Swing trading strategies

Discussion in 'Trading' started by neo_hr, Oct 5, 2001.

  1. neo_hr



    A swingtrader to be. Anyone wanna share some main strategies and ideas? Like trend following, buying bottoms/selling tops etc.

    Thx I appreciate it!


    P.S. For example, what could be played on this stock, and what would be the right way (amount9 to risk with what stops? Mind you, my acct is arround 4k

  2. ddefina


    This guy uses IB for a broker and describes a good way to begin swingtrading. He sends a weekly list of swingtrading candidates via email, and his site explains exactly how to enter and exit trades. I personally follow a basket of stocks to swing trade which have high volatility and rarely consolidate (always moving up and down). I also trade them as a portfolio to eliminate stock risk.


    My current favorite swing trading stocks:

  3. Rigel


    Check this out. It's a swing trading strategy.


    As far as risk goes, the way I understand it, it is important to be consistent. What you do is risk the same amount of your capital on each trade. That way you can see if your system is profitable, and don't go broke while doing it. You can set up an Excel sheet to calculate the number of shares to buy on each trade. The only input it needs is the purchase price and the stop-loss price. Try this in Excel
    In cell A3 put the formula (4000*0.005)/(A1-A2)
    The 4000 stands for your trading capital. The 0.005 means that you will risk 1/2% of your capital per trade. Whatever you do, once you decide on your risk, 0.005 in this case, don't change it.
    All you need to do then is to enter the price/share you paid for the stock in cell A1 and your stop-loss price in cell A2.
    An example would be if your trading system told you to buy a stock at $30.45/share and to dump it if the price falls to $29.62. You put $30.45 in cell A1 and $29.62 in cell A2 and the formula in cell A3 will tell you to buy 24 shares.
    (4000*0.005)/(30.45-29.62)= 24
    On the next trade your system tells you to buy a stock for $14.52 and dump it if the price falls to $14.15. (4000*0.005)/(14.52-14.15)= 54
    The beauty of this is that no matter where your trading system decides to set your stops the risk is always the same, 1/2% of your trading capital. So, besides trading fees, you can test a system and have ten losses in a row, and in this case you would only loose 5% of your trading capital.
    Remember, stops are determined by the trade (they don't have anything to do with how much money you have or how much your willing to risk).
    If you use this method to keep your risk the same on every trade, and use the same trading system to set your parameters for every trade (purchase price, stop-loss price, sell price), then you will have a setup that will test the validity of your trading system. If you keep changing your trading system and keep changing your risk/trade then you'll end up with a mess.
  4. NevDavies


    Hi neo_hr
    Here are some of my thoughts on SWY these are largely based on the work of Alan Farley.
    Using some of the principles outlined in Alan Farley’s book the Master Swing Trader then I would be looking to short this stock. The stock has hit several forms of resistance at around the $44 level, Farley calls this cross verification, the more cross verification one can find on a chart the better. I can see the following points on the SWY chart :-
    1. On the 4th the stock bounced off the 50 day exponential MA and on the 5th of October it closed on the 50day exponential MA.
    2. A downtrend line can be drawn from the beginning of May, and the stock is banging its head against it right now.
    3. The stock has found support and resistance in the recent past at around the $44 price level.
    4. If one puts a fib grid from the high of the 28th of August to the close of the 27th of September then the 62% retracement coincides with all the above at the price level of approx $44.
    5. The stochastics are in the over bought region.

    If one wanted to make this short trade, then a stop either real or mental would be placed just above the $44 level with an initial target of the minor support/ resistance level of $41. This provides a very favourable reward to risk ratio, one could also if one wished cover half ones open position at the $41 level and then hold the remaining half with a target of £38.50 which was the closing price on the 27th of September, along with a protective buy to cover stop at just above the $41 level.

    Any comments from you experienced swing traders would be more than welcome.

  5. I would highly recommend reading the stuff Gary Smith has written for thestreet.com. He's got a succesfull strategy that he's spelled out completely in many articles. Search the site's archives, he had an article called "GBS primer" or something like that in May '98 that covered many basics. Also lots of good stuff on money management and expectancy. His results have been between 40 and 90% annual returns.

    I've been trading this system since march with very good results. My account was basically flat during the slow summer months, but did very well when the market was trending.

    He just started a paid service where he sends his picks daily. Also an active thread on his methodology at http://groups.yahoo.com/group/GBS_Trading
  6. neo_hr



    where coulod I find his articles? THX

    Also, I added some more charts on my website, anyone wanna comment more than welcome!

  7. The concept of sizing your position to acceptable risk levels based on your initial stop is very sound. However, there is another important consideration. When swingtrading, good trades are held overnight, which exposes the position to price shocks. That 1% assumed risk can easily turn into a 30% hit on unfavorable news.

    Therefore, there is a second criterion to apply. No matter what your position size calculation says, do not put too much of your capital into any one trade. No more than 20% would be my recommendation. That way a price shock can be very nasty, but not disasterous.
  8. ddefina


    Totally agree with having a small part of your porfolio in any one trade. I won't do over 10% in any stock, so if I get a 30% hit, it's only a 3% portfolio hit. You could ruin a whole month or two of work with one bad reversal otherwise.
  9. The problem with 10% IMO is that to be fully invested you then need to be monitoring 10 positions or 20 if you are using margin. That is to much for my tired old brain to cope with.

    That's the trouble with trading, every time you gain something on the swings (pun intended) you can lose something on the roundabouts.
  10. SHORTY



    As one wannabe to another, I've focused almost exclusively on short sales for a few reasons (hence SHORTY.) These are observations that I have made in my few years of trading.

    1) Stocks are much more likely to gap down than up.

    2) The percent move down is typically greater than the move up. (Climb the ladder one rung at a time, fall off all at once.)

    3) Stock behavior in a downtrend seems more predictable than in an uptrend.

    I realize that I will need to expand my viewpoint when the market reverses, but even when looking back at charts a few years old I think my strategy will perform well. Some seasoned veterans may see flaws in these statements which I would like to know about.

    Good Luck and Big Profits,

    #10     Oct 7, 2001