Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Trading Coffee Trend Continuation

Figure # 3.2 - The December Coffee had reached a low of 73.75 on July 8 (E), the swing trade date projected from the SWING TRADING STRATEGY TR-1 pattern, (see Figure # 2.14) and began to form another bearish Reaction swing strategy where the futures market timing began a corrective rally after the July 8th swing trade date. Eight days later, Coffee crossed above the 20-day SMA and finally closed at 76.65 on July 20 (F). The retracement had confirmed a pivot low on July 8 (E) and set up another selling opportunity and a possible Swing Trading Strategy TC-pattern. The high of the preceding pivot was 76.80 on June 30. The rebound from 73.75 (E) to the high of 76.65 was more than 60% of the previous price swing and above the 20-day SMA; therefore the sell stop is placed just below the Signal bar low (F). In this case the Signal bar occurred on July 20 and the low was 75.25.

coffe chart25
Figure # 3.2 – December 2004 Coffee

The futures market timing reversed on the following day, crossed below the 20-day SMA and traded through the sell stop to trigger the signal for a short position. After the signal was confirmed the procedure for the Swing Trading Strategy TC pattern is identical to the SWING TRADING STRATEGY TR patterns. In other words, it is time to do a reverse/forward count and project the future swing trade date and the end of the cycle. The reverse count will start on the first price bar to the left of the beginning of the Reaction swing strategy marked (E) and proceed back to the low of the previous Reaction swing strategy. The previous low was 76.90 on June 25, so the reverse count equaled 9 days. Counting forward 9 days from the end of the Reaction swing strategy –marked (F) – projected a future swing trade date of August 2 marked as (G). After the short position was triggered the Coffee continued the downward trend over the next 9 days and closed at 69.80 on August 2 (G). The short position was never behind and could have been closed for a very nice gain near the major low of the long-term trend. Using the Action/Reaction methods and the signals from the SWING TRADING STRATEGY TR and Swing Trading Strategy TC patterns a trader could have captured most of the overall downward trend and exited near the major low.

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**THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT.NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES.