Hi Ray,

you mentioned that you had integrated swing trading back into your life. Do you have a system that you have developed that traders can buy or do you use a system for that? I am interested in multi day trades using end of day data. Thanks for your help.

Brian

Hi Brian,

Thanks for the question…

This is a bit of a tough question to answer… no, I don’t have a product that addresses swing trading specifically, yet each of my products kind of addresses swing trading.

So to clarify…

I’ve always tended to be a discretionary trader. In other words, I don’t use a hard and fast set of rules to trade. That doesn’t mean I don’t have a set of rules and guidelines, they just aren’t black and white.

Instead I focus on analyzing the market, accessing where things are, and where they may go, and trade accordingly.

This doesn’t make a great “system” to be distributed (at least from my own experiences).

You see, of my courses, each one got progressively more and more conceptual.

What do I mean?

Well Market-Millions was released and was a very rules based, black and white trading system. I think this is perfect for the beginner trader, as it outlines exactly what needs to be done every step of the way. Through this regimented approach, proper habits are developed like trading with the trend, risk management and knowing your entries and exits all in advance.

This is a good approach, overall… but after following the markets for some time, and applying a strict approach, you begin to wonder if there are ways to tweak the system.

And you can… the thing is, many “tweaks” tend to become more and more subjective. Saying I’ll exit at $x is different from saying I’ll exit at the previous swing low, is different to saying I’ll exit as the momentum decreases.

In each example we get potentially more and more subjective.

Is there anything wrong with subjectivity? I don’t think so. The major issue with subjectivity is that you could start running into the potential of blaming yourself for bad trades (which may be the case) instead of accepting that the markets do what they do, and that’s just how it is.

Starting with a rigid method kind of protects you from this self-criticism until you absorb the experience of losses as just a part of the game.

As you move more into the realm of discretionary trading, (at least how I see it) you move away from rules and more towards concepts.

Giving you rules to follow versus giving you concepts to follow is night and day.

A rule will define as precisely as it can the conditions you’re looking for, while a condition will describe the intent.

Buy when price breaks a trendline drawn over the last 50 bars versus, buy as you see prices moving up strongly from a low.

The first instruction will get you in at some point, while the second can get you in both earlier and later or not at all. Knowing when to apply rules and when to apply concepts is I guess the challenge.

I discovered this challenge as I was working on codifying a set of rules for the trading robot I was working on over the past few years, and that was an interesting experience because it made me realize that a bunch of decisions were unconsciously being made by me in terms of entering and exiting trades…

But here’s why most robots fail…

They are given jobs they do well AND given jobs they do poorly.

The key is leaving them to do the jobs they do well, and not giving them the jobs they do poorly.

Well this was a rather long reply just to tell you no I don’t have a swing trading product… I guess not writing for a while must have caused a backlog of stuff in my brain.

Thanks again for the question and Continued Success!

Ray

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“I’ve been told that prices go up because there’s more buyers than sellers…

But the question is when someone is buying, doesn’t there need to be a seller to complete the transaction?

So in essence, isn’t every buyer matched with a seller?”

That’s a good question. It actually address the foundation of trading. Most people don’t bother working through the mechanics of it,

If there are more buyers at $1.00 than sellers at $1.00 then after all the $1 buyers clear out the sellers at $1.00 then the

$1.00 buyers either choose to buy at $1.01 where there may be more sellers, or they wait for sellers to come back in offering $1.00

If sellers are only willing to sell at $1.10 and the buyers at $1.00 are willing to go up to that offer price, then we see the price move from $1.00 to $1.10.

So it really isn’t accurate to say that there are more buyers than sellers… there are always equal number of buyers and sellers.

What’s more accurate to state is that price moves up if there are more buyers than sellers at a given price AND buyers are willing to go up and pay sellers at a higher price.

Because even if there were more buyers at $1 than sellers, if buyers were unwilling to hit the offer at $1.01, then prices will not move up.

So what makes buyers more apt to follow prices up and hit a higher offer?

Well they must believe prices will go even higher.

What makes sellers willing to sell at the prices they sell at? They must believe prices won’t go higher, but will go lower.

Buyers buy because they believe prices will go up, sellers sell because they believe prices will go down.

So the key is being able to read the balance between the two…

Hope that helps.

If you have any trading questions, feel free to add them as a comment below.

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Q: My question is related with the way to handle short term sector rotation and relative strenght analysis.

Some sectors and industries are down sharply in the near past, but look strong when looking over 1 or 3 months.

Other sectors look strong in the near past, but show weakness when viewed over longer periods. How do you deal with this situation? Which are showing relative strenght and which are showing relative weakness?

A: The way I see it from your description is essentially this… you have a sector which was strong and is now in a correction.

And you have a sector that was weak and now is showing strength… this is the same scenario, where that sector is correcting the downtrend by showing strength.

From the sounds of these 2 scenarios we are looking at the same thing. As the corrections in both complete, and the trend reasserts itself, the strong market (currently weak) will begin to show strength again, and the weak market (currently strong) will continue with weakness.

The only way this will change is if these two markets are going through actual reversals, at which point (if they stay inversely co-related) the strong market will now get weak and vice-versa for the weak market.

In the end, it comes back to the same trading foundations… identifying a trend, a correction and a reversal; then formulating a plan to trade accordingly.

I would treat each market as separate trading decisions.

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Got questions about trading? Let’s see what we can do?

Post your question as a blog comment below. I’ll answer each question in the following weeks…

Some thoughts to get you started…

What aspects are you struggling with in your trading now?

What do you need to know to take your trading to a new level this year?

Why isn’t your trading working right now?

I don’t know… I’ll leave this homework up to you

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