| Posted in THE GATEWAY TO SHORT-TERM TRADING | Posted on
Consistent trading performance requires accurate identification of current market conditions and the
application of appropriate strategies to capitalize upon them.
Pattern Cycles provide an effective method for price discovery through all charts and time frames.
This expanded concept of swing trading offers diverse tools to uncover profit opportunities through
continuous feedback, regardless of bull, bear, or sideways markets.
But information does not equal profit. The markets have a limited number of opportunities to offer
at any given time. Price charts evolve slowly from one promising setup to the next. In between, they
emit divergent information in which definable elements of risk and reward conflict with each other.
At times this inconsistency yields important clues about the next trade. More often it represents
noise that must be ignored at all costs. The ability to tell the difference between the two marks an
important passage on the road to trading success.
Trading noise occurs during both positive and negative feedback. It simply represents those periods
when participants should remain on the sidelines rather than jump into the action. Account capital
has limitations and should only commit to the most promising setups. While effective strategies
book profits, many participants experience anxiety between positions and tend to pull the trigger
prematurely. Remember that longevity requires strict self-discipline. Swing traders unconsciously
seek excitement in the place of profits during quiet market periods. Allow boredom to bring down
the emotional level and wait patiently for the next real thing.
Both negative and positive feedback conditions produce rewarding trades, but confusion between
the two can lead to major losses. Classic swing strategies work best during negative feedback, while
positive feedback supports profitable momentum entry. Avoid the danger of choosing the wrong
strategy through consistent application of the expanded swing methods. Regarding of market phase,
use this simple, unified approach for all trade executions: enter positions at low risk and exit them at
high risk. These mechanics often parallel the buying at support and selling at resistance exercised in
classic swing tactics. But this expanded definition allows entry into the realm of the momentum
trader with safety and precision.
Swing traders study both action and reaction when evaluating setups in the momentum
environment. This demands complex planning and detached execution that aligns positions to the
underlying trend but against the current crowd emotions. This strategy naturally favors execution
against traditional momentum tactics. Countertrend reactions provide excellent swing entry levels in
momentum markets. Once filled, these positions find a comfortable exit on the next accelerating
thrust just as new participants jump in from the other direction.
Highly experienced players can use more sophisticated techniques to locate less obvious low-risk
trade entry and enter into accelerating momentum. These high volatility positions require tight
trailing stops that protect risk capital. But successful exit strategy remains the same through diverse
entry tactics. Look for acceleration and feed the position into the hungry hands of other participants
just as price pushes into a high-risk zone.
Execution must synchronize with momentum action-reaction or it will yield frustrating results.
Every player knows the pain of executing a low-risk entry, riding a profitable trend but then losing
everything on a subsequent reaction. Clearly de fined swing exit tactics will avoid this unpleasant
experience. Multi-trend technical analysis and cross-verification techniques identify probable
reversal points well in advance of the price action. Unfortunately, most market participants do not
visualize their exit when they enter a new position and allow greed to overpower analysis as soon as
it moves into a profit. The master swing trader always locates natural escape routes and major profit
levels before new execution.
FIGURE :
The continuous momentum cycle forms a timing core for swing traders to align profitable executions. Trend
surges forward against the friction of countertrend weight. Momentum slows and price falls backward to test prior
boundaries. As it reaches stability, the primary trend finally reasserts itself and ignites new momentum. Use
repeating chart patterns to uncover these pullbacks and enter long or short positions in harmony with the larger
impulse.
Manage risk on both sides of the trade. Focus on optimizing entry-exit points and specialize in
single direct price moves. Remember that execution of low-risk entries into mediocre positions
allows more flexibility than high-risk entries into good markets. Avoid fundamental analysis of
short-term trading vehicles. Mental bias from knowledge of a company’s inner workings can distort
the message of the price chart just when opportunity knocks.
Swing trading allows many methods to improve profitability. Try to adjust position size, manage
time more efficiently, or slowly scale out of winners to retain a piece for the next price thrust. But
careful trade selection does more to build capital than any other technique. Enter new positions only
when signals converge and send a clear message. Standing aside requires as much careful
preparation as entry or exit and must be considered before every execution.
Winning is a tough game. Each swing trader must compete against all other participants to take
their money. House rules ensure that the insiders always retain an advantage. Market makers and
specialists use proven techniques to frighten small players and shake them out of positions. Exercise
original strategies while controlling emotions with strong mental discipline to find that needed edge
over the crowd.
Use technical analysis and drill swing prices into memory. Target acceptable dollar and tick losses.
Remember that the average position gain must be significantly higher than average loss or survival
will depend upon a winning percentage well above 60%. Improve results by reducing losses first
and increasing profits second. Keep current and accurate trading records. The mind will play cruel
tricks when results depend on memory.
Consider the real impact of available capital and leverage. The well-greased competition can
overcome their transaction costs by trading large blocks. But small equity accounts must watch
trade size and frequency closely. Frequent commissions and small capital will eventually end
promising careers in speculation. When trying to grow a small account, lengthen holding period and
go for larger profits per entry. And use any drawdowns as a major signal to lighten up and slow
down.
single direct price moves. Remember that execution of low-risk entries into mediocre positions
allows more flexibility than high-risk entries into good markets. Avoid fundamental analysis of
short-term trading vehicles. Mental bias from knowledge of a company’s inner workings can distort
the message of the price chart just when opportunity knocks.
Swing trading allows many methods to improve profitability. Try to adjust position size, manage
time more efficiently, or slowly scale out of winners to retain a piece for the next price thrust. But
careful trade selection does more to build capital than any other technique. Enter new positions only
when signals converge and send a clear message. Standing aside requires as much careful
preparation as entry or exit and must be considered before every execution.
Winning is a tough game. Each swing trader must compete against all other participants to take
their money. House rules ensure that the insiders always retain an advantage. Market makers and
specialists use proven techniques to frighten small players and shake them out of positions. Exercise
original strategies while controlling emotions with strong mental discipline to find that needed edge
over the crowd.
Use technical analysis and drill swing prices into memory. Target acceptable dollar and tick losses.
Remember that the average position gain must be significantly higher than average loss or survival
will depend upon a winning percentage well above 60%. Improve results by reducing losses first
and increasing profits second. Keep current and accurate trading records. The mind will play cruel
tricks when results depend on memory.
Consider the real impact of available capital and leverage. The well-greased competition can
overcome their transaction costs by trading large blocks. But small equity accounts must watch
trade size and frequency closely. Frequent commissions and small capital will eventually end
promising careers in speculation. When trying to grow a small account, lengthen holding period and
go for larger profits per entry. And use any drawdowns as a major signal to lighten up and slow
down.
