Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Reaction Dow Swing Trade

Figure # 6.4 - The high of the Reaction swing was 10,453 on October 19 (C) and the low of the swing pattern fell on October 21 (D). Using the 60% entry rule, the buy signal was triggered on October 24, but the Breakout bar did not occur until six days later. This is not a typical situation as the Dow Jones continued to trade in a choppy sideways trend for a week after the buy signal was confirmed, but it also stayed above the previous pivot low and the protective stop so the trade was still active when the futures market timing finally broke above the 10,453 pivot high (C) on October 31. However, at the end of the day the Dow Jones closed at 10,410, below the 10,453 pivot high.

dow trade1
Figure # 6.3 – December 2004 Hog

The next two price bars were critical for this trade to remain active and not end as a swing pattern failure.

Day one – October 31 - Breakout Bar – After five days of sideways trading the Dow Jones broke above the 10,453 pivot high and reached as far as 10,500 before fading into the close. At the end of the day, the Dow Jones closed at 10,410, below the high pivot price, but remained above the low pivot and protective stop.
Day two – The futures market finished as an inside day, but managed to close 21 points higher than day one.
Day three – The Dow Jones opened below the low of day two—but remained above the Breakout bar low and closed well above the high of day two.

The trend is intact and the futures market timing continued higher with only minor pullback before it reached the Time and Price objective.

dow trade2
Figure # 6.4 – December 2005 Dow Jones

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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.