New idea for Swing Trading....

T

Trend Fader

NOTE: This post is mainly for swing traders not daytraders...


I have been swing trading for many years and have come across many different realizations...

One of the biggest problems I have is letting my winners run... The main reason is because I constantly watch the market like a hawk... especially the futures and broader indices...

Whenever the major indices close real bad... like the dow or nasdaq close near their lows and take out the previous days low... I get real nervous and exit my trade... even though the stock I was long closed fine...

I am thinking of ignoring broader market action all together.. The way I primarily swing trade is buy/short high volume breakouts usually in the direction of the primary trend of the stock...

Is it important to watch broader indices? Is it really all just a market of stocks??

I trade anything greater than $5 and pretty liquid in any sector.. as long as the pattern looks good.. Some stocks track the broader markets more than others.. but some can diverge significantly..

I am now thinking of letting my equity curve be the market.. and make my decisions based on that... The way I see it... if the market is bullish I will get a lot of bullish high volume breakouts and most of them will be working... and vice versa for shorts... Who cares what the nasdaq or S&P is doing!

I am thinking of never looking at the indices again as far as swing trading goes? sounds crazy?? My old routine would be to look at the major indices and get a bias of the market.. then take individual stock trades accordingly...

My new guide will be my equity curve.. the quality of setups I get on both sides long and short.. and how well the trades are working..


--MIKE
 
For example.. The S&P, DOW, NASDAQ rally big time and close at the highs...

However.. my basic breakout scans are coming up with no valid breakouts... only a series of breakdowns in the retail sector... So I will look to short retail stocks breaking down... not paying attention to what the broader indices are doing...



--- MIKE
 
Quote from Trend Fader:

NOTE: This post is mainly for swing traders not daytraders...


I have been swing trading for many years and have come across many different realizations...

One of the biggest problems I have is letting my winners run... The main reason is because I constantly watch the market like a hawk... especially the futures and broader indices...

More...

I have the opposite problem, I shoot for the moon on every trade and loathe to take profits early, routinely allowing massive retraces 50-80%. The way I see it, you'll never take part in the big moves if you keep exiting early, just to "ring the cash register".

Anyway, you're right that watching the market "like a hawk" can suck you into taking profits too early. I usually survey the market in the market during the first half hour, then I just use my software to set alerts when my positions or certain stocks or indices reach certain levels or when certain technical events occur. I glance at what's going on from time to time, but rarely at my positions, and just do something else while I'm waiting for something to happen, read a book, ET, some exercises or whatever. Pretty cool way to trade, I think; give it a shot, it's very relaxing, much less stressful than watching every tick. (I take some day trades from time to time, I'm getting better but I pretty much suck at them, can't stand having to sit there staring at the screen..)

As far as watching the broad market goes, yeah, I think it's pretty important, and most of my good trades are the ones that get helped along by the tide. Having said that, some of my best all time winners were ones that ran opposite to the market (and worst all time losers too, for that matter).

I'm not sure what you mean by letting your equity curve "be the market". Is it something like you'll trade heavier when you're equity curve is "breaking out" and ease off when it's not? I regard that as a pretty sound trading principle, if that's what you mean, but I've never heard it referred to as letting your equity curve be the market.
 
Quote from Trend Fader:


I am now thinking of letting my equity curve be the market.. and make my decisions based on that... The way I see it... if the market is bullish I will get a lot of bullish high volume breakouts and most of them will be working... and vice versa for shorts... Who cares what the nasdaq or S&P is doing!

--MIKE
More...

That is the way Gary B. Smith (Street.com) has done it for years...seems to have worked for him.
 
I think your trades tell you plenty about what the "market" is doing. Just as much as watching the indices. If distribution is starting across the board, it will show up in your positions soon enough. Plus if you watch the indices, you can become biased about taking certain trades or exiting certain trades. This can be harmful at times. I usually judge the health of the market by how my positions are doing, and what quality level of setups I see on my watch lists. Another thing I watch is the New Highs and New Lows figures for the NYSE and NASDAQ. That is just as important as watching the chart of an index to me.

Banker
 
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