The Swing and Position Trading Process
Stockscores.com Perspectives for the week ending May 2, 2008
|
| Upcoming Events |
Calgary Live Trading Event
Calgary Stockscores DisnatDirect Live Trading Events
Tuesday May 6th and Wednesday Wed May 7th
12:00 PM and 7:00 PM
Watch Stockscores founder Tyler Bollhorn as he goes through the process to identify and execute day, swing and position trading opportunities using the Stockscores Approach and the DisnatDirect trading platform. Real market conditions, real trades, a real educational experience! Seats are limited, you must register to attend this free event. Click Here to register
Toronto event on May 14th and 15th are now posted on the Upcoming Events page on Stockscores.com.
|
| Get the StockSchool Pro Free |
DisnatDirect named the number one Canadian brokerage for Traders by Surviscor! Open and Fund a brokerage account with DisnatDirect and receive the StockSchool Pro home study course free, including special Pro level access through the DisnatDirect client website. Offer only available to Canadian residents. For information, click here
|
|
In this week's issue:
Over the next two weeks I will be doing some special events for day, swing and position traders. Rather than talk about the process that I go through to find trading opportunities in the stock market, I am going to actually show the process step by step. Attendees will not only get to see how I trade the market, they will also learn why I do each thing that I do.
These events will happen in Calgary and Toronto (Vancouver was last week), two days in each city with an early afternoon session during market hours and an evening session beginning at 7:00. The day time session will focus on day trading the market and I hope to be able to find and execute real trades, so long as the market gives me the opportunity. In the evening, I will focus on the kind of trading opportunities that don't require as much time and effort to implement, swing and position trading.
These events are sponsored by the DisnatDirect, the brokerage recently named the number one broker for traders in Canada. They are putting a big investment in to educating their clients and offering the best tools for traders. Best of all, it means these events will be free to attend! However, you must register, you can get the location, time and registration details by clicking here. Some of the events are filling up so please don't wait till the last minute to register.
Last week, I described the day trading process so this week I now consider the research and execution process for Swing and Position Trading.
The Swing and Position Trading Process
Most day and swing trading strategies rely on daily charts for their entry signals. That means that we can not really begin to do the research until at least the closing minutes of the trading day, since we need to see how the chart will look for the day to determine if there is an entry signal.
For the Stockscores strategies, the trader can do their opportunity research in the last hour of trading or wait until the market close. The benefit of doing the work in the last hour is that positions can be taken before the close to benefit from a potentially strong open the following day. This strength does not always happen, but with swing trading strategies like the Pull Back Play, it certainly can.
So, for me I begin looking for opportunities in the last hour of trading. I focus on the Swing Trading strategies at this time because they are more time sensitive. I run the Market Scan I want to focus on and go through the charts to see which stocks fit the criteria of the strategy. Most of the stocks that I look at will not be ideal and I expect to say no to most of the stocks found with the Market Scan. Stockscores gives me the ability to look through a lot of opportunities in a short amount of time so I can afford to have a high standard.
I then go through the risk - reward calculation if I see something that has a good chart pattern. The trade must have at least the potential to return a 2 to 1 risk reward ratio for me to consider the trade, and of course, higher is better. If that criterion is met then I will execute the trade before the close.
Stocks that you have a position in should be put in to a Watchlist using the Stockscores Watchlist creator so that you can monitor their charts on a daily basis. It is also wise to enter a Stock Alert on Stockscores at the stop loss price that you have identified for the stock. That way, you can receive an email alert if the stock hits the threshold price you establish.
Once in a position, you simply monitor it each day to see if it has closed below the stop loss price or given an exit signal. It is important to let profits run when you have a winner so I suggest only looking for an exit signal once a stock has doubled its risk amount. Anything less is probably not enough reward to justify the risk taken in the stock.
The Position Trading research process can be done in the last hour as well but it is not necessary to do this; you can wait until after the market closes. I typically do my Position Trading market scans in the evening, running the scans that are appropriate for market conditions. In an up market, I like to do the Stockscores Simple Market Scan while I do the Longterm Breakdowns in a downward trending market. If a market is topping out, I like to do the Reversal of Fortune while a bottoming market favors the Bottom Fishing Market Scan. It is important to analyze the overall market first and then focus on the strategy that is appropriate for market conditions.
The research process is straight forward; run the Market Scan, view the charts, pick stocks that meet the criteria of the strategy. If the chart looks good, gauge the anticipated risk reward ratio to ensure that the trade has enough reward potential to justify the risk. If it does, enter the trade the next day or, if the stocks shows signs of a counter trend pull back the following day, wait for the pull back to run its course before entering the position.
As with Swing Trading, it is smart to put the positions in to a Watchlist to monitor the charts on a daily basis and use the Stock Alerts tool to send an email when the stock is hitting the support price. I exit my trades at a loss when they close below the stop loss price.
When looking for an exit signal, I wait for the stock to at least double its risk. Once it has, I apply the Exit Signal rules described in that module of the StockSchool Pro course.
This is a general overview of the research and execution process for the Stockscores Approach. At the upcoming evening events in Calgary and Toronto I will demonstrate and explain this process in greater detail. During the day time events, I will demonstrate the day trading process that I discussed in last weekend's newsletter.
Back To Top
The US markets broke their long term downward trend line this week, buyers receiving motivation yet again from the US Federal Reserve who made another interest rate cut. With this is mind, I think that looking to buy formerly weak US stocks making a turnaround chart pattern a decent strategy to consider. A stock reversing its long term downward trend typically does three things. First, it breaks the downward trend line. Second, it will trade sideways for a while, building a base that is higher than the low it hit in the downtrend. Finally, it will break to the upside from that base and start in to its upward trend, building momentum slowly at first.
I call this a Bottom Fishing pattern and it is the basis of one of the preset Market Scans found on Stockscores.com for Advanced and higher members. I ran this strategy on Friday to find some stocks that may benefit from a turnaround in the market.
Back To Top
1. NTWK
NTWK is breaking from a rising bottom after breaking its downward trend line in March. The stock has support at $2.20 and will not find significant resistance until $4 giving entry here a good 2 to 1 risk reward ratio.
Back To Top
2. NYNY
NYNY has just had its Sentiment Stockscore cross above 60 and price is breaking through short term resistance at $2.50. We may see the stock stall at the top of the gap of $3 but the longer term outlook is decent with reasonable upside to $5. Support now at $2.
Back To Top
References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
Back To Top
|
