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Swing trading strategies (EOD, Papertrading)
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Swing trading strategies (EOD, Papertrading)

  #1 (permalink)
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Swing trading strategies (EOD, Papertrading)

Hi everyone, I'll try to document some swing trades here over the next couple of months.

I've been trading for several years using longer-term trend following strategies in stocks with success. I sometimes take swing trades, but I'd like to do that more often and try out different things. (That's why it's going to be paper trading only for now.)

I. Swing trading indices

I intend to stick with Marc Rivalland's strategy, simply because I read his book a couple of years ago and after all that time it still is one of the best trading books I know. So, I will be using a simple bar chart with a 20-day moving average and an RSI(7), and look at the Point and Figure chart frequently.

Here's a short overview: the trend is up (down) when the market makes a higher high (lower low) in the bar chart; entries are always with the trend. There are two possible entries:
  1. change of trend: the market makes a new high in a downtrend, exceeding the last local high; the position is entered at the price of the previous high. Similar for a new low in an uptrend.
  2. continuation after a full corretion: a full corretion has taken place when the correction has at least three down days in an uptrend or three up days in a downtrend. (A down day is defined as having a lower low than the previous day; an up day has a higher high than the day before.) The position is entered via Buy STP or Sell STP orders above/below the corresponding bar.

With continuation trades, a stop loss order is placed below the signal bar's low; the change-of-trend trades don't have a fixed rule where to put the stop. Taking profits also doesn't have fixed rules. So, being good at placing the right stops and profit taking orders will be the major exercises. Generally, I will exit one half of a position after a meaningful point in the chart has been reached; the other half I will exit depending on price action, an overbought/oversold RSI(7), the action in the PnF chart or a fitted moving average.

For everyone who is interested in Rivalland's strategy: just google his name, and you will find his book as a PDF.


II. Swing trading stocks

I will be using the Traders Action Zone strategy (see here). A stock must be in a "nice looking" trend and trading between the MA(10) and EMA(30). I included an MA(50) for better visualization of the trend. Positions are entered via Buy STP or Sell STP, stop loss is placed below/above the bar's low/high. Every trade receives a take profit for half the position at 1.5 R. When the stock gets there, the stop loss for the rest of the position will be placed at 0.5 R, and I'll see how far I can ride the trend.


What else?

I'm using ProRealtime EOD for free. It sucks at Point & Figure, so I use stockcharts.com for that if available. I'm deliberately not including commissions or slippage (I can always do that later for all the trades).

Positions will not be entered based on position-sizing in dollar terms, because I am not trading a virtual portfolio, i.e. I won't place an order "100 AAPL Sell STP 591.00", but rather "AAPL Sell STP(ab) 591; SL(ab) 600; TP(a) 570", which means that the order consists of two separate positions (a) and (b), both of which have a stop loss at 600, and (a) also has a take profit order at 570. Each of the two positions represents one unit of risk R. Profit and loss is calculated in points and always in R, because that is the only way to compare the different trades in different stocks, indices, etc.. I've been doing that for some time now, and it works fine.


What's the greater plan?

First of all, I want to get this working for at least several months (I've been using the Rivalland strategy for a few months now). Then I'll try trading it with a small amount of real money, probably at a CFD broker with DMA.

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  #3 (permalink)
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I'm following these instruments on a daily basis: DAX, TecDAX, Dow Jones, S&P 500, Nasdaq 100, EUR/USD.

DAX
Trend is still up, up day on Friday. PnF 3/1% reversed into X's and might be setting up an ascending double top breakout that might validate a break of the bearish trendline.
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TecDAX
Uptrend still intact, Friday was an up day.

Dow Jones
Uptrend intact, big up day on Friday. PnF 3/1% still in O's, but no bearish signal has been given, yet.

S&P 500
Up day. Position (gh) was entered at 1325. I move up the stop loss orders of all three positions to below Friday's low, because any breakdown below this level would make the chart look really ugly, and I've been in the (b) position too long, anyway. SL(bgh) 1333. I've been trading the S&P for a couple of months, so here you can see the last entries and exits:
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Nasdaq 100
Up day, trend is still up.

EUR/USD
Up day, RSI(7) was lowest at 23, so it could go down some more. SL(ab) 1.2400; TP(a) 1.2100. I've recently added the EUR/USD to the small list of instruments I look at daily:
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Stocks
MOS. This one showed up on my screen today. All three moving averages are up, pullback has been between the 38% and the 50% Fibonacci retracement, and 54 seems to be a support. MOS Buy(ab) STP 55.45; SL(ab) 54.15; TP(a) 57.42.
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DAX
Up day. I‘m flat here; change of trend from up to down when the DAX goes below 6349.62, which would be a short signal. Short(ab) STP 6349; SL(ab) 6500; TP(a) 6200. The stop loss is placed rather arbitrarily, but I consider the risk-reward-ratio of 1 for the half position as a likely scenario; the stop loss for the remaining half would be moved to break even at this point. However, I'm bullish for the DAX in the short term.

TecDAX
Up day.

Dow Jones
Inside day; doesn‘t count. The PnF chart looks indecisive: price still above bullish trendline, but mainly sideways action; last real signal was a double-bottom break in May. This is the weakest of the three US indices PnF chart.
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S&P 500
Inside bar, looking a bit more bullish than bearish. I like the PnF chart a lot more, because it has given two buy signals since the June low, and it shows rising bottoms. Thus, I‘m more bullish than bearish here, and I will try to give the open trades enough room by not drawing the stop losses closer: positions are still open, orders remain unchanged: SL(b) @1333. SL(gh) @1333.
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Nasdaq 100
Up day. PnF is more bullish than bearish with rising highs and lows.


Stocks
MOS. Position has been opened at 55.45. Orders remain unchanged: SL(ab) @54.15; TP(a) 57.42.

ORLY. This one looks great: the gap has almost closed, it traded back to the 62.8% Fib retracement, which happens to be a support/resistance line. It could go back down to 75 (optimistic, I know). Short(ab) 90.25; SL(ab) 92.60; TP(a) 86.72.
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Other stocks:

NKE. I like Nike, but the gap hasn‘t closed, yet. The area between the EMA(30) and the MA(10) is wide enough so it will probably show up on my screener again the next days.

KO. Possible long entry, but risk-reward-ratio would be pretty bad, and the trend seems to have weakened.

WLP. Strong move down, but I don‘t like the fact that it traded sideways into between the two moving averages.

MPC. Ahhh, no chasing!

POT. Great setup, retracement almost back to the 50% Fib level, bullish reversal bar today. Risk-reward-ratio would be pretty bad, so I‘ll have to pass.

ALXN. Looks great with a bullish reversal bar last Thursday, but Friday and today did not confirm a bullish move, so this could go sideways for some time.

FSIV. No chasing.

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My schedule at work changes all the time, so some of the days I won't be able to look at the markets after the close; instead, I'll update orders and trades the next morning.

DAX
Up day. PF 3-1% is unchanged. The pending short order for a change-of-trend signal is still live: Short(ab) STP 6349; SL(ab) 6500; TP(a) 6200.

TecDAX
Up day.

Dow Jones
Bullish reversal outside day. PF 3-1% unchanged.

S&P 500
Same here. I just saw that I logged the wrong entry price of the (gh) position on 12.07.2012: it was 1342, and not 1325. I leave the open orders unchanged: SL(b) @1333. SL(gh) @1333.

Nasdaq 100
Up day, bullish price action. PnF unchanged.


Stocks
MOS. Gapped up nicely, TP(a) hit. SL(b) moved to +0.5 R at 54.80. Next significant resistance is at 60, so I might draw the stop loss closer after the next session.
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OLRY. Order not executed, because the stop wasn‘t hit. Short signal is still live, though: Short(ab) 91.30; SL(ab) 93.05; TP(a) 88.67.

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DAX
Up day, breakout above last local high, PF 3-1% completed a breakout from a bullish catapult.

TecDAX
Up day, lagging behind the DAX.

Dow Jones
Up day.

S&P 500
Another bullish day, took out the last local high. RSI(7) is at 67, weekly RSI(7) at 60, so no overbought situation. Breakout from the PnF double top not before 1388. Stop loss orders unchanged: SL(b) 1333. SL(gh) 1333. Take profit unchanged as well: TP(g) 1380.

Nasdaq 100
Up day, still below recent high.

EUR/USD
I had forgotten to include the EUR/USD the last days. One problem is that ProRealtime updates Forex data at midnight, and I usually analyze the markets at 10 p.m. MEST or so after the US markets closed. Therefore, the whole of today‘s action is not included in the chart. (I don‘t think it matters in practical terms, as I do not look at Forex data during the day, and I‘m not placing any live orders.)

The last bar (yesterday) was the second up day. I will liquidate the (a) part of the position on the open of the next bar. SL(ab) 1.2400.


Stocks
MOS. Inside bar consolidation. SL(b) 54.80.

ORLY. No entry today. The stock has broken above the EMA(30), so there‘s no valid way to short here.

WLP. 38.2% Fibonacci retracement; trading at a major key resistance/support level at 64. Short(ab) 62.40; SL(ab) 63.90; TP(a) 60.15.
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Other stocks

NKE. Gap has almost been closed, but I wouldn‘t get a decent risk-reward-ratio on the trade.

PM. Consolidation looks nice, but there‘s resistance at 91 directly overhead.

AET. Nice short setup, retracement back into the Trader‘s Action Zone, right now at a resistance level.

SYM. Retracement too small. Might go to 12, though.

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DAX
Up day.

TecDAX
Up day, took out last high.

Dow Jones
Up day, now above recent local high.

S&P 500
Up day, PnF 3-1% unchanged. Take profit of the (g) position was hit at 1380. Not really sure what to do with the remaining two positions. (b) was opened on June 11, so I‘ve been with it for over a month now, and it hasn‘t moved very far. A smaller pullback right now would be reasonable, so I will lock in profits of the (b) position by selling tomorrow market on open, and move the stop loss of (g) to break even at 1342. SL(g) 1342.
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Nasdaq 100
Up day, also took out the last high. Nice to see the indices move in sync.

EUR/USD
Inside day. Sold the (a) position at 1.2296. SL(b) 1.2400.


Stocks
MOS. Consolidation is ongoing; starting to look like a bull flag, stop loss remains unchanged. SL(b) 54.80.

WLP. Position was opened at 62.40. SL(ab) 63.90; TP(a) 60.15.

I‘ve found lots of setups today, most of them shorts, though. Adding two shorts seems okay, considering that the markets are somewhat extended, and pullback might be likely anyway.

ADM. Pullback is a bit small, but price action was very bearish today, and the stock is looking like it‘s setting up a bear flag. Short (ab) STP 27.15; SL(ab) 27.80; TP(a) 26.17.
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MRVL. Bearish price action today, pullback to the 61.8% Fibonacci retracement. Short(ab) STP 10.95; SL(ab) 11.45; TP(a) 10.20.
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Other possible shorts today: MGM. JNPR. JCP. WLT. SYMC. CTRP. APKT.

Longs: AMT. AGNC.

Other Stocks

F. Looks like a nice short at first glance, but 9 is a key resistance level going back several years.

GM. Looks nice, too, but trend has weakened, and it‘s trading right at support.

ORLY. Still watching.

AET. Great price action for a short trade; had considered it as a potential setup yesterday.

VZ. This might become a long entry during the next couple of days.

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Here's a summary with all trades so far:
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Open trades:
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  #9 (permalink)
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Posts: 128 since Jul 2012
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DAX
Down day. PnF 3-1 still in X‘s.

TecDAX
Inside day.

Dow Jones
Down day.

S&P 500
Down day. Position (b) has been sold at the open at 1376.51. The 61.8% Fibonacci retracement would take us back to 1346, which is four points above the stop loss of the remaining (g) position, which seems reasonable. SL(g) 1342.

Nasdaq 100
Down day.

EUR/USD
Down day, new low, double bottom breakout unchanged. I just realized, that the ProRealtime delay in Forex data cost me an entry, because if I had analyzed the market yesterday, I would not have seen Friday‘s bar, which is updated at midnight. I can‘t enter now with hindsight bias. Moving the stop loss the just above Thursday‘s high: SL(b) 1.2330.

Stocks
MOS. Reversal bar right at support. I move the stop loss to below Friday‘s bar, because I expect MOS to move higher on Monday. SL(b) 56.65.

WLP. Bearish-looking inside bar. Orders remain unchanged: SL(ab) 63.90; TP(a) 60.15.

ADM. Position was opened at 27.14. SL(ab) 27.80; TP(a) 26.17.

MRVL. Stop order was triggered, entry at 10.95. SL(ab) 11.45; TP(a) 10.20.

I‘m 3:1 short right now, so I‘d like to balance my portfolio with one or two long positions. There are way more short setups than longs showing up in my scan results, which I consider a short-term bearish sign.

VZ. This looks nice: reversal bar right at the EMA(30) and support at 44. The trend is strong, and momentum is clearly upwards. Buy(ab) STP 44.70; SL(ab) 43.80; TP(a) 46.05.
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LYB. One of the few long setups today. Trend is too weak, though.

TJX. Another possible long; risk-reward-ratio would be pretty bad, especially considering that I expect at least a couple of days with weaker action in the broad market. TJX might show up again during the next days, though.

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Fancy profit/loss diagram

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