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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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Swing traders must make the right choices to build an effective trading strategyBUILDING A SWING TRADING STRATEGY SYSTEMS AND METHODS Swing traders must make the right choices to build an effective strategy. Seek original techniques that work in diverse market conditions and stand apart from the crowd’s madness. Adopt a customized holding period that fits the personal lifestyle and permits careful position management. Spend more time controlling losses than seeking gains, and prepare to adjust everything as profits grow. Opportunity depends on inefficiency. Price patterns expose inefficient markets that discharge their instability through rapid price change. Swing traders evolve fresh strategies to capture these events and build quick profits. But as high-odds tactics gain recognition, the crowd seizes them and inefficiency starts to close. Professionals then fade the setup and generate whipsaws that shake out many speculators. This intense competition for profit forces many swing traders to cut and run. They jump quickly to the next method that works, with the crowd always one step behind. An effective market edge generates consistent trading profits. But most modern strategies must adapt continuously to the curse of common knowledge. Specialize on a single pattern for as long as it produces good results. But notice when unexpected outcomes start to undermine profitability. Stay focused and recognize immediately when the crowd discovers that pattern’s virtues. Then have the confidence to move on quickly to the next original idea. Emotional instability ensures that stock positions turn into surrogate spouses, bosses, and wayward offspring. Control your personal life first before taking a trade, or the market will do it for you. Keep in mind one disturbing fact: more swing traders will fail due to lack of discipline than lack of knowledge. Successful execution depends much more on the executioner than the strategy. Profits require both effective risk management and emotional self-discipline. The greed-fear axis clouds the mind and opens the trading game to great danger. Use cold, objective rules to manage emotions and avoid the fatal traps that quickly end a career. Engage frequently in tactical roleplaying and visualize appropriate responses to different market conditions. Hope for the best but always prepare for the worst with each new position. Both extremes will happen regularly over time. MOMENTUM TRADING Pattern Cycles generate powerful strategies to capitalize on changing conditions and major turning points. But most participants fall into the momentum game and never learn other tactics. While the greedy eye sees many rising trends with few pullbacks, most still lose money chasing a hot market. They realize too late that momentum demands precise timing and strict emotional control. Greed-fear exerts tremendous force during dynamic price movement and clouds careful preparation. Ironically, initial gains can be dramatic for new momentum traders. Beginner’s luck and fearlessness combine to make those first weeks or months very rewarding. But results often change quickly. Momentum traders at all levels lack sound risk management. Focus on the big gain dulls awareness of the big loss. Market insiders adjust quickly to the momentum crowd and generate sharp whipsaws to shake out the weak hands. Confused participants start buying tops and selling bottoms with regularity. Or they abandon their rules and try to survive by holding old winners through violent selloffs and waiting for a decent bounce. Sharp trends print wide range bars and many gapping moves. This volatility increases risk and inhibits safe entry-exit planning. Swing traders rely on S/R to define execution and reward targeting. Most momentum markets display few common landscape features. This requires entry without a clear violation level that proves that the setup was wrong. Only 3D charting or arbitrary stop loss keeps the speculator out of intense danger in this blind environment. Momentum trading can be mastered. Three disciplines will break destructive habits and reprogram trading for success: • Abandon the adrenaline rush: Forget the excitement. Profit depends upon detached and disciplined execution. • Learn the numbers: The nature of price movement must be ingrained deeply enough to allow spontaneous decision-making during the trading day. • Cross-verify: Objective measurements must filter unconscious bias. Reduce momentum risk through 3D charting. Identify reward for the time frame of interest. Confirm that the stock shows no important divergences that may signal the end of the move or an impending reversal. Then guide execution and position management through the chart in the nextlower dimension. When a strong trend explodes on the daily chart, use the 60-minute bar to pick out lower-risk entry and define natural exit points. For intraday positions, control the 5-minute bar breakout by using a 1-minute chart to locate swing levels. Successful momentum strategy requires solid tape reading skills. Demand on the time and sales ticker reveals the inner workings of rapid price movement. Both retail (small-lot) and professional (large-lot) traders need to participate in a sharp trend or it will fail. Watch the crowd’s response to support numbers very closely. If the swing trader can’t feel their urgency to get on board, perhaps it isn’t there. Use round numbers to gauge demand when the action pushes into uncharted territory. Multiples of 10 often present strong resistance in place of classic S/R levels. Understand the motives of the big players that drive fast markets and ride their coattails to gain a needed edge. And if big lots start to move against a rally, be prepared to join them. Time-of-day tendencies cultivate profit and danger zones. As the market opens, overnight imbalance and fresh retail cash trigger volatility that resolves through price change. Insiders guide stop gunning exercises and fade trends through the lunch hour’s negative feedback. The final hour arrives, just in time to resolve many complex themes with sharp breakouts or breakdowns. And through it all, intraday buying and selling oscillates in an orderly 90-minute cycle. Technical analysis uncovers momentum secrets as it exposes insider deception and herd behavior. Verify all fast markets through both patterns and indicators. Proper application will reduce failed entries because it invokes natural risk management. Always trade by the numbers and not the news. Use cold logic to painlessly exit marginal positions and move on quickly to the next opportunity. Physics teaches that an object in motion tends to remain in motion. Momentum profits depend on this well-understood mechanism. Moving averages set to multiple time frames reveal trend velocity through their relationships with each other. Measure this acceleration-deceleration with a classic MACD indicator or apply MA ribbons and watch them spread or contract over different time periods. For obvious reasons, always seek acceleration cross-verification before momentum trade execution. Swing traders apply original tactics to each phase of the Pattern Cycle. At new highs, they execute momentum setups that rely on sound risk management. When market conditions change, they move swiftly on to fresh ideas that reflect the new inefficiencies. Always opportunistic, they seek the next profit as a predator looks for a vulnerable meal. Momentum strategies fail through most market conditions. Stocks trend only fifteen to twenty percent of the time. Constricted ranges bind price during the rest of its existence. Trading longevity requires diverse skills through both trending and congested markets. Be flexible enough to shift from one strategy to the other as feedback loops alternate between positive and negative. In other words, adapt tactics quickly to changing market conditions rather than wait for those limited times when the environment favors the hot stock. |
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