| Posted in PREPARING FOR THE MARKET DAY | Posted on
Trend-range polarity underlies all swing trade preparation. Align execution properly with this
primary axis or profits will vanish. Trends rarely move in a straight line. As price surges forward, it
pauses frequently to test, retrace, and rest. This countertrend pull shakes out profit takers, losers,
and disbelievers. It lowers volatility and allows new participants to jump on board in hopes of a new
price surge. Fresh positions require excellent timing in these conditions. Early execution subjects
the swing trader to whipsaws while late entries miss the move and face increased risk. Ranges also
carry a high probability for trend relativity errors. Participants trap themselves into narrow price
movement while fixated on a broader trending market. Although the range limits losses, tied-up
capital misses other opportunities.
FIGURE :
Bulls live above the 200-day MA while bears live below. When trading within this time frame, align general
strategies to conditions that favor the right side of the market. For example, stay long when price moves above the
average and sell short when it goes below. Shorter-term traders must understand how large-scale bull or bear
pressure can affect the performance of their individual trading vehicles. But they must align positions with
smaller-scale buying and selling pressure to book profits.
Focus trading strategies on the trend-range axis but build timing on the swing-momentum cycle that
underlies it. Positive feedback (directional movement) tends to surge in waves. These momentum
thrusts carry all the rewards that swing traders seek. Negative feedback (nondirectional movement)
sets the stage by providing the conditions needed to generate profitable entry points. Coordinate
these two impulses to execute with perfect timing. Enter positions when the range nears primary
S/R and then watch for momentum in the next lower time frame to carry the trade to a profit. As the
position starts to run, align an exit to momentum in the same time frame as the entry to maximize
the gain.
Identify trend-range through pattern recognition and indicator support. Trends print as sharpramping
price bars. They force price rate of change (ROC) and directional movement indicators
(ADX) to rise sharply. Ranges appear as pullbacks, price constriction, or sideways action. Look for
volume and rate of change to drop off as ranges develop. They force moving averages to flatline
according to their period length. Oscillators such as Stochastics swing back and forth quickly
through small shifts in range direction. Watch the indicator jump to one extreme and stay there
when the trend takes over.
Use repeating chart patterns to uncover important swing points. Classic triangle, flag, and pennant
formations locate trade setups with clearly defined entry and risk levels. Constricting price bars,
lowering volatility, and range placement signal the end of one swing and beginning of a new
impulse. Align long or short positions in harmony with the expected movement but watch out for a
better trade in the opposite direction should pattern failure emerge.
underlies it. Positive feedback (directional movement) tends to surge in waves. These momentum
thrusts carry all the rewards that swing traders seek. Negative feedback (nondirectional movement)
sets the stage by providing the conditions needed to generate profitable entry points. Coordinate
these two impulses to execute with perfect timing. Enter positions when the range nears primary
S/R and then watch for momentum in the next lower time frame to carry the trade to a profit. As the
position starts to run, align an exit to momentum in the same time frame as the entry to maximize
the gain.
Identify trend-range through pattern recognition and indicator support. Trends print as sharpramping
price bars. They force price rate of change (ROC) and directional movement indicators
(ADX) to rise sharply. Ranges appear as pullbacks, price constriction, or sideways action. Look for
volume and rate of change to drop off as ranges develop. They force moving averages to flatline
according to their period length. Oscillators such as Stochastics swing back and forth quickly
through small shifts in range direction. Watch the indicator jump to one extreme and stay there
when the trend takes over.
Use repeating chart patterns to uncover important swing points. Classic triangle, flag, and pennant
formations locate trade setups with clearly defined entry and risk levels. Constricting price bars,
lowering volatility, and range placement signal the end of one swing and beginning of a new
impulse. Align long or short positions in harmony with the expected movement but watch out for a
better trade in the opposite direction should pattern failure emerge.
