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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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Successful swing trading begins with original tactics and accurate predictionCROSS-VERIFICATION The complex interplay between different chart elements baffles many swing traders. They fail to evaluate all of the important S/R influences that predict directional price movement. The rational mind naturally rebels against detailed analysis as it reduces incoming data into manageable pieces. This works against the swing trader’s interest and may contribute to poor preparation. A lazy mind can catch a single S/R level but miss a minefield of obstacles that a new position must face. Cross-verification searches the charting landscape to locate the primary sign-posts of trading opportunity. Common sense dictates that multiple crowd influences favor certain price levels over others. Swing traders can identify these setup intersections when they uncover those points where different S/R types and time frames converge with each other. For example, a single level that points to a major high, a 50% retracement of a larger trend, and the 50-day moving average strongly implies that certain important events will occur when price strikes that point. Prepare for the market day through a complete S/R analysis that looks for convergence at specific price levels. The more elements that intersect through a single boundary, the higher the probability that this chart feature will support or resist price change. Four or more cross-verification points may appear at a single S/R intersection and signal an excellent profit opportunity. But don’t let fewer cross-points discard promising trades. Many good setups exhibit less convergence but display one significant entry with few barriers or points of interest in between. Trade execution at or near new highs raises special S/R considerations. The high itself presents the only resistance barrier within the larger time frame. If shorter charting periods don’t reveal smaller obstacles, the only required strategy decides whether to buy, sell, or maintain an active position on a test of that high. Of course, analysis of risk must also locate an easy escape route if the trade turns sour. Focus trade preparation on cross-verification to locate promising setups and measure reward:risk. Look for price close to substantial support to identify low-risk long trades. Look for price close to substantial resistance to find low-risk short sales. Measure the distance between the entry and the next barrier within the holding period for the trade. This points to the intended exit and reasonable profit target (PT). Measure the distance between the entry and the price that confirms that the setup was wrong. This points to the unintended exit and reasonable failure target (FT). Execute only those trades with high PT and low FT distance. 3D CHARTING Successful swing trading begins with original tactics and accurate prediction. Excellent timing then enters a position just before bar expansion and exits as the crowd loses control. Careful planning guides the enterprise through every phase and plans an escape route just in case things go sour. Trade time, price, and safety. Profits will quickly follow. Accurate forecasting requires the ability to see price movement in more than one dimension. Investors and institutions can often accomplish this task with a single price chart. Swing traders need more information and must watch the mar kets using 3D charting techniques. Identify three time frames that correspond to the chosen holding period. Find one segment above and one below the position focus. For example, many intraday traders rely on 1-minute, 5-minute, and 60-minute charts while many position traders manipulate 60-minute, daily, and weekly combinations. Not sure how long to maintain a position? Most swing traders should choose a specific holding period that reflects their lifestyle and not change it until thoughtful planning presents an alternate strategy. The rational mind will turn poorly defined time frames into major losses. Trades become investments and ex-traders become humbled investors. As strategies evolve, slowly experiment with different time frames. During these phases, prepare to answer the time question clearly before each trade execution. Write it down and stick to it or success will not come easily. THE CHARTING LANDSCAPE Greed resists adequate trade planning and precise time execution. But consistent discipline pulls attention back to center as it marks the divide between success and failure. A neophyte may build false confidence by throwing money at hot stocks and flipping nice gains. Guess what? Short phases of the broad Pattern Cycle allow this strategy to work. But their reckless approach fails quickly as soon as momentum fades and swing traders empty their pockets with powerful 3D charting techniques. Three-dimensional charting forces the swing trader to recognize trends through different time frames and evaluate how their interaction will affect price movement. Landscapes of support and resistance reveal hidden swing levels ripe for profitable trade entry. 3D charts pack layers of complex information into very small spaces to reveal these hot spots quickly. Through visual analysis, the trader finds where moving averages, retracements, price bands, bar patterns, and trendlines cross or converge with each other. These isolated time/price zones provide the playground for profitable entry. Each element of the charting landscape has a distinct appearance. Take time to learn the special message that each one displays as these diverse forces interact with each other. Also become sharply aware of their limitations. The most memorable trades come when an indicator’s message can be confidently ignored and informed instinct guides position management. Toggle between arithmetic (linear) and logarithmic (geometric) charts frequently. Log charts examine percentage growth. The visual length between increments decreases as prices move higher. Linear charts examine price growth. The visual length between increments remains constant as prices move higher. Trendlines can form on either log or linear charts. If uncertain which view will yield the best information, apply this helpful rule for quick analysis: stick with log charts for lowpriced stocks or stocks that experience significant price change over short periods of time, and rely on linear charts for higher-priced or slower-moving stocks. Information panes below price bars serve a single purpose: to assist the investigation of the top pane. Use indicators to support the pattern analysis and not the other way around. Many market participants search so hard for mathematical perfection that they lose their ability to see. Above all else, technical analysis is a visual art. Always start trade preparation with a peek at the price bars first. If something catches your eye, then check the lower pane to find out whether it confirms or refutes the observation. Less-experienced players must cast out opportunities when lower-pane measurements don’t support objective observations. But after experience grows with lower-pane indicators, judiciously ignore them when the pattern tells a different story. BUILDING THE ROAD MAP Markets give away their secrets to swing traders who take the time to look carefully. Building a detailed landscape on each chart reveals trend and pattern powerpoints where important crowd forces will converge. These focused time/price zones target the hidden points primed for reversals and breakouts. When the participant has a clearly defined plan of what to do when price hits one of these hot spots, they’ve learned the art of swing trading. Watch these points in real time whenever possible to decide whether or not the tape action supports the message of the pattern. Pull the trigger at or near the predetermined low-risk entry price after confirmation. The path to perfect trade entry is reached by thoroughly understanding each component of the 3D road map. Every convergence event triggers a different physical reaction. Experienced technicians measure the relative impact of each individual force and make consistently accurate predictions of subsequent price movement. Develop precise visual skills and don’t rely on a toolbox of complex math-based indicators. Swing trading teaches discretionary execution based on convergence of time and price but does not require mechanical models or systems. Realize that most indicators arise from very simple building blocks. Learn these basic components well and hone that needed edge over the skilled competition. Pay attention to new forces at work within the charting landscape. Markets evolve to close off opportunities as quickly as they appear, and dependable S/R levels will fail as new dynamics work to defeat the majority. Long-term profit requires quick adaptation to new conditions as old methods fail. Use the power of Pattern Cycles to identify and test fresh strategies that respond to major market changes. |
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