Start searching for a buying day 2 days after a swing high or, conversely, a shorting day 2 days after a swing low. Ideally, the market will move in complete 5-day cycles. (In a strong trend, the market will move 4 days in the primary direction and only 1 in reaction. Thus, one must seek entry 1 day earlier.)
"Check Mark" on the Test
The potential entry is sought opposite, or contrary to, the previous day's close. If looking to buy (sell), one first wants the market to "test" the previous day's low (high), preferably early in the day, and then form a trading pattern that looks like a "check mark" (see examples).
This pattern sets up and establishes a "double stop point" or strong support. If entering a market with only a "single stop point" or support formed by today's low only, exit on the same day--the trade is clearly against the trend.
Close vs. Open
The close should indicate the following day's opening. When a market opens opposite what is expected or indicated by the trend, one may first look to "fade" it--but must take profits quickly. Then look to reverse! Support (Resistance) Is today's support (resistance) higher or lower than yesterday's?
Swing Measurements
Where is the market relative to the last swing high or low? Look for swings (up or down) of equal length, and for retracements of equal percentage. No matter in what time frame, always look for supply at tops and support at bottoms. Penetrations should be accompanied by volume and activity. Expect trends, either up or down, to last for either 2 or 4 weeks.
The following conditions are fairly reliable indicators for the start of one of these trends (I personally skip the first buy or sell swing when one occurs because the move ensuing could be quite strong):
Narrowest range in the last 7 days 3 consecutive days with small range The point of a wedge A breakaway gap A rising ADX (14-period) above 32 Practice Because a certain amount of confidence in any technique is required to trade it consistently, paper trading can cultivate the faith necessary to recognize and trade pattern repetition. Although the temptation to try too many different styles and patterns always exists, one must strive ultimately to trade in just one consistent manner--or at least to integrate techniques into your own unique philosophy.
System Characteristics Certain points about trading short-term swings deserve note. Understanding the nature of short-term systems can help you recognize the psychological aspect of trading.
When consistently following a short-term system, you should expect a very high win/loss ratio. Though the objectives with this style of swing trading appear conservative, you will almost always incur "positive slippage". In all systems, winners are skewed. Even though making steady profits, 3-4 really big trades may actually make the month. It is vitally important to always "lock in" your trades. Don't give back profits when short-term trading. You may be astonished at just how big some winners may be from catching the swings "just right!"
Article was written by Mouser57
The internet opened up online stock trading in the mid '90s with E-Trade and Ameritrade, and most of the small investor friendly brokerage houses eventually followed suit with a similar service. This allowed a lot of smaller investors to get into active stock trading ? low cost accounts let investors with only a few hundred dollars get into the market.
However, there's still a learning curve, and as it's investing with your money, making that learning curve easier to deal with is important. Getting up to speed quickly helps improve your return on time invested in investing.
First, decide what time horizon you're investing for. A long time horizon is "buy and hold" ? you're expecting the value of the stock to increase over time, or you're expecting dividends to earn out in your favor. A short time horizon means you're looking for sharp, immediate gains. Different people have different levels of acceptable risk and temperaments; for some, the adrenaline rush of a buy-and-sell strategy is a drug. For others, the security of buying stocks for the long term allows them to plan.
In the long run, the safest payout is the long time horizon; on average, the stock market returns an inflation adjusted rate of return of about 8-9%, compared to bonds which return at 2-4% after inflation adjustment. Most stocks are held in portfolio accounts for 401(k) plans, which allow investment brokers to leverage large amounts of money to make big purchases?and these tend to be conservative, and fairly safe.
If you need to immediately convert a small amount of cash into a larger amount of cash, you have to take a riskier day trading approach. Day trading approaches take considerably greater due diligence and research to pull off. Become a sponge for information that relates to the companies you hold, so that you know when to sit out a round of buying.
Under no circumstances should you berate yourself for not selling at the maximum price ? very few people can do this reliably. Nor should you berate yourself for buying a stock that drops in value ? a lot of companies are hyping stock prices more than they are their own products, and that's one of the risks you take as an invester.
Always diversify your holdings, and whenever you make a gain, put at least half of it into a long time horizon investment package, to hold on to it. Think of it as pocketing your winnings at the table rather than doubling down every time. Never rely too much on one sector, but do hold on to stocks that match the pace of the index funds.
Check your ego and your emotions at the door. This is a business, these are your savings, and as John Wayne said, "Life ain't for sissies" You're going to lose some. Learn from them. Take time to have a life ? it doesn't matter how your stocks are doing if you're just plotting charts and reading investment business daily every day.
Both Robs & Mark Crisp are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Robs has sinced written about articles on various topics from Finances, Forex Trading Forex and Penny Stocks. Mouser57 member of , and stock message board. Robs's top article generates over 18100 views. to your Favourites.
Mark Crisp has sinced written about articles on various topics from Investing and Trading, Finances and Hot Stocks Pick. About Mark Crisp:My account is up over 1,000% in the past 5 years alone trading a simple weekly momentum trading method. Free time and no stress.Get your free book "The 7 Habits of a Highly Successful Trader" here:. Mark Crisp's top article generates over 18100 views. to your Favourites.