Trading the Swing Portfolios and Swing Picks

Update: While this post is still accurate in its description of the Swing Portfolio and Picks, a new post titled How To Get a 70% win ratio trading StockMarketsVane’s Swing Picks was written a few weeks after this post and describes in detail a strategy to select and trade the swing picks.

This website offers various portfolios based on proprietary trading systems, while some systems are for long term holding periods (Trend portfolios), others are trying to capture a short term up swing and the positions are to be held 4-5 days (Swing and All-Weather Portfolios). The goal is not to make 100% on a few big winners but to make many 2-4% profits 60% to 75% of the time. For example, the US Swing portfolio has a 68% transaction win rate over a 10 years period.

This post will attempt to describe some facets of the Swing Portfolios (and All-Weather Portfolio which trades using similar algorithms as the Swing Portfolios)  in order to help applying trading ideas offered by these portfolios.

Stock Selection

One of the most important part of these trading systems is choosing the stocks to trade. At the end of every trading day, all stocks are scanned and filtered based on minimum volume, stock price and specific indicators such as relative strength, volatility, trend and past algorithm performance. If that filtered list contains a stock that is oversold on a short term basis in a pattern that was successful in the past for that specific stock, a BUY order is issued. SELL orders are using the same identification patterns but in the opposite direction.

The Basics

Trading the ideas to match the performance of my trading systems is very easy:

Entering a position based on a portfolio pending order:

  1. In the evening, write down the BUY pending orders to execute from each portfolios available here.
  2. The next day, execute the orders just before the market closes.

Exiting positions managed by a swing portfolio :

  1. Write down the SELL pending orders to execute from each portfolios
  2. The next day, execute the orders just before the market closes.

That’s it. But learning details on how my system works could help you beat it.

What are we trying to do?

A good stock for this system is identified, then it pulls back for a few days, that’s when we buy it in the hopes or selling it in a few days with a small profit. Here is a typical move that the swing systems  try to capture, the green dot is the buy signal and the red dot is the sell signal, both signals are on the execution day,  communicated the day before:

cva

How to get better returns?

The swing systems presented on this site have only one price per day where they can execute an order, the closing price. A human being has all day long to pick the best time to enter or exit a position, getting a good entry can make a good stock pick become a great one.

Passing on a trade

It is important to note that since the orders are executed at the end of the next trading day, a diligent trader has the opportunity to analyze the current day data to enter earlier or not at all, I’ve intentionally kept my system unconditional on the day of the trade to keep it simpler, it doesn’t mean that you cannot add to it.

For example, if on the day you are supposed to buy the stock, it spikes up above the previous days high, you might want to skip the trade altogether since the short term up move was probably missed:

hpq

One exception to this is if the upswing comes with an above average volume and you think it could be lasting a few days, getting in the trade might be worth it:

mw

Some winners, some losers

If the stock continues to go down in the following days after you bought it it might be because:

  1. The pull back is not over and can continue for a few days before swinging up ending in a winning trade (very frequent).
  2. The move is actually a trend reversal instead of the expected temporary pull-back, in that case, the system has built in stops that will exit when triggered.
  3. The stock is just going sideways interminably (be patient or sell and move on!).

Swing Stock Picks

In addition to the daily portfolio updates, I also post daily Swing and Trend Buy/Short ideas in the “More Stock Picks” section. Trading these ideas is similar to following one of the portfolios but it requires more work on the sell side.

Entering a position based on a swing stock pick:

  1. In the evening, write down the BUY order to execute.
  2. The next day, execute the orders just before the market closes.

Exiting positions entered from a swing stock pick :

  1. As soon as you enter the position, set a real or mental stop, be sure it is not too aggressive and be disciplined when it triggers! I often use a multiple of the ATR value of the stock (3, 4 or 5 depending of volatility) or a fixed %.  And most important, set a target that should trigger a sell, I often use a moving target adjusted daily, if the stock today reaches a 5 to 7 days high, sell during the next day. The swing positions are held on average only 5 days.
  2. Every day review your open positions to see if your stops or your target have been reached, and write down the sell orders to execute the next day.

More ups than downs

Following a trading system can be very hard, you need lots of discipline and overriding it is rarely the best option so do it with caution. After a few loosing trades you should always keep in mind that overall the system should end up with more wins. If not, it’s time to go back to the drawing board!

 

 

 

 

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