Just a brief moment to step into the discussion- haven't been back here for quite a while- Busy with the Day job!!! About Swing Trading-I'd like to contribute back, to other traders- as my periodic visits here at ET have been formative- albeit sporadic & over a longer period of slow & gradual change-As i am an EOD swing trader (meaning i hold a day Job and and i have happened to be having a good year -modestly up about 25% YTD across a few retirement accounts- So I trade within a few retirement accounts- primarily ROTH- and i live on my day job income- We all have to start somewheres- and most of us start small and try to work from there- . ) So, Perhaps im simply speaking to the smaller account trader that i can relate to: I've gone the circuit -
Others that have accumulated the large asset base have the ability to withstand the drawdowns , to hold a position (s) and have the diversification in their exposure- and the confidence in their methodology,,,That the smaller aspiring trader does not have the financial means to do. I'm talking to them , because they want to aspire to have an account that will grow and eventually provide them a viable source of income/growth- The LURE of trading in the markets : Your Boss on the Yacht- partying! While you are grinding out at your Desk! - We see the adds every evening- TD Ameritrade & company should be charged with salting the mines !
I would premise this with the admonition that someone should start trading with monies they can afford to lose- - Everything else- health plan, retirement account- kid's 529 plan etc should be fully funded- and the Las Vegas monies perhaps turned into your trading account .
JMHO... Trading is indeed about Psychology ahead of the mechanics - and if the psychology has no issues with seeing a loss or early profits taking on a gain --- it's a good start- Making a transition from one time frame to another - scalp-day-swing-position- is extraordinarily difficult psychologically- because with each time frame your stop increases - your losses are larger etc. And, You are totally irresponsible to jeapordize the kid's education fund to pay for your trading account because you want to gamble it away to send him/her to Harvard or Wharton... SORRY- Grow up and do the basic things right and well, and the rest will fall into place. Don't gamble with monies your children or family will need- and BTW- Did i mention is your trading account funding separate from your retirement account? Please say that it is so......!!!!! This stuf is tough to fund- for most of us- So i maxed out my conventional IRA and hold that separately, and Trade within my Roth- No Taxes, No Capitol Gains- Works for me...
When i hold a swing trade for days-possibly weeks- as long as the trend - (this is up to the individual) does not CLOSE below - example- the fast 5 ema- it is intact if it is still uptrending- With a trend line intraday penetration i don't react - At all intraday- If i have a fast trend penetration from the 5-10 with a close back above the fast ema , it is typically a reason to raise the stop to the low off the penetration if price normally does not penetrate-
And, i tend to add in a couple of indicators for a reference- but they usually are only saying what the price action suggests-
here is where the intraday guy gets shook out- On the same volatility move that dropped price lower intraday, but there may have been a recovery higher- often there is- so a stop loss at the very close 5 ema may not work, but a trailing stop under a price close at the 10 ema may be outside of what is the normal volatility spike-
WHY are you referencing the SPY? The SPY is in what? about 13% YTD? - Check out the QQQ's- perhaps 24% XBI?
Check out the miners- I made a very nice 20% in 3 weeks in LIT....Took it off at the momentum peak- and just reentered LIT-again this week following the recent pullback It's a Theme play, but it's also the poster child example -(at least this week) of
Sector rotation strategies work-
Don't simply focus in one area-
As a swing trader- understand sector rotation- Don't be a one man -one song approach-
WTF focus on SPY if the QQQ's give you double the move?
Stay with the indexes- and if you trade the individual stocks- be only a 10% position.
Theme plays-
Look at the global themes outperforming the US markets-
I'm using this as an example- and not pumping these because i hold a 100 share lot- Big Deal!-
As Traders- Go with the market tides- Semis were really strong earlier in the year- NVDA < AAOI- and then AAOI crashed- but i had exited- It's a little bit of Sector homework- but I've come to believe that following sector rotations - and we've had a few this year! is worth expanding your study/ charts to learn- Stockcharts is a great reference -download Art's Chart's and the "free' chart downloads as well as the weekly write ups-
Getting back to the OPs thinking- You've got it wrong in your write up-
I've learned that my likely best trades are those that are already Trending-
Those reversal of Trend/declines are a crapshoot and may rally for short change - In the mean time, i've tied up my trading dollars on a reversal of trend that has a high likelihood % of failure- even greater if it is the 1st price rprice rally higher which is where the day traders get sucked in.... No offense guys- my perspective-not my area to discuss.
But it really comes back to the same basics that have existed for decades- and this is what gives us smaller traders an opportunity -
TRADE WITH THE TREND-
Forget the oversold pop on a stock or market that has had a precipituous decline- It is damaged goods-
The 1st pop higher is not the bottom in all likelihood- it's simply the 1st oversold reaction
Why Strain?
Go where the market Tide is Flowing! If it's Semis- go there- SMH If it;s defense- go with ITA- If you want to drill down and take the greater Risk- find that individual few sector/industry group leaders- Stockcharts or Finviz.com
Simplify your chart- whatever your time frame-
For all of you price Action purists- Please ignore-
The crap that can occur intraday is the provice of the scalpers.
Good Luck- it likely takes exceptional skill and reflexes and years of experience , and a very large account to succeed over time-
holding a trade overnight needs an understanding of trend- Where are you on the daily/ weekly? What defines your POF ? Point of Failure? This is where your premise to enter the trade based on direction and expected volatility is violated and you will sell at the market if price exceeds your stop.
understanding that Market rotation- is Sector rotation- is INdustry group rotation-is Individual Stock Rotation - as the driving force- Drill down into the SMH and you will likely find NVDA, MU, AAOI held or quite a while but dropped hard etc.
The Defense Sector - BIG Moves- look at the Sector- ITA then drill down and view the sector leadership--
Going with the Market Trend-
Going with the industry Group within the larger Index
Drilling down and perhaps selecting the few group leaders- ITA might be BA, RTN ex.
Compare the index performance- For example- The q's outperformed Spy by 2:1 so far-
What drives the q"s ?
market exposure- Risk- All the Eggs in just one Basket-
If you are betting it all on the movements of SPY- You are arrogant and Hubris will take it's toll. Had to put it bluntly- just to make a point that perhapsw no one else bothered to explain.
Diversification + survival = longevity. Don't Crash & Burn- Far too many jump in with both feet because it's simple to do electronically to make a few trades- And- That takes a substantial emotional toll many never recover from-
Did anyone mention when you opened your trading account that a lot of your end success depends on your psychology? Likely not- but it does- We are pretty much hard wired as we get to the point in life we are ready to try this trading thing- Click- # of shares- Click- BUY -
i got it ! not too complex is it? perhaqps even a Caveman can do it? Apologies to Geico...
So, i'm not challenging any of you long term successful traders:
i am a nobody with a relatively small term account but it has some longevity over some market cycles- but i am speaking to those that are in the process of learning- because they simply don't know what they have not experienced yet- A number of you survived the 2001`-03 and 08-09 and perhaps in this extended bull market we have forgotten to inform our fellow recent traders that a 25% market decline will happen around the corner- But it doesn't happen in just 2-3 days- and they need to learn to adapt to a changing market - but they have never seen it before in their life times- and they will be unprepared for the change- as it occurs- I WAS UNAWARE- That markets could sell-off - That trends could turn down so hard-in such a short period-
Sorry- As a novice I was never aware of what the possibilities could be- for a decline/crash ....much to my future education it was a lesson in taking too much RISK and understanding Trend- and this thread hasn't touched on Risk, but is about the Trend Trader-
i almost forgot- , perhaps because i was weary- but a friend asked me ifi was a trend trader or transitioning into a longer term position trader (months, weekly charts) and i realized i was most comfortable with Trend trading using the Daily Chart/ and the 2 HR chart- at the EOD.
As i read this thread, i see some references to mechanical trading- systematic trading - robotic trading etc...
i realized i was a Trend Volatility Trader- I don't know when the trend will end, but i can visually see when a trade is going parabolic and capture that with a trailing tight stop-;loss- and that can be a simple up move above the norm on the daily, that requires a reentry on a move back higher-
To the OPS of this thread-
Swing trading will essentially allow for more elasticity in price movements as being in the 'normal range' - As you drop down in time frames- from a daily chart- you get more frequent possible signals- but each lower time frame holds lesser meanings in duration and importance=and more intra time frame volatility that may not be apparrent- or is diluted and overcome as the higher time frame progresses and takes the leadership in direction-
Therefore- As a swing trader- i don't want to react to intraday price fluctuations, because they are often wide ranging- and the CLOSE price tells the better story at the EOD...
As a Swing Trader, if i attempt a 1st reversal in a downtrend, it likely has a 50-70% failure rate- the 2nd attempt perhaps 50%, and with a basing action the odds improve - and i can use a swing low in the base as a stop- but if there has not been a sideways basing- it's an unknown....A wide decline -spread on the emas will need to come back into parity/ merging.
The entire question becomes WHY BOTHER ? WHY seek out this trade at all? Why do i feel the need to go after something perhaps "oversold" but oversold for good reason?
Why is my vision clouded where i do not see what the market is going after Today? Do i have Blinders on because yesterday's trade is still my sole focus?
Back to the OP= I hope to capture the wider swings in price from a momentum volatility high that i hope i can sell into, because i can simply SEE that this is too wide graphically, as the gap between the emas is exponentially wider- and i realize it cannot be sustained for weeks longer- Yet, i don't know if it can continue for 1-2-3-days or more- so i raise a progressively tighter stop-loss to capture the Excess momentum=-
i don't know that this simple chart view of momentum has been discussed at any point in this thread- Visually, it;s as simple as recognizing when a move is 'parabolic' and cannot be sustained - you don't know when this may occur- but many stocks give indications based on momentum- that swing trades can capture- and take a new position for more shares at a lower price- Adjust the stop-loss exceptionally tight to try to not guess the top of the move, but to sell on any relaxation in momentum.
For a Swing trader- These EBBS and Tides higher may occur in a position - The swing trader tries to buy 10 shares today, hold for a time and sell for a profit, and then buy 11 shares as price as declined lower, and yet it then moves higher- and repeat......incrementally.
I don';t know if this chart will load properly- but the LIT trade was an example of recognizing thaqt sector strength & rotation was occurring- and getting into an already trending play- and recognizing momentum- and raising stops to sell on any declines...
This was a great trade at the time, held for weeks- caught the peak -because of the excess momentum and has now bee
