Swing trading FTSE100 members

[tomorton]

This is partly a trade log, partly a strategy development. I aim to post here a simple and unoriginal swing trading method and apply it to the FTSE100 stocks. I won't be able to take all the signals that posted, but am looking particularly to refine exit strategy so feel free to contribute ideas and criticism. Comment on entiries too if you like, but they're by no means the most interesting part of swing trades. All based on EOD prices from Sharescope, though recognising daily highs and lows can vary between data sources and no account taken of bid/offer spread.

I will also be taking the opportunity to try out the trailing stops offered by Capital Spreads. I've repeatedly read that these are essential tools for traders but have never had the chance to set and forget these before now.

 

[tomorton]

Chart set-up – as per Marc Rivalland’s swing chart scheme noted in his book on swing trading and available in Sharescope – HL bars: coloured blue if higher low and higher high, red if lower low and lower high, orange if both high and low are inside previous day’s extremes, and black if both are outside the previous. Ignore daily Closes.

Swing days in an uptrend are identified as the third or subsequent red day after a high. Inside days are ignored. Outside days count as the same colour as the immediately preceding day.

Swing days in a downtrend are identified as the third or subsequent blue day after a low.

Buy orders in an uptrend are entered at or just above the high of the swing low day. Only enter a buy based on this putative swing low if it would be at least the third successive higher swing low. If the order is not triggered because price made another red day or a black day, that becomes the putative swing low, so move the entry lower to the new high.

Sell orders in a downtrend are entered at or just below the high of the swing high day. Only enter a sell based on this putative swing high if it would be at least the third successive lower swing high. Move the order higher if the putative swing day is followed by another blue day or a black day.

Initial stops on a long are last 5 day’s Average True Range below the entry Ignoring inside days in ATR calculation). Initial stop on a short is ATR5 above entry. Stops set to trail in both cases.

Example for a long for tomorrow Monday 30/01 is BG. Buy at/above high of 27/01 1465.5, stop at 1465.5 minus ATR5 (33.9) = 1431.6.

Further potential signals to follow.

 

[tomorton]

More possible signals for tomorrow –

BP. – Buy at /above 472.33. Initial stop -11.37 = 460.96
CRH – Buy at / above 1305.0. Initial stop -36.4 = 1268.6
EXPN – Buy at / above 890.0. Initial stop -13.5 = 876.5
IAP – Sell at / below 337.3. Initial stop +10.9 = 348.2
ITRK – Buy at / above 2138.0. Initial stop -29.2 = 2108.8
NXT – Sell at / below 2581.0. Initial stop +65.4 = 2646.4
PFC – Buy at / above 1495.0. Initial stop -36.0 = 1459.0
SGE – Buy at /above 299.68. Initial stop -6.54 = 293.14
SVT – Sell at / below 1523.0. Initial stop +27.0 = 1550.0
SMN – Buy at / above 980.0. Initial stop -16.6 = 963.4

 

[brewski1984]

I'll be following

 

[China Diapers]

Subscribed.

Question. Do you take any notice of which direction the general market is heading?

 

[tomorton]

After today's negative performance by the index, unsurprisingly, all the potential Buys listed for today printed further down (red) days. All their lows remained above the previous swing lows so just move the entry price down to today's high and re-calculate the ATR5 for the initial stop.

The IAP sell order was triggered late in the day, although price had already travelled up through the initial stop if the position had been open. Ideally, breach of the stop before the position has opened would be a signal to cancel the order: at this point, with a higher high for the day already in, the session could only end as a blue day or a black day, either way making a higher putative swing high. In this case, price printed an outside day (black) so entry would be re-set down to the new low of 336.1.

NXT printed an inside day in orange, so ignore it and let the entry order stand.

SVT was a rogue signal owing to a messy chart, scrub this order. Sorry.

New potential swings for tomorrow to follow.

 

[tomorton]

Hi China - No. These shares will either take the same path as the market, e.g. BP makes up so much of the FTSE index it is rarely seen going one way when the index is going the other, or they have a strong enough momentum to make the trade worth the risk. Worth the risk to me that is. You might want to feature a rule along the lines of no buy signals executed when the index is dropping. But I don't want to second guess what price will do, just react to what it has done.

 

[tomorton]

Putative swing trades for 31/01 -
BA. - buy at breach of 315.0
CNA - sell 290.9
ENRC - buy 721.0
HSBA - buy 536.0
MKS - buy 331.7
RR. - buy 741.5

 

[bangkoker]

More possible signals for tomorrow –

BP. – Buy at /above 472.33. Initial stop -11.37 = 460.96
CRH – Buy at / above 1305.0. Initial stop -36.4 = 1268.6
EXPN – Buy at / above 890.0. Initial stop -13.5 = 876.5
IAP – Sell at / below 337.3. Initial stop +10.9 = 348.2
ITRK – Buy at / above 2138.0. Initial stop -29.2 = 2108.8
NXT – Sell at / below 2581.0. Initial stop +65.4 = 2646.4
PFC – Buy at / above 1495.0. Initial stop -36.0 = 1459.0
SGE – Buy at /above 299.68. Initial stop -6.54 = 293.14
SVT – Sell at / below 1523.0. Initial stop +27.0 = 1550.0
SMN – Buy at / above 980.0. Initial stop -16.6 = 963.4

Look forward to following looks like an interesting thread. I think I get the drift that if a stock is in an uptrend on daily chart you look to buy after 3 downward days, i.e buy on a new high after a retracement? Is that correct? Of course if this proves as interesting as it looks will read the book.

Does Sharkscope highlight stocks in this pattern? Or do you just set the charts up so the candles paint as you have said and then study them for the potential patterns?

I am looking for the occasional swing trade to add in to an overall trading strategy.

Are you looking to use this on any FTSE100 stock? I suppose if you only chose to specialise in some of the majors then there would be less signals to follow.

Looks like it could be interesting and I will be following with interest.

 

[tomorton]

That's pretty much it bangkoker. The ideal chart picture would be a nice upslope of HL daily bars with progressively higher highs and higher lows, then 3 days with lower highs and lower lows. On day 4 of the pull-back, look to buy if the high of the lowest, third day is breached. If the bars continue lower, re-set the entry downwards to the high of the fourth bar.

But if the low eventually breaches the low of the previous swing low day, the uptrend is broken, move on to another share.

Sharescope astutely added the Rivalland set-up to their EOD package a few years ago when his book came out, the bar colour scheme makes the patterns much easier to see.

The strategy should work on absolutely any instrument, though there will always be issues with getting an agreed high or low from data sources, especially when this coincides with the open of the day.

 

[Jason101]

Sounds like a good thread covering lots of interesting topics. I’ll be looking out for your approach on exits.

With varying multiple trade opportunities each day in both directions on an index moving in just one, how will you manage risk on your current positions and newly opened positions?

 

[tomorton]

Jason101 - This is a really good point. When I've run multiple trades in the past, whether forex or equities, I have found annoying times when the longs are going down and at exactly the same time the shorts are going up! For a couple of years now I have just been running trades on the FTSE100 index (occasionally GBP/USD or the Dow), so generally never had two positions open at once.

No individual swing trade will risk greater than 2% of the account, but how many to open up in parallel? I just don't know yet how I'm going to do this in truth.

 

[tomorton]

Positive performance across the 100 index from Wednesday onwards. Several entry points for long swing trades breached, e.g. Antofagasta (ANTO): many share prices now at least 3 negative days action off a comfortable entry point, e.g. Aviva (AV.). Some potential shorting candidates neutralised by positive price action, e.g. ICAP (IAP).

Remaining opoportunities for Monday are -
AstraZeneca (AZN) - Long at or above 3010.0: initial stop (ATR5) -93.1
ARM (ARM) - Long, 589.5 or above (stop -21.6)
BSkyB (BSY) - Short, 686.5 or below (stop +16.4)
GlaxoSmithKline (GSK) - Long, 1419.0 or above (stop -26.4)

Of course, no position shouild risk more than 2% of the the account capital, but the list above poses the question whether to go long on both AZN and GSK: probably not worth it in my personal view.

 

[tomorton]

Tomorrow, I will only be taking the BSkyB short if triggered, I feel I don't need any more longs. Current open positions(all long) are -
BT
CRH
Diageo
Experian
HSBC
Intertek
M&S
Rolls Royce
Sage

 

[Jason101]

How many of these still have initial capital exposer?

I had a friend who day traded FX at no more than 2% per trade. Usually he would have 2/3 trades on at a time, very occasionally having up to 8 or 9 trades on highly correlated pairs. He was making a mint on intraday trades. Until one day the latest correlated trend changed and he took an 18% draw down in one hit. That was enough to change his trading style now.

 

[tomorton]

All open longs had a good day, none stopped out. My short on BSkyB triggered as price hit entry exactly, and just avoided being stopped out by a few tenths of a penny.

Additional short entry set on SSE, entry at 1243, initial stop 1248.

 

[bangkoker]

So have you got 9 longs at 2% each? that seems like an awful lot. If market takes a skip because of something like 'Europe' it is possible they will all dip with the market, no? Can you not narrow it down to choose the ones with the best looking trend? or strongest sectors or suchlike.

I am keeping a keen eye and hope to step in and help out if I can soon but seem to be really busy with work and other commitments, needless to say I am keeping a careful eye on things and having a good ponder about it.

 

[tomorton]

Easy tiger, none of the longs are as high as even 1% risk, and it looks like all have had their trailing stops moved up by the Caps system from initial levels and I think 6 would be above b/e if stopped at tomorrow's open.

I see the additional risk in having multiple parallel positions open but I fear if the index goes south, all the longs will follow, it won't matter which had the strongest trends before entry. I just hope the trailing stops will give me a good chance of emerging with honour intact, I am looking forward to seeing them all stopped out. With luck, any retracement will be a chance for further longs if it's not too severe and too prolonged.

 

[deebee1]

interesting thread... will be following...

 

[bangkoker]

Easy tiger, none of the longs are as high as even 1% risk, and it looks like all have had their trailing stops moved up by the Caps system from initial levels and I think 6 would be above b/e if stopped at tomorrow's open.

I see the additional risk in having multiple parallel positions open but I fear if the index goes south, all the longs will follow, it won't matter which had the strongest trends before entry. I just hope the trailing stops will give me a good chance of emerging with honour intact, I am looking forward to seeing them all stopped out. With luck, any retracement will be a chance for further longs if it's not too severe and too prolonged.

:cheesy: Good good.. will keep watching :smart: