Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Market Timing Windows

The stock market enters into the buy/sell window when it has retraced 60% of the original move. In other words, if the prevailing trend of the stock market were down, the stock market would have to trade higher (against the trend) to enter the sell window.

Calculating the buy/sell window is a very simple and quick process – all you need is a calculator. Even though most, if not all technical charting software programs that can do this automatically, it is a good idea to know the process.

For a sell window, you take the high price of the current stock market swing and subtract the low price of the current of the stock market swing. The low is the price made just before the stock market began to trade higher against the prevailing downtrend. For example, if the high price is 7500 and the low price is 6500, the difference is 1000. Now calculate 60% of 1000. This equals 600.

Add the 600 points to the low price of 6500 to get 7100. This means that the stock market will need to trade up to 7100 before entering into the ideal selling window. Once the stock market has traded above 7100, a sell signal can occur anywhere between the beginning of the sell window and the recent high (in this case 7500). The following is a quick review of a sell window in a downtrend:

1-Once the stock market establishes an intermediate low and starts to trade higher from this low, subtract the high (the high price at the beginning of the prevailing trend prior to this intermediate low) from the low. This will equal the total price range of the original move, i.e.: 7500 – 6500 = 1000

2-Now multiply the range by 60%, i.e.:
1000 x 60% = 600

3-Add this total to the low.
6500 + 600 = 7100

4-This price (7100) is the beginning of the sell window.
To calculate a buy window, follow the same process except subtract the 60% total from the high price. When the stock market is in the sell window, in conjunction with a TR pattern, a major turn in the stock market can occur.

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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.