Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Market Timing

Athough using the Reaction swing to project Market Timing can be a very powerful trading tool, it is still a one-dimensional trading approach. Through the years of working with many different traders, I have found most are focused on Price alone. They enter when the futures market timing breaks through a predetermined price level and then they look for an exit based on a price. I think this puts them at a disadvantage because—as I have shown in the previous chapter—Time can run out before the futures market meets its price projections. Without this foresight, a trader can give up a lot of the profit potential before they realize the move is over. Remember, it’s not about entering at the very beginning and exiting at the very top—although that is good to do once in while—it’s really about making consistent gains with as little stress and risk as possible. You aren’t going to get rich on one trade; success is built over the long-term. I truly believe that by combining Time and Price together, any trader can improve their entry and exit of trade positions and help improve their bottom line.

Both the TR pattern and Swing Trading Strategy TC pattern can not only help determine how long a futures market timing should continue in the current trend, but also how much to expect out of the move or where the futures market timing will likely lose its momentum before reversing or moving into a sideways pattern. The more you know about a trade signal the more confident you will be about stepping into the futures market. The more confidence you have in your trading methodology the more likely you are to trade the signal properly and not exit too early or too late.

Action/Reaction is not an exact science and falls more in line with Fractal laws. Which means I am not looking for perfection in the trading signals, but I am looking for consistent performance. I have never forgotten a statement made by an experienced and successful trader. He said to me, “Amateurs look for perfection, but professionals look for performance, that is what separates the two.” Fractal perfection allows for some variance in the projections of Time and Price. In other words, there are times when Price will accelerate and exceed Time. This means the Price projections are reached before the Time projections are met. On the other hand, there will also be trade signals where Time runs out before the Price projections are met. Either way, you will know in advance when it is time to take action.

In the early 1960s, one of Roger Babson’s close friends and students, Dr. Alan Andrews, began to provide a study course based on the theory of the “Law of Action/Reaction.” One of the techniques he taught was called the “Median Line Study.” This technique employed a set of chart lines that were drawn from a significant low or high through the center of the following Reaction swing. Lines were also drawn parallel to the center line, from the high and low of the Reaction swing. When completed, these three lines resembled a pitchfork. Eventually, it became known as the “Andrews Pitchfork” and can be found on many charting programs today.

I have found the combination of Roger Babson’s Action/Reaction theory and Dr. Alan Andrews Pitchfork is a powerful indicator of future price action. It seems that I have combined the two in a rather unusual way; yet it has proved to be an uncanny combination for price projection. I call these price projection lines Action/Reaction lines.

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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.