading are based on technical analysis. Technical analysis is a way of using historical price volume patterns to predict future behavior. It is not necessary to have a detailed understanding of technical analysis in order to swing trade. There are tools available that can assist investors at every level - from novice to expert. While there are many sources of information and tools that help identify swing trading opportunities, this book will focus on those provided at www.mrswing.com. Once you understand the principles, you can explore other sources of information.
Also among the most popular methods of trading forex, swing trading differs considerably from position trading in almost every way. For the most part, swing traders generally ignore fundamental information and concentrate almost exclusively on the technicals. The only time swing traders will generally pay any attention to the fundamentals is when they check the schedule for fundamental news announcements so that they can avoid trading during market-moving economic data releases. Much like its label suggests, swing trading is all about trading swings, or turns, in the market. Any price action that occurs over time in any financial trading market will be made up of countless short- to medium-term swings both up and down. This will occur whether the market is in trending mode (overall price movement in one general direction) or ranging mode (sideways price action). Swing traders attempt to capitalize on all of these swings. Another way in which swing trading differs considerably from...
To examine a typical trend-following swing trading system, we will modify the channel breakout system used in Chapter 3 by changing the entry criteria from 20- to 15-day highs or lows and reducing the exit condition to the violation of 8-day highs or lows. This shifts our original system from a stop and reverse to one that allows for neutrality during sideways market action. In addition, to ensure that these trades remain short term in duration, we have added a time-driven exit criteria that will be triggered on trades held beyond 7.5 days. (See Chapter 4, Time-Driven Exit Filters, for the programming code.)
A swing trader typically catches short-term price trends that range from a few days to a few weeks. There are several advantages and disadvantages to swing trading. Some of the disadvantages are Swing trading involves more buy sell decisions, which implies the possibility of more mistakes, and also the increased costs of frequent movements (commission and slippage). It is unrealistic to believe that even with the best tools, we will be able to obtain the 77.7 percent profit stated earlier. I consider it a good job when I grab 30 percent of a long-term trend, and an exceptional job when I get 50 percent. Swing trading involves a lot more work and stress than long-term investing does. Some of the advantages of swing trading are When you swing trade, you are invested in a specific stock only during the time of the swing. Therefore, if you calculate the profit you generate for each day during which your money is invested, you will see that most often the return will be greater for swing...
It is important to understand the basics of swing trading to understand how our strategies work. Since the days of Charles Dow, traders have written about two distinct methods of trading. The first is playing for the Iong pull.-This involves trying to determine the underlying value of a market or security through fundamentals. A trade is then held until a revaluation takes place. This is analogous to trend-following strategies which ultimately depend on long-term economic policies or fundamental shifts in supply and demand. The second method of trading, as described by Dow back in 1908, was to deal in active markets making many trades, and relying on stop loss orders for protection. This came to be called swing trading. Trading opportunities presented themselves on both the long and short side, regardless of what the underlying long-term trend was. Swing trading is anticipating the market's next move, and asking what is the most probable outcome. For example, if a market broke support...
Fast becoming the trading style of choice, swing trading offers the greatest opportunities. The markets have changed and big moves no longer take weeks or months. Ten-point moves are quite possible in two to six-day periods. Adapting to this style of trading allows a trader to reap huge gains quickly, because he does not allow volatility to eat away his profits in longer-term positions. This is just simply smart Swing traders usually hold onto positions over a period of two to six days, trying to pull out a minimum of one to three points. Targets can be three points and higher. The swing trader has the option of adding to his position if his entry point is not quite exact, as long as the stock does not go beyond its predetermined stop-loss. The swing trader usually trades stable 20 to 50-priced stocks in well-established companies that have the potential for three-plus point moves. Because of the reputation of the companies, a twenty-point gap the following morning should be low risk...
SWING TRADING Swing trades in this case refers to trades that will typically last from 2 to 5 days. You should be looking to take several points of profit out of the market with each trade. Since holding overnight can be risky, you may wish to hold fewer shares. If you normally day trade 1000 shares at a time, consider trading only 200 to 500 shares on these setups. This limits your loss potential if after-market news on the company causes it to gap open against you. Fewer shares also allow you to use a wider stop-loss (typically 1 to 1&1 4 points) so that you don't get hurt. This also allows more room for price to move around without stopping you out of a good trade. As the stock moves in your favor you can trail the stop-loss anywhere from 1 to 1 & 1 2 points behind it. At some point the stock may trade in your favor to a price level where you want to go ahead and take your profit. Some reasonable exit points are a price support or resistance level, the other side of the channel on...
The chart below shows the price movement of Myriad Genetics (MYGN) in an uptrend. Notice that after the price moves up, it takes a rest, or pulls back. When we swing trade an uptrend, we buy on the pull-back. The price movement looks more like the zig-zag of a saw blade than a sinusoid, but once an uptrend is established the pattern tends to repeat itself. In swing trading we capitalize on the predictability of the pattern. We buy during the pull-back to increase our chances of making a profit.
Using the Master Plan, swing trading opportunities are identified after the market closes. Trades are entered in the morning, usually within the first half hour of trading. When you enter the trade (and the decision rule you use) depends on whether or not the stock has gapped up or down from the previous day's closing price. According to the Master Plan, a stock is considered to have gapped up when it opens 50 cents or more higher than the previous day's close it is considered to have gapped down when it opens 50 cents lower than the previous day's close. Most frequently, the stock price will open within 50 cents of the previous day's close, neither gapping up nor gapping down.
While anyone can sell short, you must make sure that your brokerage account is approved for trading on margin. If you do not have a margin account, simply fill out the necessary forms with your current brokerage firm or open an account with one of the firms recommended for swing trading. A chart showing a downtrend that is conducive to short swing trading is shown on the next page.
Prices rise and fall, with rising prices being stimulated by greed and falling prices by the awakening of fear. This emotional war between greed and fear generates a swinging price movement that provides a perfect opportunity for swing trading. Swing Traders capitalize on the emotions of others while they carefully control their own emotions and systematically enter and exit trades. Swing Traders recognize the levels of support and resistance. They understand the concepts of momentum and volatility and can identify a trading range or channel. Equity trading provides a natural arena for Swing Traders. As price seeks an equilibrium state, Swing Traders seek to exploit direct price thrusts as they enter positions at support and resistance. By examining chart pattern characteristics they make money in both trending and range bound markets. Swing Trading is a classic strategy that involves holding stocks for a short period of time, typically between a few days to a few weeks. Unlike day...
Trading patterns - SwingTracker is a real time charting program available at www.mrswing.com that is designed to identify swing trading opportunities. While SwingTracker has many features (described in the Appendix), the scan feature is used to identify stocks whose price action show patterns that make them good candidates for swing trading. The scan feature allows you to identify patterns based on price history, volume history, moving averages, technical indicators, candlestick criteria, and fundamental company characteristics. Scan criteria are saved in a scan library so they can be used over and over again. A scan scenarios (also called a template) can be used to evaluate patterns in over 6000 stocks on the NYSE, the AMEX, and the NASDAQ. This evaluation happens in real time. During the day, you can use SwingTracker to watch the price and volume behavior of individual stocks. You can easily monitor stocks on a favorites list, and set alerts to tell you when particular prices are...
While looking at a chart can often tell you whether a stock is appropriate for swing trading, it is very time consuming to look at charts, particularly if you look for opportunities every day. Another way to identify good stocks is to use software that can scan all of the listed stocks based on a series of algebraic equations that represent the characteristics of a good chart pattern. I use SwingTracker to accomplish this task. Before discussing the specifics of pattern recognition criteria, we'll briefly consider the measures used in the algebraic equations. Some of the measures are simple descriptive variables (e.g., the high price for the previous day or the average volume over the past 20 days). Other measures are based on technical analysis which is discussed in more detail in the Appendix. Technical analysis has many different indicators from a simple moving average to a complex oscillator. It is not necessary to have an in-depth understanding of technical analysis to be a...
Swing Trading can result in large losses and may not be an activity suitable for everyone. Used for swing trading & core trading Visited occasionally by swing traders and also used by some long-term investors. We encourage our traders to This is the domain of the swing trader. It is where the swing trader will spend 90 of his time and get nearly 2. Swing Trading (2 to 10 days). This wealth-building style of trading is designed to capture short-term swings in an on-going trend, while side stepping the brief countertrend moves. It attempts to take advantage of a very overlooked niche, one that is too short for large institutions and too long for day traders. Daily charts are used for Swing Trading. Swing Trader buys near the declining 20ma Swing Trader buys near the declining 20ma Tools of the Swing Trade
Larry writes about real trading situations, explaining how to reduce risks and enhance returns. The book contains practical examples and explanations how to handle the various scenarios that might arise. I feel comfortable saying that this is the best practical manual for swing trading that I have ever read. His focus on short-term (swing) trading is very understandable. In the current, turbulent market environment, many people consider buy-and-hold investing to be an outdated strategy. However, they are not sure what else to do. Swing Trading offers a real opportunity to produce profits while keeping risk under control. The algorithms that Larry uses in SwingTracker are great at identifying swing trading opportunities - they are extremely valuable to both beginners and experienced swing traders. Larry covers the whole process of swing trading, from soup to nuts. He even recommends brokerage firms that have features which are particularly useful to swing traders. Not only does this...
OptionsXpress is a discount broker that has many features to help the swing trader. While the name suggests a specialist in options, you can trade stocks, bonds, and mutual funds as well. optionsXpress also has a unique autotrading service called XecuteSM which we use for several of our services including QQQ Swings, OEX Swings, DIA Swings and SMH Swings. In the near future you will also be able to trade our OptionSwings service using XecuteSM. If you are a subscriber to one of our services, our trade recommendations go directly to optionsXpress and they can automatically place the buy and sell orders in your account. This is particularly convenient for subscribers who are unable to watch the market. For swing traders, optionsXpress has a feature called One Cancels Other Autotrading means that optionsXpress can executes your QQQ Swing trade recommendations automatically based on your specifications in your brokerage account and sends QQQ Swings trade alerts.
Can you make money swing trading YES, we enjoy a high percentage of winning trades because the charts pattern used have been back-tested. The risk parameters are highly defined The swing trader is a disciplined user of trading STOPS. This is only TRUE when you apply a solid trading plan, like our MASTER PLAN.
SwingTracker 4.0 is quote, scan and charts software designed specifically for Swing Traders. In addition to our acclaimed features like real-time intraday technical charts, sophisticated stock tool and dozens of technical indicators, we have the following special features for swing traders
Bickford Getting Started in Rental Income by Michael C. Thomsett Getting Started in Exchange Traded Funds by Todd Lofton Getting Started in Fundamental Analysis by Michael C. Thomsett Getting Started in REITS by Richard Imperiale Getting Started in Swing Trading by Michael C. Thomsett Getting Started in Property Flipping by Michael C. Thomsett
Specially as time went by and retail trading became a larger part of the overall daily trading volume. As time went by I focused more and more on the forex market and less on individual stocks. It was logical. With stocks I had to wait sometimes a week or two to see descent profits. Now, with the forex market, most trades would last an average of 2-3 days (in case of swing trading, much less when daytrading), sometimes a bit more. And as I already mentioned above, I needed the psychological edge that fast gains provide.
Swing trading is a style of trading with a lot of similarities to day trading. Many of the strategies outlined in this manual are also relevant to swing traders as well as longer-term investors. The key difference between day, swing, and investing traders is the length of time the trader plans to hold onto the securities. For example
On very short-term trades, characterized as scalping, you can be successful with a 1 2 or even a 1 1 ratio. This means if your loss limit is a nickel, you can accept a reward of a dime or even a nickel per the species the underlying entity trades in, e.g., shares, bushels, barrels, bales, pounds, etc. With swing trades, you will be in the market longer (several days to a week or more) and should be looking for ratios of from 1 4 to 1 10. With the former, you are trading heavy and the latter light. Never violate this rule. Long-term investors can look for 100 percent, 200 percent, and more for holding positions for months, quarters, and years.
If you have a passion for currency trading, then in order to utilize diversification to the extreme, consider your overall allocation of your investment strategies within this sector. Depending on your time constraints, you may only be able to participate to a limited extent in day trades during the European session or early morning U.S. hours as economic numbers are released. As such, you should also have devotion toward holding positions as they go into a strong trend mode and should carry a position for more than a few days. This is known as a swing trade. Then, if you want to really capture a longer-term market trend, finding the right vehicle and strategy will allow you to hold a longer-term position. Let's define what I consider the three important time periods and classifications of a trade. 2. Swing trade 2 days to 10 days. Day traders can use the forex or futures markets for small price swings. Swing traders can also use the forex and futures markets but can also implement an...
This chart should be initially used for risk assessment on a trade. Entry price is a big factor in risk control. Obviously, getting in early on an uptrend is safer than getting in later. We prefer to take positions in a stock as close to the convergence as possible, as opposed to taking a position later on in the uptrend as the gapping and rising slow down. Therefore, we always use this chart before we take a position, be it a scalp or swing trade, just to confirm that we are on the right side of a trend and to evaluate our risk into the trend.
Forget that last week the market may have taken a nosedive or that yesterday the market rallied significantly. Concern yourself with what the market is doing now. Ask yourself where prices are in relation to the current trend. It is up to you to identify the type of trader you are (day trader, swing trader, long-term trader) and the time frame in which you trade (minutes, days, weeks, . . .). For example, a day trader in the mini-stock index futures or the foreign exchange (forex) markets may only be working with a five-minute time frame. In that case, she could care less what the market did last week or yesterday. A day trader may also want to focus on a 60-minute trend to decide whether she should hold the position for two or more periods. A swing trader, who would hold a position for several days, may want to see what
My concern here is for active, short-term traders. How can they gauge supply and demand How can short-term trends be discovered and tracked The very short-term or day traders and the swing traders, who hold stocks for a few hours or days, have a different set of rules than long-term investors have. When phase 3 kicks in, the investor or trader watches the appropriate moving averages. The value investor begins aggressive buying when the 50-day moving average crosses the 200-day one on the daily chart. In a more compressed view of the market, the swing trader acts when the 20-period crosses the 50-period on an hourly chart, and the day trader acts when the 20-period crosses the 50-period on the 10-minute chart. All three are simply reacting to the basic rules of supply and demand as stated in the opening of this chapter and revealed by the moving averages. They become classified as aggressive buyers when there are more buyers than sellers, which explains why volume is such an important...
If you miss a trading opportunity at 8 15, another will be coming down the pike by 8 30. If you want to learn to scalp or swing-trade, or milk stock splits, earnings plays, IPOs, futures unbalances, option spreads, or whatever, write down those strategies in your trading plan. Put them in order of priority. Which is most important to you Which is easiest to learn Which is most in tune with the complexion of the current market Which will get you making money the fastest Then go after them one at a time. Focus on developing a whole bag of profitable plays.
I take the concept of diversification one step further. You can trade the same market and still be diversified properly. How Use different uncorrelated trading strategies. For example, suppose you want to trade the GBP USD market. You can use one system based on capturing short term swings and another one capturing long term swings. Or, you could have a day trading strategy on the one hand and a swing trading strategy on the other. Instead of using all capital on one strategy the trader would allot a certain percentage to one strategy and a certain percentage to the other. The key is, exploiting different characteristics of the same market.
The greatest skill you will attain as a day trader is the ability to adapt to changing market conditions. To put it another way, the best day traders are masters at adapting to changing market conditions. The fine line between stubbornness and conviction is as clear as night and day to them. Just as people can be divided into mostly left-brain analytical thinkers and right-brain creative thinkers, traders can be broken down into swingers and scalpers. We do want to make clear that you can be a scalper that also swing-trades or a swing trader that also scalps. However, most traders lean more toward one or the other style. You need to determine which style fits your temperament and character. We define swing trading as taking a position in a stock intraday and holding through wiggles and or taking a position for several days like a short-term investment. We define scalp trading as getting in and out on momentum. Swing trading can reap greater rewards, but the risks are also greater in...
Unlike swing trading and day trading, which will both be discussed later in this chapter, position trading usually relies substantially on fundamental analysis, along with longer-term technical analysis. Other than in the realm of ultra-short-term news trading, which will also be discussed later in this chapter, fundamental analysis is usually geared toward longer-term price forecasts rather than toward the short-term swing-to-swing movements that are primarily the domain of technical analysis. As discussed in Chapter 4, fundamental analysis concerns itself with the economic conditions that drive the major market movements. These economic conditions, which include interest rates, inflation, and economic growth, help to determine the value of a national currency over time. The general
Trading on the shortest timeframes in this manner works well only if the trader possesses the requisite discipline, technique, and money management skills to overcome the formidable odds surrounding this style of trading. One rather considerable difficulty with short-term day trading is the fact that a necessarily small number of pips is targeted for each trade 's profit objective, making the cost of the bid ask spread a very significant prohibiting factor. For example, if a typical profit objective is around 20 pips for a day trade, a 3-pip spread alone accounts for an immediate handicap of 15 of the projected profit. This occurs even before there is actually any price movement on the trade. The day trader therefore has a distinct statistical disadvantage from the outset. In contrast, the 3-pip spread on a targeted 60-pip swing trade or a 300-pip position trade would represent an immediate handicap of only 5 or 1 of projected profit, respectively.
Figure 38.2 shows what a rectangle top looks like. Prices are trending up leading to the rectangle. Then they bounce between support at 54 and overhead resistance at 59.50. The wide, tall rectangle has plenty of trend-line touches. If you are lucky, you might be able to get three or four trades from this formation (as marked by the numbers on the figure). Each side-to-side pass represents a price change of about 5, plenty of profit opportunity to be of interest to swing traders.
Day trading, swing trading, and position trading, as just described, are general approaches to trading foreign exchange. This trend trading section begins a more in-depth look at the methods and strategies commonly used by foreign exchange traders. When the trend moves onto its middle stage, it is considered to be well-established with consistent prior evidence that price is making progress in one direction. It is at this point that many trend traders will jump on the trend, fueling it even further in the same direction. From a day trading or swing trading perspective, this type of entry in the middle of a trend is simply too late. From a position trading and trend trading perspective, however, it can be considered a sensible entry targeting long-term profits. Once a trend and its stage have been identified, the next step for a trend trader is to decide on the timing and location of entry. For trend traders, this decision is not nearly as crucial as it is for shorter-term swing...
As expected, because this system exits trades near the mean, our average trade duration and percentage of time in the market have decreased when compared with the trend-following swing trading system results shown in Table 5.4. What is most surprising is the system's unusually poor win loss ratio. This is in stark contrast to the results shown in Chapter 4 and is a direct result of this asset's extraordinarily high volatility.
This is the first analytical concept that we will examine because the techniques used are relatively simple, and will lead us to the BASIC SWING PLAN' Furthermore, it will lay the foundation for a deeper understanding of the markets and swing trading techniques in particular
Note this is pretty much how my trading day looks if I trade trend-following patterns as well as some swing trades. If I would only do very short-term scalps, my day would certainly look different because I would be less affected by the overall market. If I am in a position I will always keep an eye on it. For longer term trades I strongly advise using automated stops for your protection. They have two advantages I.You don't have to watch the stock all the time and 2.They automate your exit decision, which leaves less room for failure. Please be careful though with stop orders and study your brokers order guide carefully. Some stop orders are only saved on your computer if you lose your Internet connection or your computer crashes your order wont be send out anymore and you are not protected.
Almost as many currency speculators fall into the medium-term category (sometimes referred to as momentum trading and swing trading) as fall into the short-term trading category. Medium-term trading requires many of the same skills as short-term trading, especially when it comes to entering exiting positions, but it also demands a broader perspective, greater analytical effort, and a lot more patience.
The trader with a mechanical system is most likely a technical trader. This is what I would recommend for starters for any short-term or swing trader. Once you have developed a repertoire of trading strategies and have mastered all the basic trading skills, you can begin to go out on your own. This is when you really become a trader. You develop your special technical signals, much like Brian Shannon has developed moving averages that may be unique to him. These modifications of an existing and proven approach put Brian on his unique island. When you get to this stage, your confidence soars, permitting you to occasionally bend the rules. But please don't break them, at least not often it won't be a pleasant experience to try to fool Mother Nature. Let's talk a little about swing trading rules since a good percentage of short-term traders use this technique. I define swing trading as holding a position from one trading session to at least another. That could end up to be only a few...
How long should you stay in a swing trade Like any other trade, you must plan your exit before you enter. Actually, plan two exit moves. The first move should be your response if the trade does not begin to move in your favor as soon as you enter it. Don't wait around very long for a trade to develop, especially if it is a setup trade. If you have to wait, you most likely got in too early or your analysis missed its mark. Visu When swing trading, use stops, just like you would at any other time. If the swing trade is a setup-type trade, keep the stop pretty tight. But if you are trading a trend and it has been consistent for a few days, you can take more heat and use a little wider stop. Keep it a few pennies larger than the largest daily move over the past few days or just below the last support area on a long trade.
You've heard the expression The Trend is Your Friend. However, history shows that most tradables, except currencies, tend to move in a non-trending or sideways fashion, more of the time than in a trending mode. One way of trading non-trending markets is swing trading. Swing trading techniques can be used in any timeframe - daily, weekly, monthly, and intraday charts. However, the most popular timeframe for swing trading is the daily bar chart. The strength of support and resistance at the boundaries is usually determined by the number of times the tradable has pivoted at the support and resistance boundaries. The more times a tradable has reached a support or resistance boundary, and then reversed course, the more powerful is that boundary. Pivoting simply means reaching a support or resistance boundary, and then reversing. Hence, the word pivot. Swing traders know what this means.
Market sentiment may drive the importance of smaller reports, but there is always a group of key fundamental reports that are worth trading. These reports gauge the primary factors of a country's economic health. Table 9.1 lists key economic reports I monitor for trading opportunities, along with the countries to which they apply. I will not provide an exhaustive explanation of each report because frankly, other authors have covered this material. I'm a trader, not an analyst, and so I don't focus on the nuts and bolts of how data is calculated. If you're interested in the nuts and bolts behind each country's fundamental factors, I recommend reading Kathy Lien's book, Day Trading and Swing Trading the Currency Market, Second Edition (Wiley, 2008). Kathy is a brilliant analyst and excellent trader her book will teach you all the gory details of each economic report.
However, the best option is to use from three to four time frames, especially when you are swing trading, because the perspective will be much broader, and you will be able to understand how the market moves. For example, in a usual swing trading situation, where the main chart is located in the daily time frame, you can use the weekly, daily, 1-hour, and 5-minute charts. Here is a short description of what you should look for in each of those time frames, and if you are trading intraday, you can translate the method to the series of smaller time frames. This type of multiple-chart analysis can improve your success as a swing trader. Your main goal is to identify the areas of support and resistance and to check if there is an alignment of your preferred setup on most of the time frames chosen. The more all the time frames are in alignment,
The Sniper - Analyzes the market, takes the trade when the market moves only on the conditions that have been have specified. This trading style is similar to swing trading or waiting for a key support or resistance to be tested. Many people do not have the patience or the wisdom to be a sniper trader.
Using price channels as a reference for swing trading is similar to trading inside a range bound or sideways price action You sell when prices are at the high of the range and buy when prices are at the low of the range. The only difference will be that, unlike the sideways market where the high and low levels are mostly the same throughout the whole range, you will have higher highs and lows in an uptrend and lower highs and lows in a downtrend.
Day traders generally trade more contracts than do position or swing traders because they trade smaller time frames and generally remain on the screen while in a position. The larger trade size means they can take smaller bites out of the market and make just as much as the higher time frame traders make, only over a shorter period. The same techniques for distinguishing between trend and countertrend setups and the use of stop placement that is based on percentage of the account and chart structure apply to day trading too. Day trading is very much a microcosm of position trading and swing trading. The only difference is that in day trading one must be aware of scheduled economic releases and other world or financial market developments that can affect price movement over the short term or intermediate term.
Scanning for day trades is a little more difficult because there is less time to prepare for the actual trade. Just as with scanning the daily charts I use hot lists to find candidates. Please refer to your software in order to find out which particular list is interesting and available. I also like to use remote scanning programs. These scanners deliver a number of pre defined and partially adjustable scans directly to your desktop without having to install complex software that takes up a lot of resources. They can be used for day trades as well as swing trades.
In order to build a high return low risk portfolio, the concept should be as follows take a mixture of different systems and apply them to different markets in different timeframes. For example you could choose some liquid markets from the bond group and apply a medium-term trend-following system, like the one described here. Then you would add, for example, swing-trading systems for the currencies and day-trading systems for the Mini S&P and so on. Various possibilities exist which you must fit to your personality and your trading style. The whole topic is too big to treat it seriously here.
This includes Change of Swing direction. Please go back and check all of the definitions given in Swing Trading Basics and Terminology . Because the definitions for both time periods are the same, we can apply the same logic to both. 1. A better understanding of swing trading. Now let's go back to Advanced Chart 5. This is where the grasp of Swing Trading Where could your stop be The only two logical market driven places can be Daily Peak C or Daily Peak A . Why Because these are nearest true resistance points, if you are swing trading. This potential bottoming process in Chart 6 was crystal clear. If it was that simple all the time swing trading would be easy. But, you would be surprised how often it happens if you watch a variety of contracts in the Futures Markets and heavily traded shares in the Stock Market. There are three patterns to keep an eagle eye on. This chart will be used to illustrate some important ideas (besides showing intraday possibilities for short term swing...
Also, it is a good idea to explore trading strategies that are unrelated to what the plan is currently trading. If you have a longer term trend-following system and a short-term swing trading system, then look at breakout systems or the same systems in different markets. Just as in the creation of the original portfolio, diversified is the name of the game when adding strategies and or markets later on in the plan.
TradingMarkets Swing Trading College Throughout the year, Larry conducts a 14-week, in-depth course on Swing Trading which remains one of the most popular courses taught by us. The Swing Trading College covers equity trading, ETF trading, options trading, and E-mini trading. It also includes 4 weeks of live trading with the profits eoine to the charitv of the class's choice. For more information on the TradingMarkets Swing Trading College, please contact us at 1-888-484-8220 ext. 1 (international direct dial 213-955-8585 ext.l) or visit www.TradingMarkets.com. Here is what past students of the Swing Trading College (STC) had to say about it The Swing Trading College has been the best investment I've made yet in learning how to trade. STC has taught me to have clearly defined entries & exits with an amazingly high percentage of winning trades the way Larry interacts with the class makes me feel like I know him personally I would highly recommend this class to anyone who is serious...
Using the Support Resistance points of the NEXT TIME PERIOD (in this case, the Daily) provides a mega-leap in swing trading concepts. Let's see what you think after you have back tracked some Daily and Intraday charts. What makes this concept different from other types of swing trading is that we use the 50-minutes' price activity within the Daily confines of Support Resistance. In other words, we trade the 50-minute bars using the Daily energy points.
Various pieces of U.S. economic data impacted the dollar (against the euro) in 2004. I chose the EUR USD because it is the most liquid currency pair in the world and tends to have the purest reaction to U.S. numbers. For this second edition, entitled Day Trading and Swing Trading the Currency Market, the study is updated using 2007 data. Not only have the rankings changed, but so have the magnitudes of the reactions.
This chapter should really be titled Pinball-Part 2 Instead of using a one-period rate of change, we are going to use a 2-period rate of change. We will then calculate a shortterm pivot point to tell us when the 2-period rate of change is going to flip from a buy to a sell or vice versa. This pivot then tells us whether we want to go home long or short by the close on a fresh signal change. It is best used in conjunction with Taylor's swing trading methodology.
Kathy Lien is Chief Strategist at one of the world's largest retail forex market makers, FXCM in New York and author of the highly acclaimed book, Day Trading the Currency Market Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, one of the most popular currency research websites online. She publishes both technical and fundamental research reports, market commentaries and trading strategies. A seasoned FX analyst and trader, Kathy has direct interbank experience. Prior to joining FXCM, Kathy worked in JPMorgan Chase's Cross Markets and Foreign Exchange Trading groups using both technical and fundamental analysis to trade FX spot and options. She also has experience trading a number of products outside of FX, including interest rate derivatives, bonds, equities and futures. She has taught seminars around the world on day and swing trading the...
Getting started as a day trader is not cheap. In order to open a day-trading account, a minimum investment of 25,000US is required. It is vital that this money is risk capital. You must be able to lose your investment without it affecting your lifestyle. The requirements for a swing trading account or investing account can vary, but they may be as low as 500US. However, trading with capital of less than 25,000US will limit your maximum trades to three per week, as ruled by the Securities & Exchange Commission. Traders in this category are not considered pattern traders, another term for day traders.
Swing trading Swing traders hold their positions for a few days, but seldom more than a week. Identifying and riding on trends early is the central objective of this trading style, and the profit objective tends to be set higher than that of day trading since the swing trader is expecting that by holding out for a few days, there is a better chance of capturing a larger price move. Unlike the day trader, the swing trader has to endure overnight risk. As swing trading requires much less minute-to-minute monitoring of the market, this type of trading is generally preferred by people who hold day jobs. My opinion is that swing traders must still keep up-to-date with the latest fundamental and technical changes in the market, even when they are not monitoring the market all the time.
The term day trader gives the impression that all trades are opened and closed within the same business day. While this may be the case for most of us, there are some that could actually last longer than a day. Swing trading could continue for several days, while core trading could last into weeks.
To understand pairs, we must also understand technical analysis so that we can make more informed decisions when considering our positions. Technical analysis is simply the art of evaluating the historical price movements of a stock in an attempt to find information that may discern possible future direction. Usually, this is in the form of reading charts, coupled with assorted indicators such as moving averages, stochas-tics, relative strength, and or any other indicator that may map a stock's historical trading activity. Technical analysis can be both up to the moment, in real time, or on a historical basis. However, I would like to point out that even real-time data is an event that has already occurred. Thus, all technical analysis is made up of lagging indicators, which presume future movements. For the swing trader, end-of-day (EOD) data will suffice to do proper analysis. End-of-day data is simply the open, close, high, and low of a stock's trading activity after any given...
The differential is simply one equity minus the other. For example, Closing price of Stock A - Closing price of Stock B Differential. The differential is dissimilar to the spread, as it uses the pure closing price of both stocks and does not directly consider how much either stock gained or lost during the session. While a differential can be calculated for specified intraday periods, we will not do so in this book. The differential will primarily be used for EOD data and swing trading analysis.
For day or swing traders following the stock market, the futures market offers an advantage over stocks from tax liability perspective. Always check with your accountant but, generally speaking, profits generated in a futures account are taxed at a rate significantly lower than that for a stock account.
A pattern combination system identifies charts with two or more patterns with a similar bias-bullish or bearish. If a chart shows both bullish and bearish qualities, then the bias is neutral. Essentially, the system catalogs all known bar patterns and then identifies combinations of them. Furthermore, the system is extensible. A trader can add as many patterns as possible, building the pattern catalog. For example, Dunnigan developed a swing-trading catalog of patterns that could be implemented in a pattern combination system 9 .
In short-term trading traders will depend on the analysis of intraday data and aim to hold their positions for a few days or up to one or two weeks. Short-term traders usually perform swing trading. A shorter-term trading approach is referred to as day trading, where trader try to take small profits from intraday swings, exiting all positions before or at the daily market close. The advantages of short-term trading are that there are much more opportunities for trades, thus also less chance of experience losing months, and that traders do not have to rely on one or two trades a year to make money. With day trading in particular, since positions are closed daily, there is absolutely no overnight risk. On the negative side, the cost of their transactions will be higher in short-term trading (traders will be paying more spread). Swing traders also incur in overnight risk. Day traders have to confront more difficulties psychologically because of the frequency of trading and having to...
The most important thing we need to know about an individual candle is that we do not make an analytic, or trading, decision until the candle is closed, which means that the time period is complete. You will be hearing this again. Another important aspect of individual candle analysis for forex intraday charts is the time of day. In trading, even for the 24-hour-a-day market, all time periods are not equal. If there is very little trading volume, as is generally the case from the close of the U.S. financial markets through the Tokyo open, we do not place importance on individual candles or patterns during this period. In forex markets, it is widely known by experienced traders that volume generally trails off noticeably leading up to noon EST and stays very low until the Tokyo open. Regardless of your own experience in trading, you do not want to initiate short-term trades that are based on individual candles or candle formations during those hours. The exception to this would be U.S....
Point-and-figure charts are used to condense price action. If prices move from lower to higher levels due to events, the time it takes to reach the new level is unimportant. Point-and-figure charts record events, not time. As long as prices rise without a significant reversal, the chart uses only one column when prices change direction, a new column is posted (see the point-and-figure section of Chapter 9 as well as the swing trading section of this chapter). Price objectives can be determined from formations in a point-and-figure chart usually related to the length of the sideways periods or horizontal formations. These objectives are very different and normally closer than objectives found using similar bar chart formations.
The strategies included in this book are open to customisation according to your own personal preference. While most of the strategies are meant for day or swing trading, you have the freedom to adjust certain parameters to suit your own trading time frame and or other preferences.
Swing analysis is one of those nebulous terms that means different things to different people. It is often associated with swing trading, which also harbors a variety of connotations (the swing trader usually keeps a trade open longer than the typical session or day trader).
Unlike scalp and swing trading, core trading takes advantage of situations in the market that require longer lengths of time to develop. For these types of trades, market assessments and decisions are generally made after market hours due to the busy activities of the trading day. Both detailed fundamental and technical analysis are very important before executing core trades. The challenge of core trading tests a trader's skills at stock picking and predicting the future of stocks. Separate Accounts - As an active day trader, you may be involved in scalp or swing trading in addition to your core trading activities. Having separate accounts for the your intraday transactions from your core trading actions will be easier to maintain, including the prevention unnecessary errors as you try to calculate your daily profits, losses and costs. Decisive Exit & Entry Points - Even though core trading is significantly different from swing trading, the knowledge of intraday price swings will...
You often lind reversals starting in ibis way at around 10am New York time, the major news releases have been out and traded on, leaving London traders with a day's worth of profits or losses to manage. Now. if you are a trader in Europe who is about to head home for the day, you know that liquidity dries up fast after the London fix so you will begin to slowly close your books around this time. You are careful to tip-toe your way out the door instead of rushing for the exits, since you know that any rush (meaning that the original move was artificial) will flood the market with supply and turn your winners into losers in mere minutes. Of course, everyone is thinking the same thing, and the greater fool theory takes over to get the bali rolling aided by the liquidity crunch. This creates a sudden rush in activity that can easily turn winners into losers or losers turn into disasters, which is why you want to make sure that your profits have been booked by the time the fix comes...
Swing trading involves a different paradigm in thinking from the intraday scalping mentality. For many traders, it is very hard to hold a stock through an extended wiggle, much less a pullback. This is what makes swing trading so much harder to stomach than taking the quick scalps and nullifying your exposure in the market. The most effective technique to deal with this problem is to have a separate swing trade account.
Traders need to identify themselves, which will help them know the time frame to follow in a trending market. Are you a day trader Are you a swing trader who may be in a position that lasts two to five days Or are you a position trader Once you acknowledge what your time objective is, you can narrow down your goals and your expectations for the trade. For example, when I am day trading, I will generally be able to identify what the average range for a day is I will expect that if I miss 20 percent of the bottom and 20 percent of the top, while waiting for a moving average crossover signal, then I can expect to only capture 60 percent of the average daily range. Perhaps this can be achieved only once or twice a day.
When reading this chapter, keep in mind that the lines between each trading method strategy system style can often be excessively blurred. For example, swing trading shares many similarities with range trading. The same may be said for position trading and long-term trend trading. Similarly, point & figure trading is sometimes considered breakout trading at its finest. The point is that each of these ways of tackling the foreign exchange market will have its own separate heading, but the overlap among them can be substantial. This is due to the fact that there are almost as many ways to trade currencies as there are traders in the financial markets, and each particular way of trading does not always fit precisely into one neat bucket. This chapter will provide an overview of some of the main methods of trading forex that have proven themselves over time, as well as some specifics regarding how to go about applying those methods. In no particular order, the foreign exchange trading...
Protecting your profits is another factor that helps to ensure consistent success. If you are a longer-term trader such as a swing trader or position trader, it is important to protect your profits by using a trailing stop loss. For example, let's say that you are taking a long position (buying) in the USD JPY and you are looking for a larger return than 400. Now let's say that your goal is 800 rather than 400, and you are currently sitting at a 500 profit.
No matter what type of trading you're doing (swing trading, day trading, long-term trading), you'll need to come up with your own set of rules to keep your trading structured. The problem is most people don't want to make up their own rules, because if they did they would have to take responsibility for their results. And, as we all know, most people don't want to take responsibility for their action. But, as we all know, the only way to be successful in trading is to take 100 responsibility and act in our own best interest.
In both cases, you can have an early signal of those changes when the prices fail to reach the respective support or resistance in one of the inside swing moves. When using channeling swing trading strategies, traders usually look for a short position when the prices reach the upper trendline resistance and look to buy when the prices have reached the lower trendline support. In itself, the channel can't be taken as a sole reference other technical analysis tools should be used to confirm that there is a continuation of the actual trend.
Let's look at another commodity-related stock this one is Exxon. By now, everyone knows that this company generated the highest profit in a given quarter of any company in the world. As energy prices bounced around, so did this stock. In Figure 8.13, we have a 60-minute chart for a swing trade, showing the weekly and monthly pivot points that are helping to illustrate and uncover the hidden support value. As the market declines, the doji formations develop at these confluence levels of supports. Then, as the moving average crosses and as prices close above the doji highs, we have a confirmed buy signal.
The only trouble was that I had the itchy fingers of a day or swing trader, but the attitude of an avid follower of LTBH. That works for Warren Buffett because he buys entire businesses and takes them private for their cash flow, but little did I know then that for me, H stands for Hope in LTBH.
We learned two strategies so far Forex Cash Cow - a swing trading strategy and Forex Runner - a day trading strategy. At this point you probably understand that my approach to trading is by using as little or no indicators at all. I look at the market in a different way than most traders. My personal opinion is that most trading indicators are worthless (and trust me, I have tested and traded most of them earlier in my career ). The Flip & Go strategy is another day trading strategy that I like to use since it is very simple to implement and results can be very rewarding.
Very often, when the market looks the most bullish or bearish and everybody is jumping in, this is precisely the moment when professional FOREX traders will be loading their positions in the contrarian direction. Be very aware not to be late when entering a trend. At the same time, never trade against a trend (unless you are swing trading in a range or scalping in smaller time frames). When the trend is strong, apparent reversal patterns may have no meaning, and the reversal never happens, unless it is for just a few pips. In a strong market such as this, you trade breakouts and that's it. Very often there isn't even a pullback to trade, and by the time a pullback happens, the move is already over. In a market such as this, the energy has to slow down before it can reverse.
Once we find a time frame that climbs smoothly with the Wave and retraces back into the Wave, then we have a potential swing trade set up. If we have a time frame that shows a choppy market that does not obey the Wave or show a Wave traveling at three o'clock, we have a potential momentum trading set up. Once we know which set up we are most likely working with, we can begin to draw trendlines, measure recent major rallies or declines with Fibonacci levels, and to confirm and build our trade.
One of the primary purposes of modeling financial markets is to develop trading systems. If the model has real predictive power, then to exploit the model one needs an approach to using it in a trading system. There is a large body of literature on trading systems. A recent book by Kaufman covers a whole range of subjects, including trading systems, approaches, and indicators.1 Systems and indicators are described in sufficient detail for programmers to turn the concepts into software. Schwager's book is a tour-de-force on the application of the full range of technical analysis.2 It covers chart patterns and interpretation, indicators, trading systems, and system testing. A book by Williams provides a number of specific trading patterns for short-term swing trading and for complete trading systems.3 The interesting use of certain calendar and seasonal effects to filter signals is discussed. A book by Pardo discusses the formulation and testing of trading systems.4 A general approach...
If you decide to trade, the first thing you need to determine is the time frame in which you are going to trade. It is important that the time frame fit your lifestyle. There are three general categories of trading styles. The first is position, or end-of-day, trend trading, which tends to have the most favorable risk-reward ratio and also takes up the smallest amount of time per day. The second is swing trading, for which you don't need to be sitting in front of a computer screen however, signals can come at any time of the day, and so you need to be able to enter orders from a portable electronic device. The third is day trading, which takes a high degree of concentration and requires the trader to be sitting in front of the computer this type of trader has a higher winning percentage but a less favorable risk-reward ratio.
First lets go about a few ways on how to find stocks that have an interesting daily chart pattern. Each charting trading software has so called hot lists build in. Let's assume you are looking for stock that is in an up trend and that has pulled back over the last couple of days. You could simply bring up a hot list that shows you which stocks have had the biggest percentage gains over the last month. If you look thru the individual stocks within this list I am sure you will find stocks that match your criteria of a pullback pattern (i.e. basic swing trading patterns). Bring all of those stocks in separate watch list and do some further analysis. Do the stocks fit you trading criteria Do they have enough volume What is your risk reward ratio It is very important not to over-analyze and to only consider stocks that match your criteria. On some days you will simply don't find any interesting candidates. Beginners often don't understand this fact and end up making trades they shouldn't't...
The importance of doing your homework the night before to prepare for the next day's trading cannot be emphasized enough The whole object of swing trading is to anticipate setups so that we are not in a reactive mode the next day Spontaneous trades are not a good way to make a living' Just as the professional athlete must have a game plan, so must the professional trader. Have you ever noticed how many athletes have a pre-game routine they go through Routines and rituals keep us in a steady frame of mind. They help us to focus solely on the task at hand-in this case, the next day's trading opportunities.
The Results Snapshot lists the important details of the earnings flag, a pattern that sometimes occurs after a surprisingly good earnings announcement. With a comparatively low break-even failure rate in a bull market (10 ) and decent average rise (34 ), this pattern does well for both swing traders and position traders.
Traders and swing traders, it helps them also identify a potential confluence support level based on pivot point analysis. Feel free to visit and check the numbers yourself at www.nationalfutures.com just click on the link that says Daily Dow Report. Even better You now have your own Pivot Point Calculator, provided on the accompanying CD to this book.
The following is a performance illustration of the Forex Cash Cow strategy. Results are hypothetical and include every single trade from January 1st 2006 to August 4th 2006. The reason I did not do the same for Forex Runner and Flip & Go strategies is the following. For a day trading strategy it is very inaccurate to calculate hypothetical results by looking at a string of many past trades. The reason being that since you are going for small profit objectives slippage can cause very different results for any two traders trading the same day trading strategy with different brokers (remember, this is because you are looking at many trades with relatively smaller profit objectives. This is in contrast to a swing trading strategy were you aim for much larger profit objectives). The second problem with measuring past hypothetical results with day trading systems like the ones you learned in this course is that even if we did measure these results it is unlikely that a trader will sit in...
This modern-day classic Features a treasure-trove of proven, viable trading plans suitable for every type of trader. Based on the proven methods of trading legend W.D. Gann, this thorough work has been updated to lie relevant for today's most active traders - and even includes powerful new swing trading techniques. COMES COMPLETE WITH VIDEO Swing Trading Simplified E.earn the basics - or refine your swing trading skills - with this swing trading primer. Learn to implement your own profitable program without being glued to your monitor. Simply pick your position, enter a close, and a protective stop, and go back to your day - it's that easy Add or restore vitality to any investment program - using these simplified techniques.
Swing trading is profitable only when there are oscillations and good volatility. However, this volatility is quite cyclical in nature the market experiences a constant ebb and flow of range contraction range expansion. Toby Crabel elaborates on this principle in his book, Day Trading with Short-Term Price Patterns and Opening Range Breakout. He states that after the market has had a period of rest or range contraction, a trend day will often follow. How does one know when to jump on board a trending move It is extremely difficult for the majority of traders to learn to switch gears from a swing trading style, looking for reactions and tests, to a breakout mode that calls for jumping on board the train. Many floor traders will make money 9 out of 10 days and then give half of it back trying to fight a trend day. That's true. Many novice traders misunderstand swing trading as a license to buy weakness or sell strength. When a trend day comes along, they get their head handed to them....
Trend channels occur in stable trends when you can draw a second (parallel) trend line in addition to the one we talked about before. This time we will also draw a line above the highs of the up trend and vice versa for down trends. By drawing this line we have established a trend channel that not only shows us support, but also shows the most likely range the stock will be trading in, thus us very nice entry points at support (referring to the core swing trading buy setup) and profit targets at resistance. The basic buy setup is a pullback into support within an uptrend. It is very important, that the pullback is significant. Ideally, there will be at least three consecutive days of lower highs and lower lows. The support can have many forms. I like to focus on moving averages as well as trend lines and sometimes Fibbonacci retracements. This setup is taking place on a daily chart. The example I used earlier for the hammer candlestick is a very good example here too. The stock has...
The Turtle Soup' pattern typifies the basic testing concept in swing trading, It is a volatile pattern with the potential for substantial gains. It is definitely not as easy to trade as it looks, but the reversals that follow through indicate a potential change in trend of significant duration, and a very tight risk point is predefined.
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