Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Swing Trading Silver

Figure # 2.22 - July Silver peaked at 8.235 on April 6. This high proved to be the end of a strong three-month rally and the point where Silver quickly rolled over and began to collapse. Six days after Silver posted the 8.235 high, the futures market timing hit a low of 7.020. However, the following three sessions posted three consecutive higher closes and confirmed a pivot low on April 14. This low also marked the beginning of the 1st reaction in the new downward trend and possibly the completion of a major SWING TRADING STRATEGY TR-2 pattern. Since the corrective rally had not retraced at least 60% of the downward price swing from (C) to (B), I considered this a SWING TRADING STRATEGY TR-2 pattern which means the sell stop was placed underneath the pivot low that marked the beginning of the Reaction swing strategy marked (C) on the chart.

After the Silver fell more than a $1.20 in six days, most traders expected it to resume the upward trend, or were afraid to enter a short position right after such a large price move. However, the corrective rally failed on April 19, when the futures market timing tested the gap, but was unable to push any further. The following day began with a gap lower followed by a lower close. This price action confirmed the pivot high and marked the end of the Reaction swing strategy. A break below the (C) pivot low was all that was needed to confirm the major SWING TRADING STRATEGY TR-2 pattern and trigger a major sell signal.

One day later, Silver traded below the pivot low at (C), when the Breakout bar gapped lower and began trading at 6.50, followed with a close at 6.18. The price action had confirmed the bearish SWING TRADING STRATEGY TR-2 pattern as well as triggered the sell signal. Now that the sell signal has been triggered and short position entered, timing of the exit and stop placement became extremely important, especially with the volatility Silver had been experiencing.

The reverse count began with the first price bar to the left of the pivot low at (C), back to the pivot high at (B) and continued on to the pivot high at (A)...the count equaled 16. With this information in hand I moved to the forward count and began on the first price bar to the right of the pivot high at (D) and counted forward 16 days. I came up with future swing trade date of May 11.

Silver reached a low of 6.04 before it began a three-day bounce that ended on the April 24th where the futures market timing turned lower and resumed the downward trend. However, the most significant date was May 11. As you can see in Figure # 2.22, Silver chopped back and forth for several days before it bottomed at 5.52 on the May 11th swing trade date…98-cents below the trigger price of 6.50! Even after a very volatile beginning the SWING TRADING STRATEGY TR-2 pattern and Reaction swing strategy were able to pinpoint the exact low price bar in the July Silver.

silver chart21
Figure # 2.22 – July 2004 Silver

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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.