Swing Trading Tactics That Work In The Real World
Today I want to discuss some swing trading tactics that actually work in the real world. I was browsing a trading forum a few days ago, trying to find out topics that people may be interested in and saw one comment about moving average indicators being too delayed to work in the real word. The post went on and on about how it looks good on paper but how it doesn't really offer anything in real time trading.
This got me thinking about lagging indicators and leading indicators and the effectiveness of these indicators in real time environment. I figured I would write a short article outlining my view about this topic.
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What Indicators Work for Real World Swing Trading Tactics?
I always look at technical indicators as serving two different roles. One role is to identify specific market conditions or to further my analysis. I call these general indicators, because they are not used to time my entries or my exits, but are used more often than not for general analysis.
One perfect example is the moving average indicator. I find the simple moving average and the exponential moving average to be very valuable indicators, not for telling me when to enter my favorite Stock or Futures Market but instead to guide me in the right market direction or trend.
I agree with the fact that moving average indicators are not the best indicators because they are lagging, and do not make real time trading very efficient or precise. But for determining the direction of the trend I find them to be extremely useful and beneficial the great majority of the time.
The other type of indicator I call specific indicators or set up indicators. These are the indicators that tell me specifically where to enter the market and where to exit the market and where to place my profit target and stop loss orders.
“If you ever read Market Wizard books there is an article by a very famous trader. He discusses indicators and compares indicators to lenses.He goes on to discuss how every lens will color the view, but the clearest view comes from not having a lens. Well those few words are very important to understand, because the clearest indication of price action is price action itself.”
Think about it for a minute, you use indicators that are based on price action to determine what price action is going to do next, instead of looking at the actual price without any filter in between.
I want to show you three weird numbers:
0.95… 1.5… and 0.66…
With them you could have turned every $10,000 into $3.31 million since 2010.
If you notice most of my entries and exits are based on price levels or actual price bars. I use actual price data to determine most of my entries and exits. Remember, there is no better technical indicator than price itself and the next time you are looking for the major indicator that has no lag or delay and gives you the best indication of the market just look at the actual price itself.
I will expand on this article in the future; I believe there is great difference between swing trading tactics that work in the real world and swing trading tactics that work only on paper.