Yuri Shramenko - Trade Execution
Contents
1. li i 55 0 54 5 54 0 53 5 53 0 52 5 52 0 51 5 51 0 50 5 50 0 49 5 49 0 48 5 48 0 In a DownSwing the Blue Line i is expected to contain rallys 46 5 46 0 l i 45 5 In an UpSwing the Red line 45 0 is expected to contain reactions HE 43 5 43 0 42 5 42 0 41 5 41 0 40 5 40 0 Lo e pe poon o p po w moa n TR e e E ne A a pe May June July August September These HiLo bands are the parents of the Swing Line described in Technique 2 Below you can see that the magenta line switches from being the High or Low moving average occasionally When price closes above the High band then the Swing Line becomes the Low band If price closes below the Low band then the Swing Line becomes the High band However the HiLo bands give you more then the more esoteric and popular Swing Line like an initial stop loss and a sophisticated trailing stop technique Microsoft Daily ae 58 5 58 0 Swing Line Revealed 575 57 0 56 5 56 0 55 5 55 0 54 5 54 0 53 5 53 0 52 5 l 520 51 5 51 0 50 5 50 0 49 5 49 0 Tes when price closes above Hi MovAvg He swing line switches to Low MovAvg 46 0 45 5 45 0 when price closes below Low MovAvg 44 5 swing line switches to High MovAvg ie 43 0 42 5 42 0 41 5 41 0 40 5 40 0 5 a e E G E Bp m i u ui eE E E BIE nr m EBE May June July August September 4 Displaced Moving Averages This is taken from a popular swing trading system sold b2. Drawing Tool MT has this in the Larry Expert to draw price projections by connecting the swing from A to B The tool will draw the standard Fib Expansion lines as you see When price forms a pivot inside the bands of lines you exit For entering the market assume you have a time zone where the red circle is You d look left to find the top of the prior swing A and connect it to the first correction B If a pivot forms inside the expansion lines then you have a very good confirmation that price will correct or reverse Microsoft Daily A Fibonacci Price Projection 100 0 138 2 150 0 161 8 April May Below is the same technique a few months later in Microsoft s chart Its surprising how often this occurs 0 A 71 ing ho Microsoft Daily Fibonacci Price Projection 100 0 y 0 WA 138 2 58 150 0 Vs 57 161 8 56 8 The Lower Time Frame There are 2 charts below the first is a daily chart the one beneath a 30 minute intraday chart of the same time period This technique is about Assume we have a turning point time zone starting at point A below The short term trend is clearly up before A so we re looking to go short during or just after A A 29 0 28 5 tL f hui h p hy la Microsoft Daily 26 5 Forecast with Daily Manage Trade on Lower TimeF rame 26 0 25 5 25 0 24 5 In the below chart point A is centered on the same day as the daily chart above In this technique yo
3. You should also know that a popular variation of this technique is to using a short sell as an example to enter the market when price falls below the low of the past 3 or 4 days I used that technique for awhile in the early 90 s but gave it up as too often the entry was far from the beginning of the swing I wanted to trade I developed this 30 minute chart technique precisely to overcome that drawback 9 Candlestick Patterns These can be divided into continuation and trend change patterns There effective use however requires more skill then any of the above techniques AND they do not define an entry price for the next trading day nor do they help you in determining a stop loss or trailing stop Furthermore a common mistake among candlestick users is to mis apply them to markets that are not showing any trend Still they are effective for price confirmation that a swing is starting if the market has been exhibiting some trend preceding the formation of the candle pattern For good Candlestick references see the books by Steve Nison or Gary Wagner If you re a Metastock user it ships with an Expert that automatically identifies candle patterns on your price chart The Metastock user manual also identifies graphically the major candle patterns Next Yuri Shramenko www TechEdgeCycles com yurips earthlink net Tips for Trade Management Trade Management includes but isn t limited to the use of mechanical entry and exit techniques describ
4. greatly in avoiding those trades where the short term trend never reverses Don t let one bad trade wipe out the profits of several good trades 2 Even very good forecasts have difficulty telling you when to exit the trade and how to set the initial stop loss taking and of course advise the initial stop loss This point can help even experienced swing traders as most will tell you that in the years it takes to develop good trading techniques knowing when to take a profit is usually the weak link in their trading process 3 Unknown Events Lets say you have a turning point technique that you believe is 90 accurate Unless you believe you know every event that influences price you don t know if there are other powerful cycles or events at work during the next due date this turning point occurs that will alter the timing or effect of your 90 accurate event 4 Even accurate short term forecasts have a statistical variance of one or two days before and after the forecasted peak or trough Over the years I ve been trading with forecasts since 1989 I ve had hundreds of trades where the turning point is exact to the predicted day but I can show you over a thousand swing trades where the actual turning point was a day early or late It is inevitable that you will encounter vendors who claim to never be off by even one day Most of these vendors don t trade they just research and market Or maybe you re an enthusiastic researcher yourself exp
5. 5 45 0 44 5 44 0 43 5 43 0 42 5 42 0 41 5 41 0 40 5 40 5 40 0 May July Auqust September The below chart shows the 3x3 line and also a 7x5 line 7 period moving average moved forward 5 periods I recommend using just the 3x3 in forecast trading I used it myself for years in SP 500 Futures trading on 30 min charts Once you have a high or low pivot confirmed enter the market when price closes above the 3x3 line When and if the 3x3 line crosses the 7x5 line begin using the 7x5 as a trailing stop The goal is obvious to give the short term trend a little wiggle room I used the 3x3 by itself but other traders prefer the two together as occasionally the 7x5 will keep you in a swing that corrects a little then strongly resumes Note you know tomorrows 3x3 value after the close of today s trading Just draw a regular 3 period moving average and note the value of that average two days ago that s tomorrows 3x3 value the value you can use in stop orders For going long add 3 ticks to that value for going short subtract 3 ticks Microsoft Daily se 59 B Displaced Moving Averages 58 used as Swing Lines 57 C lj l y 48 N Blue 7 simple displaced 5 i y 46 Orange 3 simple displaced 3 j 43 41 40 EE el Ur PCY ee Ane Ce ao AC re r A Sr ec RE CTR i May July August September Displaced moving averages are a premium technique and I highly recommend the 3x3 line The occasional whipsaws are small compared
6. F i May June July August September October Trendlines won t help you with a stop loss or profit objective If the trade goes your way you may be able to draw a new trendline that acts as a trailing stop My experience is that for swing trading there are far better alternatives to trendlines which oftentimes get you in and out later then old fashioned lagging moving averages In fact I had to do a bit of searching to find a chart on which I could draw a series of trendlines These days it seems markets trade in a range for extended periods and then rapidly extend to a new level In that scenario you don t get a series of geometrically rising lows or highs upon which to draw trendlines So I don t recommend this technique but am showing it as a benchmark for what s common 2 Swing Line This technique has been an integral part of several swing trading systems for decades some of these systems sold for over a 1K These systems usually use chart pattern identification followed by trading the swing line In the past decade this swing line has become married to strength of trend indicators like ADX A trader may run a market scan on numerous tradeables and apply the swing line technique to those exhibiting the most trend But we re using predictive forecasts here Just by looking at the below chart you can see it contains swings very well gets you in and out early and the small whipsaws are just that small And this is just looking at the Swing L
7. For novice traders I recommend technique 5 the Open Close moving averages This simple technique has a sound underlying premise that is true in all timeframes a market will tip its hand as to its next trend by the relationship of the close to the open With this technique you simply look for one line crossing another don t let the simplicity fool you this is an especially good technique if you swing trade using 30 minute charts For most traders I recommend technique 3 the HiLo Bands They re perfect for traders who are now ready to add or increase discipline to their trading approach They provide an initial stop loss a trailing stop and a technique to lock in more profit if the market extends rapidly And any charting software can draw it as its comprised of two simple moving averages However in those instances when price moves quickly the HiLo Bands will be too far from price to be effective In this case I have two recommendations 1 drop to a lower time frame and apply the HiLo Bands there If you re trading off daily charts use a 30 minute chart 2 if this isn t practical then use technique 6 the Short Term breakout I use this method the most probably reflecting the fact that these days most market swings are very quick rather then slow trends Experienced traders who are adept in a discipline shouldn t have any problem selecting their own technique None of the techniques presented here are poor they all use price to confirm
8. at your analysis can be correct but before your anticipated swing starts markets often retest prior pivots I can confidently state that there are many successful ways to trade the markets but without understanding and using these entry methods its doubtful you ll be able to trade for a living Next Yuri Shramenko www TechEdgeCycles com yurips earthlink net Entry and Exit Examples This sections lists entry techniques that I ve found to have merit over the years in almost all market situations Starting with the second technique they get you in and out of anticipated market swings early To review what we re doing here you have a forecast of either future turning points or you have a forecast of predicted price trends these also give you a date or dates in which markets will reverse You are primarily interested in high probability short term swing trading Your forecast covers the short term trends the high probability part of the equation comes from the worth of your forecast AND your ability to manage the trade These techniques help you manage your trades early entry into a new market swing and capturing most of the profit in that swing Only one of them 3 provides an immediate stop loss As we re trading forecasts using a time zone if you re long subtract 3 ticks from the prior low pivot if you re short then add 3 ticks to the high of the prior pivot I hope you review all of them At the end of this section I ll make a recommendat
9. awed the swing trader often profits Perhaps you ve heard the phrase 70 of the time markets trade sideways Well a good portion of that 70 sideways motion is wide enough for tradable swings but its not wide enough for the trend follower who by definition has to wait for a trend to develop A growing number of traders are finding short term swing trading to be an ideal time frame and the techniques presented here are appropriate for trend or range markets y swing trading I m referring to trades that usually last from 2 to 15 days with the goal being to trade the smallest anticipated trends visible on a daily chart By forecast I m referring over time With either forecast the trader is trying to enter the trade as soon as reasonably possible that being in the beginning of a market swing While some swing traders only trade anticipated short term trends i e swings in the direction of the intermediate term trend most swing traders do not And this is one of the considerations we ll cover here Examples of forecasts include e Fibonacci Time Projections several techniques where prior pivots are used to calculate future turning points e Cycles Fourier spectral manual fixed length these usually provide expected direction and amplitude of intermediate and long term trends with future turning points visually displayed e Seasonals times of the calendar year that show averaged market swings over many years to find
10. change till a day or two after the time zone price moving in the direction of the new trend that is a pivot may form within the Time Zone but it may not be visible as a pivot till the next couple of price bars are in and that may be outside the Time Zone For reference in the above image x 1 is a pivot bar If a pivot forms within the Time Zone you want may want to add two price bars to the Time Zone for when you are apply the Swing Lines presented in the next section Cycles Traders There are two points that can help trading with cycle forecasts 1 About 20 or more of cycles invert This means that instead of a low in prices you have a high peak or vice versa This shouldn t throw you the timing of a trend change is often accurate though so use the cycle forecast in this instance a trend change date 2 If a market is in an intermediate or long term trend and a cycle contrary to trend direction doesn t happen then when the next cycle in the direction of the trend is forecast it often is a powerful move The Trend Change As previously mentioned we expect trend changes in a timezone TZ but it may not be readily apparent till we are past the TZ That may sound confusing and this example should help Assume the red circled price bar is a trend change TC day determined by any method you may be using To create the TZ you add and subtract one day from the TC day That s represented by the red rectangle circle trendi chang
11. d Its called the Choppiness indicator it comes standard with the free eSignal Advanced Charting software Below the chart I show the MetaStock formula As the name implies it measures a form of volatility the smoothness or lack thereof in a trend This one is more sensitive then the above Oscillator Divergence You d use it when you want to take partial profits and leave a few contracts or shares or lots on lifting the entire position when Oscillator Divergence is confirmed Choppiness Indicator During a healthy trend aOR Choppiness is falling Some traders use a rule as a correction starts if Choppiness rises above 55 Choppiness is increasing they take profits then i ih i Ml ih o i i used for longer term trading i f M Choppiness Indicator Formula Log Sum ATR 1 14 HHV If H gt Ref 0 1 H Ref 0 1 14 LLV f L lt Ref O 1 L Ref O 1 14 Log 10 Log 14 Log 10 100 Alternately sometimes markets just go in narrow trading ranges When both the ADX 8 and ADX 16 are falling shown below it is an indication that there is neither a short or intermediate term trend in place and there is simply no reason to be in a trade at this time This screen I recommend for when you re in a longer term trade or you re in a swing trade that is extending nicely but you don t have access to the Choppiness indicator shown above Two ADX Plots Red 8 periods Blue 16 Periods 1 Whe
12. doubled in value in just over half a year Journalists wrote this bull market was a once in a lifetime event The next chart shows once in lifetime occurring 4 years later in the summer of 2003 again a roaring bull market where the Nasdaq gained 50 of its value in a few months These charts show forecasted turning point times suitable for swing trading they paint as gray vertical bars I extended a few with black lines so you can see how they correlate to the price chart At 2 4 8 you d be swing trading Long At 1 6 7 you d be swing trading short At 3 you d never be filled using any of the techniques and at 5 and 9 the results are ambiguous Nasdaq Index 3500 July 1999 March 2000 f T t 3000 2500 n CORIS Ions ISEN EA TEENA SEE Ta Ta aaa 1 May 2003 December 2003 i Yt 4 i i trading Short 1100 The reason I m showing these specific charts is they show one of my personal forecasting tools and I have to deal with this issue of trading with or against a trend all the time Its a personal choice but I do it safely as I employ entry exit techniques as shown in this manual It appears to me that swing trading both long and short using forecasted turning points is a very promising and lucrative venture Each trader can review charts and make up their own minds both charts from AIR s Market Trader Next Yuri Shramenko www TechEdgeCycles com yurips earthlink net Recommended Entry Exit Strategy
13. e day box time zqne Pl We look for one of two events in a TZ 1 a reversal if the prior trend was up then this bars low will be below the last few lows and the close will be in the lower half of the price bar If the prior trend was up just reverse this scenario 2 a pivot bar formed in the TZ thats the example above Note that the pivot bar is not confirmed till the bar marked by the x is complete and that x bar is outside the TZ in this example There are three bars in the TZ and the pivot bar can be any of the three This example shows the three bars in the TZ had higher closes and the TZ ended with the highest high in the swing there is nothing in the TZ that looks like a trend change Its confirmed as a pivot outside the TZ This implies that the TZ is a reference and you only occasionally will enter a trade within the TZ most of the time its after a pivot or reversal has been confirmed by price bars immediately after the TZ The price bars immediately after the TZ are used to determine an Inactivity Stop Below the red circled price bar is the TC day The X bar begins to confirm the pivot bar in this case the circled bar is the pivot bar Since the prior swing was down you re looking to go long You create a trade setup where you place a buy stop above the high of the bar labeled X if price gets there you feel you have confirmation of a trend reversal inactivity Inactivity Inactivity is relevant in two wa
14. e is really due around midnight should the anticipated high or low belong to the prior or next trading day to be considered exact to the day Consider again your turning point event falls on a weekend Will it manifest Friday or Monday Consider again if a cycle low is due Wednesday should Wednesday have the lowest Low of any day preceding it What if Tuesday s Low was lower then Wednesday s but Wednesday s Close was lower then Tuesday s Close Which day was the cycle Low The point Yuri Shramenko www TechEdgeCycles com yurips earthlink net by Yuri Shramenko What we re trying to do here is trade market forecasts specifically the times when the forecast is telling us the trend may change Because we know forecasts aren t always right and even when they are right they may be skewed by a day or two we are looking for a way to avoid trades that will be losers and we still want to get in very early in the start of a new swing Furthermore we experience the same issues when exiting a trade When and where should we exit a losing trade or a trade not going anywhere And if profitable is your use of forecasts exact enough to capture the bulk of a price swing consistently An experienced swing trader s ultimate goal is to make more profit much more profit then the trader who uses trend following methods to trade the intermediate term trend This is because regardless of whether a market is in trend mode or a sideways range mode
15. ecting to crack the code of never miss turning point days These techniques will let you trade your current 5 Personally I don t believe a variance of a day before and after is even a variance a three trading day time zone is the best realistic expectation you should have for forecasted turning points Consider the market is open only 25 of a day if a short term cycle is really due around midnight should the anticipated high or low belong to the prior or next trading day to be considered exact to the day Consider again your turning point event falls on a weekend Will it manifest Friday or Monday Consider again if a cycle low is due Wednesday should Wednesday have the lowest Low of any day preceding it What if Tuesday s Low was lower then Wednesday s but Wednesday s Close was lower then Tuesday s Close Which day was the cycle Low The point I m trying to make is that defining exact to the day is often vague And you shouldn t let this distinction mar Next Yuri Shramenko www TechEdgeCycles com yurips earthlink net The Basics In this section we ll review four items we need to understand for effective trade execution We ll review Time Zones TZ Trend Change confirmation Inactivity Entry Methods The first three points lead you into the fourth point Entry Styles I firmly believe that without understanding this you will not be successful in trading any method be it discretionary rule based or system
16. ed earlier In this section we look at ways of enhancing our understanding of market conditions information you can use as a trade filter A filter can be used to void a potential trade or exit an existing trade if market conditions are inappropriate for your trading methods When trading with forecasts I recommend never trading on the basis of just one forecast regardless of how well its tested out Do what Commodity Pools and Institutional traders do use the Vote by Committee approach where you require two or more forecasts to agree on future price move before you consider trading it In the case of Fund Managers they utilize multiple CTA s Certified Trading Advisors for trading recommendations They only make a trade when two or more advisors agree You can do the same with newsletters or trading advisories for retail traders me and you For AIR Software Market Trader users I advise using similar criteria in different Experts You should get similar forecasted swings from the different Experts using similar criteria Since each Expert uses different weighting algorithms when two agree on a swing your probability of success increases dramatically Only have one Expert Use it and SuperSearch s Efficiency Tester together See what aspects are coming due the following week Save the Efficiency Test for each one If most of them point to swing for the same period your Expert is forecasting a swing same deal the probability of success increas
17. er when Price at Sup Res within a TimeZone timezone irk Pull Back trade when price breaks out then retraces to a sup res level usually 50 or 62 goal is to achieve a high winning percentage and have a small stop drawback is that at times price does not retrace used by professional and full time traders Plus high percentage small stop loss potential to capture most of swing Minus requires the most skill and discipline to execute not all price swings pull back Below is another more conservative example of a pullback Here are the first wave down corrects you would place a sell stop below the low of the first pivot The idea here is to avoid a loss if your forecasted trend change never happens and the initial trend resumes In effect you re requiring a double confirmation that the trend has changed by the time you get filled in this entry style the swing has begun its second move down This style is most appropriate when you have reason to believe the intermediate term trend has reversed and you are anticipating a relatively large swing down Now that I ve presented these styles its important that you understand that you use two of them in your trading not just one Select either the Price Confirmation or Early Entry but its critical that you also use either PullBack1 or PullBack 2 The difference to your bottom line will be staggering In effect you are chasing a trade because the reality of market movement is th
18. es dramatically The point is don t trade using just one forecast Random Market Noise can emulate the presence of cycles and you don t want to take a chance that the sewing one forecast is calling for was the result of mis training on random market noise For those times when you are trading a forecast longer then a few days and you are holding a profit but are not sure where to take profits it is helpful to consider using not just a tool but a trading system just for managing an existing position Below are recommended components meant to be used AFTER you enter a trade Primarily one is first looking for oscillator divergence If you are short this is a condition where price makes a lower low while the oscillator makes higher highs if you are long price makes higher highs but the oscillator does not See below for three examples in one chart I d like to mention that this one function Oscillator Divergence has an incredible track record going of picking trend changes a correction is also a trend change You can use price data from any decade and see it picking trend changes Please consider using it 1 Price Oscillator 20 period Moving Avg minus 5 period Moving Avg used for Momentum Divergence take profits 2 Additionally you can use the 7x4 or 7x5 DMA for profit taking AFTER divergence is spotted HIN Below I d like to show another little known but very powerful indicator used for gauging the health of a tren
19. ic Time Zones After you ve received or created your forecast the next step is to create a time zone around it Its often the case that the actual trend change is a little early or late by trend change I m not advising that you always trade against the trend it also implies the end of a correction and the next larger trend resuming Swing trading requires a three day time zone Assume X is the day of a projected trend change Subtract one day and 4 add one day to X This is your time zone for anticipating the start of a trend change 3 Trading Day Time fone X is day of projected Turning Point e Swing Traders short term trades of 2 15 price bars should use a 3 day time zone as shown above e Trend Traders should use a 5 price bar time zone where they subtract and add 2 days to the projected trend change date e Seasonal Traders and intermediate term traders trades lasting 20 60 price bars should use a 7 day time zone where they subtract and add 3 days to the projected trend change date Key Points e you are looking for signs of a trend change within the Time Zone most of the time its not apparent that the trend has changed till after the time zone has ended you will usually see a pivot within the timezone and a pivot requires one or two confirming price bars after it e you apply one of the entry techniques presented in the next section within the Time Zone e Important you may not have confirmation of a trend
20. ine alone with no other analysis This is an excellent technique for swing traders 59 5 Microsoft Daily 59 0 58 5 THE Swing Line gan l li 2 3 lil yh W FE 51 0 50 5 50 0 T at Indicator Editor al j ji z 46 0 Formula 45 5 Name Swing Linel V Display In QuickList i 0 44 0 Formula prd 8 43 5 HLd If CLOSE gt Ref Mov HIGH prd SIMPLE 1 43 0 If CLOSE lt Ref Movi LOW prd SIMPLE 1 1 a 425 HLy ValueWhen 1 HLd lt gt 0 HLd 42 0 If HLv 1 Mov HIGH prd SIMPLE 41 5 Hov LO prd SIMPLE 3 41 0 WAN 2 3333 770 Mov LOW prd SIMPLE amp amp oo E A ome ff os The MetaStock formula for this swing line is in the chart However this Swing Line is derived from the below High Low bands which actually are a bit better then the above popular Swing Line 3 Hi Lo Bands These are two simple moving averages the first an 8 period of the High the second an 8 period of the Low You never optimize the period of 8 Using going long as an example for this entire paragraph you enter when the market penetrates the High moving average and the Low moving average immediately becomes your stop loss It also becomes your trailing stop High moving average Do not let the simplicity of this approach fool you 59 5 Microsoft Daily 59 0 58 5 Blue 8 period simple moving average of High e Red 8 period simple moving average of Low 57 0
21. ion but its best if you can evaluate these techniques and see which matches your approach to trading best In the last section I ll describe a technique that s appropriate for active traders who have several years of experience To jump to one of the techniques click its name Trendlines Swing Line HiLo Bands Displaced Moving Averages Open Close Moving Averages Short Term Breakout Fibonacci Price Expansion The Lower Timeframe Candlestick Patterns 1 Trendlines a benchmark These have been used for decades in all sorts of trading If the trend is up draw them by connecting two or more lows reverse the procedure for a downswing If you have a time zone forecast around A then in the below example you would enter when the blue trendline is penetrated at small letter a If you have a time zone forecast around B then in the below example you would enter when the brown trendline is penetrated at small letter B The C example shows a variation The traditional use is to require a close below the trendline for a sell close above for a buy At c1 we have a penetration but not a close at c2 we have a close below the trendline Which do I recommend Neither 37 9 57 0 a i 56 5 Microsoft Daily 560 55 5 tiie i 55 0 Traditional Trendlines 54 5 54 0 53 5 i 195 TVA a 46 0 UE 43 5 43 0 42 5 42 0 41 5 41 0 40 5 e na jo j3 po j7 a 1 B n5 p2 j m2 hs j B p je 23 po
22. ique is used almost always at least 5 price bars outside of the end of the time zone What we re doing here is seeing that the timezone did effectively end the prior upswing Price either has not exceeded the high formed within the timezone or it has passed above it briefly and been quickly rejected the so called head fake This happens because prior to most trend reversals the market retests prior highs When that test fails the real swing down commences And the PullBack technique is meant to capture this event This technique requires the most focus and discipline to execute The idea expressed in the example is really a form of price confirmation that the test of prior highs has failed Another benefit of this technique is that when you don t have quick price extension in your favor after being filled its because the market has entered a narrow trading range and you can often exit with a wash I m hoping I was able to point out e using entry techniques with your forecast can keep you out of swing trades where the market doesn t correct or reverse e using these entry techniques lets price action confirm your forecast while still getting you in early e using entry and exit techniques as presented here will often yield the bulk of a swing e for many traders the most difficult part of a profitable trade is knowing when to take profits these techniques allow that decision to be mechanical removing emotions from your trading decision
23. its own trend early in a new price swing The idea is to find an entry technique that is close to the natural way you view the markets There is one thing I need to add when dealing with Swing Lines and I ll use a Long trade as an example Sometimes you ll see price penetrate below a swing line by a few ticks during the day and then the trend resumes that is the market does not close below the swing line yet you may have been stopped out In that case what I do is place a buy stop above the high of that day and leave it on for two days In other words if the market quickly rejects a downside penetration of your swing line that s bullish maybe very bullish as traders have just discovered something about that price level there is more buying then selling there It may be confirming your forecast However I just allow one swing line penetration and trade re entry a second penetration of your swing line within a few days is no longer bullish I need to re emphasize the importance of knowing when to re enter your trade Markets often retest prior highs or lows before the move you ve been anticipating starts too many good traders get stopped out and then watch the swing they ve been waiting for start I can assure you the answer is not using stops further out especially if you hope to trade for a living Rather take small losses use inactivity stops and learn how to use the PullBack method described in The Basics section The PullBack techn
24. more then 90 percent of the time markets move in short upswings followed by downswings Swing traders sometimes makes more in trending markets then the trend follower as they trade the swings within a trend And in sideways range markets where longer term trend followers often get whipsawed the swing trader often profits Perhaps you ve heard the phrase 70 of the time markets trade sideways Well a good portion of that 70 sideways motion is wide enough for tradable swings but its not wide enough for the trend follower who by definition has to wait for a trend to develop A growing number of traders are finding short term swing trading to be an ideal time frame and the techniques presented here are appropriate for trend or range markets By swing trading I m referring to trades that usually last from 2 to 15 days with the goal being to trade the smallest anticipated trends visible on a daily chart By forecast I m referring to one of two of how prices will trend over time With either forecast the trader is trying to enter the trade as soon as reasonably possible that being in the beginning of a market swing While some swing traders only trade anticipated short term trends i e swings in the direction of the intermediate term trend most swing traders do not And this is one of the considerations we ll cover here Examples of forecasts include e Fibonacci Time Projections several techniques where prior pivots are used
25. n both ADX s are falling you will correct for awhile take profits met S eee 2 When the fast ADX red falls below the slow ADX after bothe were rising another sign a correction is coming My used for longer term trading Wi Next Yuri Shramenko www TechEdgeCycles com yurips earthlink net Evaluating Trend Filters A common admonition often given to beginning traders is to never trade against the trend The trend is your friend Certainly no one wants to advise another trader to not pay any attention to the trend But a concern arises when the trader tries to identify the trend Based on your chart s data compression how many price bars you re displaying you may see several different trends simultaneously How s that possible The Longer term trend may be up the intermediate term trend may be in a corrective down swing and the short term trend over the past few days may be up possibly the long term trend resuming So which of these three trends are you supposed to never trade against The long intermediate or short term trend Orange Channel shows Long TermUp Trend t Red Channel shows Intermediate Down Trend l Black Channel shows Short Term Up Trend Which of these trends is your friend Of course nobody wants to advise another trader to disregard trend So lets review two very bullish charts The first chart below is the Nasdaq Index from July 1999 to March 2000 when the Nasdaq more then
26. r you have found good trading methods and learned how to place sensible stop loss placement this is the last and usually overlooked hurdle for consistent trading success This event isn t just important to your bottom line its crucial to your trading psychology Its often necessary to exit and then re enter your trade before the swing your anticipating occurs While its common to believe that well placed stop losses give you staying power the reality usually is that these larger losses offset your profits enough to make trading for a living unlikely Its far better to take one or two small wins and or losses especially now in this age of discount commissions and extended trading hours usually trends change after a retest of the prior high or markets turn on clear pivots less then 25 of the time Price Confirmation trade when price moves in your anticipated direction goal is to have price confirm that a swing has begun Plus higher winning percentage of trades Minus larger stop loss then other entry styles and smaller profits as swing is already underway Price Confirmation sell breakout of lowest low of prior two days timezone Early Entry trade when current swing reaches support resistance goal is to minimize stop loss Plus very small stop loss and potential for larger profits Minus lower percentage of winning trades requires more discipline to enforce your exit right or wrong Early Entry ent
27. raders as most will tell you that in the years it takes to develop good trading techniques knowing when to take a profit is usually the weak link in their trading process 3 Unknown Events Lets say you have a turning point technique that you believe is 90 accurate Unless you believe you know every event that influences price you don t Next know if there are other powerful cycles or events at work during the next due date this turning point occurs that will alter the timing or effect of your 90 accurate event The Even accurate short term forecasts have a statistical variance of one or two days before and after the forecasted peak or trough Over the years I ve been trading with forecasts since 1989 I ve had hundreds of trades where the turning point is exact to the predicted day but I can show you over a thousand swing trades where the actual turning point was a day early or late It is inevitable that you will encounter vendors who claim to never be off by even one day Most of these vendors don t trade they just research and market Or maybe you re an enthusiastic researcher yourself expecting to crack the code of never miss turning point days These Personally I don t believe a variance of a day before and after is even a variance a three trading day time zone is the best realistic expectation you should have for forecasted turning points Consider the market is open only 25 of a day if a short term cycl
28. s Yuri Shramenko www TechEdgeCycles com yurips earthlink net
29. time price correlations based on the calendar year e Financial Astrology techniques too numerous to detail for Market Trader users these would come from any of the Experts the Stepper Analyzer planetary aspects and anything the Efficiency Tester validates as a high probability timed trade The intended audience for this material is the active at home trader or those intending to be who utilize any forecasting methodology These can be any of the many cycle techniques Fourier spectral analysis fixed length neural net projections Fibonacci Turning Point projections the many techniques generically labeled Gann high vibration days planetary aspects associated with turning points and the forecasts created with any of the Market Trader Modules While the techniques presented here will be valuable for any swing trader why are they especially valuable for traders utilizing forecasts 1 As a swing trader is often trading against the smallest trend visible on a daily chart sometimes that short term trend keeps going your forecast was wrong or off by more then a couple of days The techniques presented here will aid never reverses Don t let one bad trade wipe out the profits of several good trades 2 Even very good forecasts have difficulty telling you when to exit the trade and how to set the initial stop loss The taking and of course advise the initial stop loss This point can help even experienced swing t
30. to calculate future turning points e Cycles Fourier spectral manual fixed length these usually provide expected direction and amplitude of intermediate and long term trends with future turning points visually displayed e Seasonals times of the calendar year that show averaged market swings over many years to find time price correlations based on the calendar year e Financial Astrology techniques too numerous to detail for Market Trader users these would come from any of the Experts the Stepper Analyzer planetary aspects and anything the Efficiency Tester validates as a high probability timed trade The intended audience for this material is the active at home trader or those intending to be who utilize any forecasting methodology These can be any of the many cycle techniques Fourier spectral analysis fixed length neural net projections Fibonacci Turning Point projections the many techniques generically labeled Gann high vibration days planetary aspects associated with turning points and the forecasts created with any of the Market Trader Modules While the techniques presented here will be valuable for any swing trader why are they especially valuable for traders utilizing forecasts 1 As a swing trader is often trading against the smallest trend visible on a daily chart sometimes that short term trend keeps going your forecast was wrong or off by more then a couple of days The techniques presented here will aid
31. to the many times you ll get over 80 of a swing that goes your way However this technique does not give you an initial stop loss Place it just a few ticks beyond the prior pivot if you re trading a forecast then when prices get about 10 ticks above the 3x3 line begin using the 3x3 line as a trailing stop 5 Open Close Moving Averages This is the simplest entry technique yet it is not common It yields surprisingly good results Its simply a 5 period moving average of the opening price blue and a 5 period moving average of the closing price red I have used this on daily charts 30 min charts 5 min charts and 1 min charts If you trade using a forecast and are not technically inclined this is the entry technique for you Microsoft Daily 58 57 Open Close Moving Averages ll l http trott tv X 2 a ko p7 J p n5 pz aje l2 Ha pe g e he 23 po F o M Ri aj June July August September October Nover 6 Short Term Breakout This is a very popular technique for traders who believe a larger market swing is coming It s purely chart based and for traders who won t use any technical indicators this technique is very valuable Its also used by mechanical systems traders extensively example for going long Assume 1 below is the beginning of a forecasted time zone On this day you would place a buy stop two ticks above the high of A which is three days back of 1 If not filled on day 2 you place a buy stop above the high of B
32. u apply a 3 that s three tenths of one percent zigzag indicator aka filtered wave to the 30 min chart Select the Low not Close in the zigzag Looking at the zigzag plot identify the prior low pivot to the left of point A That would be B below Starting with the first day of the time zone you place a sell stop order 2 ticks below the Low of B In this example you d be filled at point C If price continued to rise during day 2 or 3 of the timezone you d still apply this technique Its certainly possible that the High pivot could be on day 3 the prior low zigzag on day 2 and your fill a day after the time zone ends With this technique only place orders till one day after the time zone ends i e price can start falling on the last day of the time zone but not reach your order till tomorrow A 28 85 28 80 28 75 28 70 28 65 28 60 28 55 28 50 28 45 a 29 48 http trott tv 28 35 ail 28 30 28 25 28 20 28 15 28 10 28 05 28 00 27 95 Zig Zag 3 Low N 27 90 C Microsoft 30 Min Chart li 27 85 27 80 raS 27 70 27 65 27 60 27 55 27 50 27 45 27 40 3 as This entry technique does not have an exit counterpart It is preferred by those traders who dislike the use of technical indicators Generally these chart oriented traders will first try and apply a trendline but if none is apparent they will use this or a similar technique where the emphasis is to enter a trade when price exceeds a prior pivot
33. visit for more nttp trott tv Your Source For Knowledge Chapters Introduction The Basics Swing Entry Exit Examples Trade Management Evaluating Trend Filters Recommendation Yuri Shramenko Technical Edge yurips earthlink net Trade Execution by Yuri Shramenko What we re trying to do here is trade market forecasts specifically the times when the forecast is telling us the trend may change Because we know forecasts aren t always right and even when they are right they may be skewed by a day or two we are looking for a way to avoid trades that will be losers and we still want to get in very early in the start of a new swing Furthermore we experience the same issues when exiting a trade When and where should we exit a losing trade or a trade not going anywhere And if profitable is your use of forecasts exact enough to capture the bulk of a price swing consistently An experienced swing trader s ultimate goal is to make more profit much more profit then the trader who uses trend following methods to trade the intermediate term trend This is because regardless of whether a market is in trend mode or a sideways range mode more then 90 percent of the time markets move in short upswings followed by downswings Swing traders sometimes makes more in trending markets then the trend follower as they trade the swings within a trend And in sideways range markets where longer term trend followers often get whips
34. which is three bars back of 2 On day 3 above the high of C In this example at the end of day 3 you re not filled yet but you notice a low pivot has formed in the time zone As such the turning point is giving an early appearance that it may be working So on day 4 you place a buy stop above 1 and you re filled on that day Like most chart based techniques your initial stop loss is x ticks below the low pivot at 1 This technique comes with a chart based trailing stop Each day place a sell stop two ticks below the lowest value of the past two days 2 fo amp S dh RP 58 5 58 0 Microsoft Daily Exceeding Highs and Lows 57 5 of the prior 3 bars 57 0 56 5 56 0 55 0 55 0 54 5 54 0 53 5 53 0 545 52 0 51 5 51 0 50 5 50 0 49 5 49 0 48 5 48 0 47 5 Should you always use the highest high of the past three days That s a common conservative approach e If I m expecting a short term correction to end and the intermediate term trend to resume I place a buy stop above the highest high of the past day e For trading against the intermediate term trend I use the past two days e For a breakout from a sideways range I usually use the highest high in the range 7 Fibonacci Price Expansion This technique can serve as a profit taking technique or an entry technique Lets cover profit taking first In the below chart assume a forecasted time zone for either A or C You used your charting software Fibonacci
35. y Joe DiNapoli in the 1980 s There are still traders who use these techniques profitably and pass them on Most all charting software has displaced moving averages in the dialog box for the regular moving average look for the words offset or horizontal offset or shift Short period displaced moving averages like the one below oftentimes contain an entire swing up or down hence their value here The blue line in the below chart is a simple 3 period moving average By simple I mean its not an exponential moving average What s being averaged is the Typical Price High Low Close 3 Its sometimes called the daily pivot If you can t select Typical Price then use the daily closing price The red line is the blue line moved forward three trading days This is called a 3x3 displaced line In the below chart observe rectangles A amp B Notice how the traditional moving average blue is useless for swing trading while the 3x3 displaced line does a great job of containing market swings In August and September this red line again did a great job in getting you in and out of two swing trades Note you never optimize either the period of 3 nor the displacement of 3 59 5 Microsoft Daily 59 0 58 5 i f 58 0 Blue 3 period simple moving average EFE Red the blue line dsplaced 3 periods forward ti 56 0 55 5 55 0 54 5 54 0 53 5 53 0 52 5 52 0 51 5 51 0 50 5 50 0 49 5 49 0 A 48 5 46 0 47 5 46 5 46 0 45
36. ys 1 how many trading days are you willing to wait to get filled 2 once filled how many days are you willing to wait before the trade shows a profit greater then a preset value In the above example you re filled Long in the first bar in the blue box But 5 days after the pivot bar this trade is showing no profit Do you feel like staying with this trade If your answer is no you understand inactivity Lets say the trade was showing a profit of 5 ticks 5 days after the pivot bar would you still be interested in staying in the trade If your answer is no you understand inactivity For Inactivity there is no science I usually wait three or four days after a pivot bar to get filled before I cancel the order Once filled I wait another three days for the trade to show a profit greater then a few ticks This is a very simple concept to understand but for some people its very difficult to apply There is no one correct number for either the number of days to wait for a fill after a pivot bar nor is there one preset number of ticks the trade has to be in a profit by before you call it a dud and dump it Entry Methods This section can also be called trade entry and reentry This refers to your point of entry into a market you ve determined that a trend change is probable and now have to decide exactly when to place your order Don t forget that by trend change I m also referring to the end of a correction and the longer term trend resuming Afte
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