• Free Book
  • Store
    • Books
    • Free First Chapters
    • Free Newsletters
  • Recent Articles

TradingMarkets.com

Quantified Stock Market Trading Strategies & Systems

  • Home
  • New Trading Research
  • Education
    • Articles
      • Connors Research
      • ETFs
      • Options
      • Stocks
      • Volatility
    • Trading Lessons
    • Connors Research
    • Glossary
    • Interview Archive
    • Videos
  • Python
  • Quantamentals
    • Quantamentals: The Next Great Forefront of Trading and Investing
    • Quantamentals Resources
  • Courses
  • Store
    • New Book! The Alpha Formula
    • “Buy The Fear, Sell The Greed” – Best Seller!
    • Swing Trading College 2019
    • Trading Books and Guidebooks
    • Street Smarts
    • Online Trading Courses
    • Private Mentoring with Larry Connors
    • Customized Trading Research
    • Amibroker Strategy Add On Modules
You are here: Home / ConnorsRSI / How to Successfully Swing Trade – Part 1

How to Successfully Swing Trade – Part 1

July 10, 2013 by Joshua Glasgall

One of the fundamental ideas we base our research around is the relatively static nature of the ‘human factor’, or more simply that human behavior rarely changes. What changes are the markets, and we are buying and selling at extreme moments of either fear (we’re buying) or greed (we’re selling).

There are two extremes on the spectrum of trading that many people choose to follow: buying and holding and day trading. While buying and holding may be preferential for long-term investors who are inactive in the market on a daily or even regular basis, in reality it ties up your money and can trap you in a bad situation if the market starts to significantly decline. On the other end is day trading, and for the average trader outside of the professional trading desks this can an incredibly competitive arena. Without those extensive resources at your disposal it makes it all the more harder to secure consistent gains if you’re managing your own money

What we focus on, and what we believe is the perfect middle ground, is swing trading. Between inactivity and constant activity, swing trading enables you to allocate your money into several trades a week to take advantage of current opportunities in the market without ensnaring all of your capital and without chaining you to your computer.

Learn more about swing trading by clicking here. Discover the strategies and tools necessary to quantitatively swing trade like professional money managers.

Beyond the advantages of flexibility and maneuverability, swing trading stands out because it allows you to trade the market regardless of whether it’s up, down, or even sideways.

For the first part of this series, we’ll start with one of the core rules surrounding our swing trading philosophy: buying above the 200-day simple moving average. The most common of moving averages, the simple MA is the arithmetic mean of the most recent series of data – in this case the last 200 closing prices.

The 200-day moving average is a quantified long-term indicator of trending markets. In this long-term view markets that are currently below their 200-day MA are more often than not in a long-term downtrend, while those above their 200-day MA are usually in a long-term uptrend. Some people think they’re taking advantage of a good opportunity by buying a stock that’s plummeted and continues to drop below its 200-day MA on the hopes of a reversion. Historically, once a stock crosses below its 200-day moving average the edges all but disappear. We’d rather be buying stocks in a long-term uptrend, wouldn’t you?

As with stocks, our research has shown through historical back-testing that greater edges exist selling or shorting ETFs below their 200-day MA, and buying above it. As these securities approach the 200-day MA in trading, the only thing that increases is the volatility of the returns, while the average gain per trade or percentage of winning trades sees little upside.

We strive to statistically-quantify any edge that may exist out there as we investigate behavior patterns out in the markets. The 200-day simple moving average is a steady indicator of whether a trading vehicle or market is in a bear market or a bull market. From the largest banks to hedge funds and investment advisors, the 200-day MA is one of the most regularly used technical indicators available. This massive backing from all these influential areas of the markets, portfolio managers, analysts – the list goes on – is at root an established behavioral pattern. And because of this, we can take advantage of that edge as a swing trader.

Buying stocks above their 200-day MA and selling below is a key rule to ground your swing trading foundation. Trading with this indicator as a starting point can help you maximize your gains and, just as importantly, retain your capital. In the next installment of this series we’ll start to dive into the strategies you need to know to successfully swing trade. We’ll begin by discussing and looking at the specifics surrounding how you can increase your swing trading gains by buying on pullbacks.

Click here to read How to Successfully Swing Trade – Part 2: Buying on Pullbacks

Filed Under: ConnorsRSI, Recent Tagged With: 200-day MA, Featured, Swing Trading, Swing trading strategy, Trading Lessons

About Joshua Glasgall

Joshua Glasgall, Editor in Chief of The Connors Group. Before joining The Connors Group in 2012, Joshua worked in online advertising, market research, and financial journalism.

Buy The Fear, Sell The Greed

Buy The Fear, Sell The Greed

Swing Trading College

New Book From Larry Connors and Chris Cain, CMT – "The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk"

We’re excited to announce the release of a new investment book written by Larry Connors and Chris Cain, CMT. The book, “The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk “ combines… Hedge fund legend Ray Dalio’s brilliant insight into combining uncorrelated strategies… With new, minimally correlated, quantified, systematic strategies to trade… [Read More]

Buy The Alpha Formula Now

Connors Research Traders Journal (Volume 57): 7 Real-World Reasons Why Short Strategies Should Be Included In Your Portfolio

In our new book, The Alpha Formula – High Powered Strategies to Beat the Market with Less Risk, we show the benefits of including short-strategies in your portfolio. As a reminder, building portfolios should be based on First Principles – otherwise known as truths. These truths are: Markets Go Up Market Go Down Markets Go… [Read More]

Company Info

The Connors Group, Inc.
185 Hudson St., Suite 2500
Jersey City, NJ 07311
www.cg3.com

About Us

About
Careers
Contact Us
Link To Us

Company Resources

Help
Privacy Policy
Return Policy
Terms & Conditions

Properties

TradingMarkets
Connors Research

Connect with TradingMarkets

Contact

info@cg3.com
973-494-7311 ext. 628

Free Book

Short Term Trading Strategies That Work

© Copyright 2020 The Connors Group, Inc.

Copyright © 2023 · News Pro Theme on Genesis Framework · WordPress · Log in