Swing trading.

There are a lot of trading styles and methods. Since I am a long term value (dividend) investor, position trading is my favourite trading method. Position trading kan overlap with short and even long time investing. You set your position and go on vacation. If you take an Oceanic cruise or an around the world trip, you do a thorough rational analysis, set your position and return some months or even years later. If you have done your job good enough, (sometimes that is best) you should have earned a monthly or yearly income, depending on the total amount in your portfolio.

Setting (trailing) stops should reduce the risk you take, but also the profit potential. I am not a day trader or short time trader. If I am stopped out, that was due to my risk management.

Brian Shannon says, “Know your time frame and mangage risk” and he regards himself as a swing trader.

Financial time series have fractal structure, that is selfsimilarity at any frequency.

An increasing (declining) trend is defined by a security that makes a higher high (lower high) and a higher low (lower low). Don’t buy the dip for an increasing stock. Buy strenght after the dip and place the loss under the most recent low.

You can loose 50% or more of your money if you don’t understand cyclical stocks that is the most misunderstood stocks.

That’s what Peter Lynch, often called the world’s best fund manager, said. He is also called the P/E guru and warned against focusing on low P/E (PEG(Y)) when analyzing cyclical stocks. P/E often peaks around the bottom of the cycle and sometimes become negative if E is negative. P/E becomes infinite if E==0, and that is often the best time to invest in good cyclical (dividend) stocks. Earnings, E have fallen more than P, while the opposite happens at an economic (industry) peak. Then E has risen more than P and P/E is often low near the economic peak.

Cyclical shares are often the most misunderstood shares and you can earn buckets if you hit the cycle correctly, but as Peter Lynch pointed out, you can loose 50% (some say even close to 100%) of your investment if you do not understand cyclical stocks.

Shipping one of the most important sectors in Norway, is a highly cyclical sector and sometimes experiences super cycles. Shipping companies can have their own cycle and it can be different for tankers, container ships and dry bulk cargo ships. For those stocks I personally say, market timing is more important than time in the market. Therefore, position and swing trading may be the best “investment strategy” for cylical companies in general.

Don’t try to time cyclical stocks unless you have intimate knowledge of the company.

Cyclical stocks rise and fall with the economy. Low cash flow and low debt is important if you invest in cyclical stocks. The company shall survive the downturn.

In conclusion, I will say that position and swing trading is a relevant strategy for investors that understand the company, may be swing trading on a lower frequency than daily or weekly data, e.g. monthly or quartely. Know what you own and own what you know.

In additon for a trader, plan your trade and trade your plan. Setting (trailing) stop losses is in my view important when you invest in companies that follow the economic cycle or companies like shipping companies that follow their own cycle.

As a swing trader you ususally exit your trade before the opposing pressure comes in.

You should find a least one link to BarChart.com on MultiFinanceIt.mobi or my old nonresponsive site from the stonage that need to be seen on a large screen, preferrably at least 24″, MultiFinanceIt.org.

BarChart.com is one of my favourite sites for financial information and charts. Best of all the Achored VWAP is available on that platform. VWAP on a daily basis is available on Nasdaq.com.

I can make that in a Google or Excel spreadsheet using the GOOGLEFINANCE or the more advanced YHOOFINANCE function to import data. Data that is not available via these functions can be XML or HTML scraped from the internet.

Here is an example with weekly data for NVIDIA where true price is the average of open, high, low and close, the thick blue line. VWAP20 is a 20 week simple moving average based VWAP (red line) and MVWAP20 is a 20 week moving median based VWAP (green line). We note that VWAP20 is smoother than MVWAP20.

I make AVWAP from any timestamp by usinge absolute cell references, eg. one from the date of a swing high or another from the date of a swing low. If you wan’t to make an anchored VWAP from the date of an IPO e.g. for ARM or Porsche, that is done in a similar way. You have to have one column for each VWAP anchor, as many as you need. That is of course more timeconsuming than using a platform like Barchart that has this implemented.

The figure below shows AVWAP for Nvidia for daily data ancored on November 22 2021 high (red line) and anchored on October 13 2022 low (yellow line). The average true price is the blue line in the chart.

TraderLion | a short note and three videos. TraderLion is one of my favourite YouTube channels on trading. Even if you are an experienced trader, you should find value in the interviews with various traders that have different trading styles and results e.g. “+291% Swing Trading – The 3 Powerful Setups of a Top Trader”. Make it simple, as simple as possible, but no simpler said Einstein. I have listened to the whole interview, and I hope that you learn as much as I did. The last few minutes of the inverview is important.

We started by embedding a video of swing trader Brian Shannon and we end this article with an interview with him.

The BEST Time to Buy a Stock | Brian Shannon






Leave a Reply

Your email address will not be published. Required fields are marked *