Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Market Timing Confirmation

Projected swing trade dates are very specific and can be very precise in determining major turning points in the futures market. So far I have only used the swing trade dates to identify the most probable end of the move. Therefore, it would stand to reason that a Reversal date might also identify the beginning of a price move in the opposite direction. Usually, it is not advisable to for a trader to try to buy or sell before the trend change has been confirmed. It has always been tempting to try to pick the top or bottom of a major futures market timing move, but the risks are very high.

Once again, the swing trade date Indicator provides a “Market timing Tell” that can go a long way towards confirming a major high or low and provide a confirming price pattern at the major turning point. For this to happen, the specific criteria for the three major components of the swing trade date Indicator must come together. The key to the pattern is the “trail day”; the trail day is the date or price bar immediately following the swing trade date and it can be a very powerful directional indicator. The direction in which the futures market closes on the trail day is usually the direction of the next price move. In other words, if the trail day closes higher than the opening price, the futures market timing will usually continue to trade higher over the next few days. If the futures market closes lower than the opening price, the futures market timing will tend to trade lower. This falls right in line with the overall concept of the Time, Price and Pattern. The swing trade date suggests the Time is correct for a reaction in the futures market timing and the new high or low puts the futures market timing at the right Price level. The only thing left is the Pattern confirmation. Like everything else, the trail day must meet specific criteria for it to be a valid trail day confirming pattern. The rules are as follows for a major high.

1-The trail day must trade above the high of the reversal day and close lower than the opening price.

2-If the first criterion is met, a sell stop is placed underneath the low of the trail day. If the sell stop is filled the following day, a protective stop should be placed above the high of the trail day. From this point on, the individual trader can determine the degree of risk management they prefer.

3-If the trail day is an inside day (the entire trading range is inside the previous day’s trading range), the following day must trade lower and not trade above the high of the trail day. The protective stop is treated the same.

4-All rules are reversed for a trail signal at a major low.

The swing trade date and confirming trail day combination is a leading indicator that uses the futures market timing action to identify a major turning point and trend shift. This allows me to enter the futures market at the beginning of a new trend and take advantage of the initial price thrust. Another advantage offered by a leading indicator is a specific stop placement. If the swing trade date has just confirmed a major high the protective stop is placed above the trail day high. A true reversal will not re-test a new high; therefore it will remain below the previous high. If the signal is going to fail, it will do so very quickly.

Let’s look at the trail day signals that occurred after the swing trade dates in some of the futures markets we have already reviewed.

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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.

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