Swing Trading Concepts & Edges
Swing Trading Concepts & Edges Rob Hanna Co-Founder & VP of Research, InvestiQuant
9/16/2015
Copyright © 2015 InvestiQuant
1
1
Disclaimer It should not be assumed that the methods, techniques, or indicators presented here will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. There is a high degree of risk in trading. 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 similar to those shown.
9/16/2015
2
What is “Swing Trading”? • A short-term trading approach that looks to take advantage of market swings that typically last from 1-7 days. • Most swing approaches will look to buy short-term weakness and sell short-term strength. • Often traders will use the intermediate/long term trend to further filter opportunities.
9/16/2015
Copyright © 2014 InvestiQuant
3
3
A Simple Swing Trading Approach
Buy 5 Day Low & Sell 5 Day High
9/16/2015
Copyright © 2015 InvestiQuant
4
4
Buy 5 Day Low & Sell 5 Day High 9/16/2015
Copyright © 2014 InvestiQuant
5
5
A Simple Long-Term Trend Filter Doesn’t Help 9/16/2015
Copyright © 2015 InvestiQuant
6
6
Few trades, fewer days exposed to the market, bigger average wins, smaller average losses, and more total profits 9/16/2015
Copyright © 2014 InvestiQuant
7
7
IQ Swing Trading Concepts • Acceleration • Momentum • Seasonality
9/16/2015
Copyright © 2014 InvestiQuant
8
8
Acceleration How fast is the market moving and from where?
9/16/2015
Copyright © 2014 InvestiQuant
9
9
A Strong Move Down From A High – No Edge
A Strong Move Down From A Low – Big Bullish Edge
A Strong Move Down Within A Range – Small Bullish Edge
9/16/2015
Copyright © 2014 InvestiQuant
10
10
While Big Drop From A Low Point Suggests A Strong Bullish Edge, A Small Drop Does Not
9/16/2015
Copyright © 2015 InvestiQuant
11
11
Acceleration Summary Both the magnitude of a move and the place that move is occurring make a difference in price action moving forward.
9/16/2015
Copyright © 2014 InvestiQuant
12
12
Momentum How persistent has the move been over the last few days and weeks, how strong is the movement, and where are we trading in relation to the long-term trend?
9/16/2015
Copyright © 2014 InvestiQuant
13
13
Persistent drop from high – no edge
Persistent drop to a new low – bullish edge
Persistent drop within a range – in between (mild edge)
9/16/2015
Copyright © 2014 InvestiQuant
14
14
Momentum Summary Like fast moves, persistent moves can provide an edge but should be examined within the context of the longer-term trend.
9/16/2015
Copyright © 2014 InvestiQuant
15
15
Seasonality What long & short-term seasonal forces are in play, and how has the market performed during similar periods in the past?
9/16/2015
Copyright © 2014 InvestiQuant
16
16
Seasonality – Fed Days
Fed Days have seen strong gains over the years.
9/16/2015
Copyright © 2014 InvestiQuant
17
17
Seasonality – Non-Fed Days
All other days combined have managed very small gains.
9/16/2015
Copyright © 2014 InvestiQuant
18
18
Seasonality Summary • Certain days, times of the month, times of the year and other cycles can exert a seasonal influence on stock market prices.
9/16/2015
Copyright © 2014 InvestiQuant
19
19
Acceleration & Seasonality Combo
When price & seasonality-based edges combine it can make for a very strong setup.
9/16/2015
Copyright © 2014 InvestiQuant
20
20
IQ Swing Guides
9/16/2015
Copyright © 2014 InvestiQuant
21
21
IQ Swing Acceleration Ensemble (stand alone) 9/16/2015
Copyright © 2014 InvestiQuant
22
22
IQ Swing Momentum Ensemble (stand alone) 9/16/2015
Copyright © 2014 InvestiQuant
23
23
IQ Swing Seasonality Ensemble (stand alone)
9/16/2015
Copyright © 2014 InvestiQuant
24
24
The average of all 3 approaches is better than any one of them on their own. 9/16/2015
Copyright © 2014 InvestiQuant
25
25
Summary • Swing traders look to take advantage of short-term market imbalances & price extremes. • Many techniques can be used to swing trade, but most involve combining short-term overbought/oversold indicators with long-term trend. • IQ utilizes 2 price-based concepts (Acceleration & Momentum) along with Seasonality. • Combinations of edges often provide better forecasting information than any individual component. • IQ Swing Edges can be used on their own, or as an additional input/filter for other systems. 9/16/2015
Copyright © 2014 InvestiQuant
26
26
9/16/2015
Copyright © 2015 InvestiQuant
1
1
Disclaimer It should not be assumed that the methods, techniques, or indicators presented here will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. There is a high degree of risk in trading. 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 similar to those shown.
9/16/2015
2
What is “Swing Trading”? • A short-term trading approach that looks to take advantage of market swings that typically last from 1-7 days. • Most swing approaches will look to buy short-term weakness and sell short-term strength. • Often traders will use the intermediate/long term trend to further filter opportunities.
9/16/2015
Copyright © 2014 InvestiQuant
3
3
A Simple Swing Trading Approach
Buy 5 Day Low & Sell 5 Day High
9/16/2015
Copyright © 2015 InvestiQuant
4
4
Buy 5 Day Low & Sell 5 Day High 9/16/2015
Copyright © 2014 InvestiQuant
5
5
A Simple Long-Term Trend Filter Doesn’t Help 9/16/2015
Copyright © 2015 InvestiQuant
6
6
Few trades, fewer days exposed to the market, bigger average wins, smaller average losses, and more total profits 9/16/2015
Copyright © 2014 InvestiQuant
7
7
IQ Swing Trading Concepts • Acceleration • Momentum • Seasonality
9/16/2015
Copyright © 2014 InvestiQuant
8
8
Acceleration How fast is the market moving and from where?
9/16/2015
Copyright © 2014 InvestiQuant
9
9
A Strong Move Down From A High – No Edge
A Strong Move Down From A Low – Big Bullish Edge
A Strong Move Down Within A Range – Small Bullish Edge
9/16/2015
Copyright © 2014 InvestiQuant
10
10
While Big Drop From A Low Point Suggests A Strong Bullish Edge, A Small Drop Does Not
9/16/2015
Copyright © 2015 InvestiQuant
11
11
Acceleration Summary Both the magnitude of a move and the place that move is occurring make a difference in price action moving forward.
9/16/2015
Copyright © 2014 InvestiQuant
12
12
Momentum How persistent has the move been over the last few days and weeks, how strong is the movement, and where are we trading in relation to the long-term trend?
9/16/2015
Copyright © 2014 InvestiQuant
13
13
Persistent drop from high – no edge
Persistent drop to a new low – bullish edge
Persistent drop within a range – in between (mild edge)
9/16/2015
Copyright © 2014 InvestiQuant
14
14
Momentum Summary Like fast moves, persistent moves can provide an edge but should be examined within the context of the longer-term trend.
9/16/2015
Copyright © 2014 InvestiQuant
15
15
Seasonality What long & short-term seasonal forces are in play, and how has the market performed during similar periods in the past?
9/16/2015
Copyright © 2014 InvestiQuant
16
16
Seasonality – Fed Days
Fed Days have seen strong gains over the years.
9/16/2015
Copyright © 2014 InvestiQuant
17
17
Seasonality – Non-Fed Days
All other days combined have managed very small gains.
9/16/2015
Copyright © 2014 InvestiQuant
18
18
Seasonality Summary • Certain days, times of the month, times of the year and other cycles can exert a seasonal influence on stock market prices.
9/16/2015
Copyright © 2014 InvestiQuant
19
19
Acceleration & Seasonality Combo
When price & seasonality-based edges combine it can make for a very strong setup.
9/16/2015
Copyright © 2014 InvestiQuant
20
20
IQ Swing Guides
9/16/2015
Copyright © 2014 InvestiQuant
21
21
IQ Swing Acceleration Ensemble (stand alone) 9/16/2015
Copyright © 2014 InvestiQuant
22
22
IQ Swing Momentum Ensemble (stand alone) 9/16/2015
Copyright © 2014 InvestiQuant
23
23
IQ Swing Seasonality Ensemble (stand alone)
9/16/2015
Copyright © 2014 InvestiQuant
24
24
The average of all 3 approaches is better than any one of them on their own. 9/16/2015
Copyright © 2014 InvestiQuant
25
25
Summary • Swing traders look to take advantage of short-term market imbalances & price extremes. • Many techniques can be used to swing trade, but most involve combining short-term overbought/oversold indicators with long-term trend. • IQ utilizes 2 price-based concepts (Acceleration & Momentum) along with Seasonality. • Combinations of edges often provide better forecasting information than any individual component. • IQ Swing Edges can be used on their own, or as an additional input/filter for other systems. 9/16/2015
Copyright © 2014 InvestiQuant
26
26
