Quote from neutrino:
Thanks for the question lindq!
As your signature says, I tried to "keep it simple" and not to get into specifics
I refer to trading NASDAQ stocks with an average holding period of 3 days.
That would be stocks with daily ATR about 5%, prices above $5.00, volume above 0.5 mln but these are just preferences I guess.
I hope this will give a better framework for the discussion...
Well, still not sure on what basis you are buying or shorting. But swing trading generally lives or dies based on a minimum level of movement in the overall market. (Obviously, no movement, few trades. More movement, more trades.)
I recently ran backtests on market indexes because I was curious as to (1) What kind of overall market movement would help to set up trades on my primary system, and (2) How often those conditions were present now, versus historically.
For my trading - I buy pullbacks - I find that a deviation of 2% from a 10 period MA in the overall market averages begins to trigger trades. Since 1993 the S&P has made that move 120 times, or an average of once per month. (Nice the way that divides easily.) This past year, that same number has generally held true. About once per month.
To your orignal question - the number of 2% moves in the past two years has been slightly more than those 97-98, but not by much. So if you are trying to get a sense the kind of volatility that would generate swing trades, I would say that overall it has remained fairly steady.
So for someone doing basic pullback trades, the historic pattern is fairly even. But if you are looking for "serious" volatility, that is a different story. Historic levels generally do not match those that we've experienced since January 2000.
You can do the same research on your system. Generally, market conditions will help to set up certain types of trades. Chart when your trades trigger most often, then compare to a chart of the S&P or Naz. Is there a pattern in the index that you can discern that accompanies many of your trades? If so, then determine the appropriate levels, and run a backtest on the index to see when those levels occur. For me, it was very enlightening, and encouraging, to see that my set ups were often triggered by a fairly regular movement in the indexes.
