Swing Trading

FGTIn most of my talks and posts I have encouraged a conservative set of rules and searches. I am convinced that if all follow these that their path to wealth will be steady and sure.

In this post I will try and point the way to a more aggressive approach that if coupled with strong risk management can accelerate wealth accumulation.

The technique is a standard VectorVest study and it’s called the DEW. There is a standard template on VectorVest which pulls up the study easily. I have left off the bands and will talk about those in the future. Let’s get the basics done today.

FGT

The technique is fully explained with dozens of examples at the VectorVest University and it’s an excellent and robust technique to find high probability short term swing trades in the stock market.
I have been trading with leverage since 1988 when the South African futures markets opened and I know that you need to be exceptionally disciplined to stay ahead. With leverage a moment’s weakness will be savagely punished. I have added a few rules of my own which help with consistency.

My own personal goal from leveraged trading is not big money but a consistent income without the Theme park ups and downs.
My rules are as follows

1. I only wish to take “Long” positions in companies with high relative value. In short term trading the risk is managed with stop loss orders and thus the relative safety is not as important. I still like a relative safety of higher than 1.15 if I can.
2. I want to take most of my “Long” positions while the market has given a confirmed call up. There are times when I will take a trade when only the Primary Wave is up. That’s much more dangerous but the rewards can be enormous if the turn in the Primary Wave follows through to a change in the longer term trend.
3. The setup is simple. When the share closes above the 30 period weighed moving average and the momentum oscillator is over zero we just buy.
4. Above I show Finsbury (FGT). In early July the conditions were satisfied and a buy signal given. FGT has a RV of 1.8 which is compelling. The share moved upward from 460 to 500 in a few days. At the old high always take profits on half of the position and make sure the stop is at entry plus costs.
5. I am watching the share closely as there may be another BUY signal in the next few days.
6. Can you see the trade which fired in May?

Enjoy simple and happy Trading with the DEW.

David Paul

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