New to swing trading

[grazy81]

Hi guys i am new to trading generally and am looking more into swing trading and have read up a bit more but my main stumbling block is screening for suitable LSE stocks in a trend does anyone have any good pointers on what screeners to use and what criteria to search.

I am only looking to paper trade at this stage so am trying to just use the free services initially until i am consistently making money, plus if anyone has any proven stratergies for a beginner i would be glad to hear them.

Thanks

Grazy

 

[tomorton]

This is pretty closely what I am doing in this area:
at weekend check overall FTSE100 and Dow / S&P trends are strongly up to confirm I should be buying:
rank FTSE350 shares by % rise in last 6mths: ignore those that rose less than FTSE100:
chart prices of selected FTSE350 shares to display week HLC bars with 50EMA overlain, over 33wks:
count number of H, L or C for each chart beow 50EMA and subtract from 100 to give rough and ready trend strength percentage score:
rank the shares by trend strength %:
ignore those that have not risen over last month:
buy share rising out of a three-day pullback (see references to Rivalland for details on this).

Of course, getting in is the easy bit, you need to cut losers quickly to stay alive and in the game.

Best wishes.

 

[grazy81]

Thanks for that mate, do you scan for liquidity or just make your own judgement into that. Also when counting the HLC below the 50ema line is this done on a weekly or daily chart and can i assume that this can be done on all chart tipes i.e HLC, Candlestick and line?

Using this technique what sort of retention am i typically looking for on average?

 

[tomorton]

Thanks for that mate, do you scan for liquidity or just make your own judgement into that. Also when counting the HLC below the 50ema line is this done on a weekly or daily chart and can i assume that this can be done on all chart tipes i.e HLC, Candlestick and line?

Using this technique what sort of retention am i typically looking for on average?

I don't look at liquidity (or volume) but stick to the FTSE350 - pretty liquid at any time but I hold back from trades in the first half-hour - spreads are wide and the TA is all over the place. I tot up trend strength with weekly HLC bars compared to the 50EMA as the results make sense on my holding time frame, 1 to 3 weeks: naturally, if you're intra-day trading, there's not much to be gained by looking at 33wk price action (nothing magic about number 33 either, it just makes mentally calculating percentages easy).

I suppose you could look at daily candlesticks or whatever and gauge the number / severity / duration of incursions across the 50EMA as a way of assessing trend strength: why not?

 

[grazy81]

Great thanks for that, that makes more sense to some of the stocks i have screened as when i look at them on a weekly chart they seem to be hitting the right lines but soon as i look at them on a daily chart that all goes out the window.

I am currently charting them on a 10sma and 30sma and on a weekly chart this all looks good, but if i am to look on a daily chart what kind of sma's should i be comparing too.

One more question i have screened some stocks using the msn site and have found some interesting stocks but they all look like they are coming to the end of a trend some of which have lasted almost a year, is this usual and is there a better way to screen them to catch them earlier in the trend.

 

[tomorton]

On daily charts I use the 14 and 50EMAs: just to confirm trend really though I have sometimes used price crossovers above / below the 14 to trigger a long or short entry: works fairly well, but best when entry is in same direction as established strong trend pointed by the 50.

Catching trends earlier is just a matter of shortening your chart timepspan: will get you entry signals earlier but more likely a young trend will fail and reverse than a longer-established one. So you will have lots more false signals and need to control losing piositions tightly. I am not only looking for long trends but also those that are smooth - fewest incursions across the 50EMA.

MA lengths are not magic numbers but should correlate in some way with your holding period. No point looking at the 200EMA if you never hold overnight.

Trends sometimes end abruptly the days immediately after a new high but more common that they give a signal. In an uptrend, look for new high, folowed by 3+ down days to a new low, followed by 3+ up days to a new high which fails to breach the last high: see Marc Rivalland. So the trend didn't end on day 1 or any particular day, it failed over a 6+ day period and gave ample notice so you could get out by day 7 or just after.

 

[grazy81]

Excellent thanks for that advice i think things are starting to make alot more sense so i can see more noticeably where and why i have failed in previous attempts.

Is there anything worth doing on a day like today where the majority of shares fall, should i sell out in the morning in the hope to soften the losses or should i just ride it out as " one of those days " i'm not too sure about this as with having to pay the 0.5% tax per deal this works out as costing 1% plus two lots of commision plus if i dont buy at the right time the following morning or that night i risk the market opening much higher than the close.

Using your advice earlier i have picked out a few stocks that i think could do well unfortunately not many did well today but i put that down to the market just having one of those days today so i will keep an eye on them and look for the signals.

Also do you use any sites or software to screen stocks or is it mainly by hand?

 

[tomorton]

Excellent thanks for that advice i think things are starting to make alot more sense so i can see more noticeably where and why i have failed in previous attempts.

Is there anything worth doing on a day like today where the majority of shares fall, should i sell out in the morning in the hope to soften the losses or should i just ride it out as " one of those days " i'm not too sure about this as with having to pay the 0.5% tax per deal this works out as costing 1% plus two lots of commision plus if i dont buy at the right time the following morning or that night i risk the market opening much higher than the close.

Using your advice earlier i have picked out a few stocks that i think could do well unfortunately not many did well today but i put that down to the market just having one of those days today so i will keep an eye on them and look for the signals.

Also do you use any sites or software to screen stocks or is it mainly by hand?

Personally, I line up my potential entries on new shares and stop-losses on my holdings and then let the day take its course. I closed a long on LAM as it fell through my stop-loss but also closed a short on ETI as it went through mmy profit target. I let these trigger regardless of what the market is doing. Of course, if you're looking to buy on a recovery up from a dip in an uptrend, that means most buys occur on a day when the market lifts its constituents.

By the way, 0.5% stamp duty is only due when you buy, not on selling. Advantages of trading FTSE350 largecaps is that you get a narrow spread and possibly a frequent trader deal from your broker to keep commissions low. So, e.g. my broker is quoting CHG, a FTSE350 stock I pick out only because it is smack in the middle of the 350 at 2775-2776p, a minute spread. I pay £12.50 commission per trade (but you can get it cheaper), so for say £2000's worth of CHG, round-trip overheads without any change in price would be appr. £12.50 + 12.50 + 0.72 + 0.72 + 10 = £26.44 = 1.3%. So a price rise of only 2% would put me in the money.

Of course the market can gap or move unexpectedly. Sometimes this will hurt, sometimes it will help. The biggest share price changes are often between one night's close and the next morning's open: subsequent price action is often all done and dusted by 9 or 10am so if you weren't in the previous night there would be no chance. The idea is not to be right every time, its to be right more often than you're wrong and to lose less when you are wrong than you win when you are right.

I use Sharescope Gold for all my TA needs.

 

[grazy81]

Ah thats a nice thing to hear but i guess if i'm thinking of loosing that extra 0.5% that means i have to be sure i am making the right move. So as it turned out when i took a 3% profit from rpt yesterday to watch it fall and to re buy it after it fell could well have been a smartish move after all but in hindsight i would like to have held off buying it back so soon, but then i guess thats how we learn.

After i start making money consistently i will try the 30 days of sharescope and see how i find it as my biggest problem atm is finding the right stocks in the first place and as my broker only seems to support longs i am limited to the type of trades i can make but it's best to master one kind before over complicating things and not being good at either.

 

[tomorton]

Good policy to trade very small until you have mastered the mechanics but also absorbed the psychological lessons the market teaches. These only start when you're in a position, with real money at risk. Lose small, learn to look after losses very quickly - and how that hurts: stay alive, then expand your account and diversify.
Best wishes.

 

[grazy81]

Yes i am just learning with an ok amount enough for a trade to be worthwhile and to absorb the trading costs but not so much that if i lost on a deal that it would cost me too much, i have already made bit of a loss but i can see where i went wrong and i shant be investing more untill i have recouped those losses. i have one deal ongoing that made a 4% loss today and sits on a support line so i will have to make a decision tomorrow morning as to cut the losses and walk away about even or hold on if things start to look up again

 

[jaspertrademaster]

Well said tomorton.

 

[subarashi]

Moving averages are good to use. Each average is a poll on a stock's value. Explore Guppy Moving Averages. Even if you do not use them the method can teach you how to think about a trade; it's duration and character.