swing trading style?

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prunepicker

i've lurked at this board for quite awhile now,but i've been struggling with my trading lately,so i thought this might be a good place to post my thoughts. I have been swing trading for about 2years now with moderate success.Initially,i traded mostly mechanically with limited sucess.It just always felt like i was chasing a dynamic problem with a static solution.The tendency of the systems i used was to work great at times,but fall apart in the face of changing market conditions.The drawdowns associated with that style was too intolerable for me.I don't mean to indict the mechanical style.I probably never developed a good enough system to make it work.i tried both store-bought and personal systems.In the process,i became very familiar with the curve-fitting problem.It seemed to me that avoiding over-optimization,yielded systems subject to big drawdowns,which lead to distrust in the process.At any rate,about 6 months ago i decided to switch to a more discretionary style.Probably the biggest influence to date on me has been Farley's Master Swing Trader book. I've read it twice,(yea, i did feel like drawing my light saber a time or two!:) i use a lot of the stuff he talks about in that book,convergence of support or resistance in different time frames,narrow range entry,candlestick patterns at support-resistance boundaries,etc. i have also read Van Tharps book,and am very familiar with his concepts of expectancy and trading size.so,even though i'm fairly new to this style of trading,i feel like i've done a fair amount of homework.My frustration with this style of trading centers on the trading vehicles of choice.i've always felt like it was better to trade a small number of vehicles,because of the familiarity edge.i have focused on the Ndx,Osx,and Xau.i chose those three because they are relatively un-correllated.
The problem i am experiencing is lack of trades.I have currently gone 2 weeks without trading.Maybe i'm missing some trades, or maybe i'm just too picky.I have been profitable so far,although i think my track record is too short to make any real judgements there.but i understand there is a different way to do this style of swing trading that i am considering,and am looking for some feedback from the group on.Reading the GAry b. Smith interview in S.&C. mag this week got me thinking about it.Basically, he mechanically scans the universe of stocks for his favorite pattern and trades those. as a result he gets lots of trades.So the question becomes, Which method is more profitable? Trading just a few indexes has the advantage of familiarty and small amount of slippage,on the other hand, you cant make money if you dont trade!! if any of you guys have been down this road, i would love to hear about it...thanks for listening
 
Quote from prunepicker:

i've lurked at this board for quite awhile now,but i've been struggling with my trading lately,so i thought this might be a good place to post my thoughts. I have been swing trading for about 2years now with moderate success.Initially,i traded mostly mechanically with limited sucess.It just always felt like i was chasing a dynamic problem with a static solution.The tendency of the systems i used was to work great at times,but fall apart in the face of changing market conditions.The drawdowns associated with that style was too intolerable for me.I don't mean to indict the mechanical style.I probably never developed a good enough system to make it work.i tried both store-bought and personal systems.In the process,i became very familiar with the curve-fitting problem.It seemed to me that avoiding over-optimization,yielded systems subject to big drawdowns,which lead to distrust in the process.At any rate,about 6 months ago i decided to switch to a more discretionary style.Probably the biggest influence to date on me has been Farley's Master Swing Trader book. I've read it twice,(yea, i did feel like drawing my light saber a time or two!:) i use a lot of the stuff he talks about in that book,convergence of support or resistance in different time frames,narrow range entry,candlestick patterns at support-resistance boundaries,etc. i have also read Van Tharps book,and am very familiar with his concepts of expectancy and trading size.so,even though i'm fairly new to this style of trading,i feel like i've done a fair amount of homework.My frustration with this style of trading centers on the trading vehicles of choice.i've always felt like it was better to trade a small number of vehicles,because of the familiarity edge.i have focused on the Ndx,Osx,and Xau.i chose those three because they are relatively un-correllated.
The problem i am experiencing is lack of trades.I have currently gone 2 weeks without trading.Maybe i'm missing some trades, or maybe i'm just too picky.I have been profitable so far,although i think my track record is too short to make any real judgements there.but i understand there is a different way to do this style of swing trading that i am considering,and am looking for some feedback from the group on.Reading the GAry b. Smith interview in S.&C. mag this week got me thinking about it.Basically, he mechanically scans the universe of stocks for his favorite pattern and trades those. as a result he gets lots of trades.So the question becomes, Which method is more profitable? Trading just a few indexes has the advantage of familiarty and small amount of slippage,on the other hand, you cant make money if you dont trade!! if any of you guys have been down this road, i would love to hear about it...thanks for listening
More...
Teresa Lo has her own ideas on this that are alot simpler and generate more trades. That is neither good nor bad, just more...

nitro
 
The markets are in strange times.
There's nothing wrong with sizing down or sitting out when your present style of trading is not working well.
Use the spare time to look at new ideas, but do not forget your profitable style, and take the signals when they come.

As you can see from these charts, the smart money is sitting out and/or playing SMALL.

A good trader knows when to say, "Wait, something doesn't look right here, I'm going to pull into safe harbor"

Looming geopolitical events have many traders very nervous, and unsure of the outcomes. The less certainty in the markets, the less volume you'll see.

Hope this helped. :)
 

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You make some good points and pose some good questions. Initially, I would say an approach that kept you sidelined during this crappy market is not to be sneezed at. Sometimes keeping your powder dry is the most you can ask for. Also, the desire for action is one of the most dangerous trading impulses.

I have read Gary Smith's stuff for a while and don't find it too compelling. Others on this site think he is great, but I've never seen any kind of track record from him, other than his own claims. He does seem to have a disciplined approach, I'm just not sure if it works.

Scanning the universe every night has its advantages but you tend to end up with unwieldy numbers of stocks that youare not familiar with. Many have popped or blown up due to one time events, and it takes a fair amount of research to find out what happened. I am technically oriented but I'm not going to buy a stock without knowing if it announced some material item that day. Personally, I do a pretty extensive series of scans most nights using Quotes Plus software, but I do it as much to get an idea of what's working and what's not than to generate actual trades. I find most of my better trades come from trading familiar stocks that tend to track the overall market.
 
"You make some good points and pose some good questions. Initially, I would say an approach that kept you sidelined during this crappy market is not to be sneezed at. Sometimes keeping your powder dry is the most you can ask for. Also, the desire for action is one of the most dangerous trading impulses."

Just had to say Amen to that.
 
I am a hybrid of mechanical and discretionary. I use stock filters to get candidates for trades and don't deviate from the list, but I pick from the list manually. I use stops and trailing stops to get out most of the time. I tried doing it with options and it didn't work due to the peculiarities of options, but it works fine with stocks.

I rarely make more than one trade per day. I am looking into the opening order strategy in order to smooth out the cash flow and possibly trade for a living, but no such luck so far.
 
Prunepicker - If I may offer an obversation, it sounds like you have a basic problem with confidence in your system, or lack of a systematic approach. I would advise that you need to nail down your approach more firmly before even attempting to trade a market such as this. Best to remain on the sidelines. If in doubt....

Regarding lack of trades, it is part of the environment. I swingtrade a very nice pullback system that generated 800 trades last year and 800 points profit. But in the past two weeks I have pretty much been sitting on my hands. But isn't that also the mark of an excellent system? In my mind, a system that keeps you out of trouble when you might otherwise screw yourself is a system that is to be praised, and loved, and stroked, and worshipped!

David
 
"I have read Gary Smith's stuff for a while and don't find it too compelling. Others on this site think he is great, but I've never seen any kind of track record from him, other than his own claims. He does seem to have a disciplined approach, I'm just not sure if it works."

he recently admitted on real money that he was down for the year last year.
 
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