Swing Trading revisited

I am overwhelmed by the response to my swing trading presentation. While I will answer many of the comments in subsequent posts, here is some quick response.
The purpose of the presentation was to quickly explain what Swing Trading is all about. This was in response to a request by Mustafa. I gave four different examples for swing trading setups. There are hundreds of setups which traders can use. So, the presentation was only an introduction.

Nitin wrote “you have many times told that ride with trend in this presentation your ideas to buy after 5 days fall is it contradctary staatement”. This is a valid statement. I should explain my views. The idea of swing trading is to capture small moves usually when the market is at one extreme. Now, you should always go with the trend. Therefore, you can filter your setups to say: “If we are in an uptrend, then I will buy after a 4 day decline”. The filter is a a question of personal preference. After four days of declines, even in bear markets, many stocks may be ripe for relief rallies / bounce. So, it is your choice if you wish to take such trades. Please understand that trading is a very personal activity. That is why you cannot copy or mimic another person blindly.

For gaps, you should consider the market environment. If the market opens with a gap, supported by external factors, it is possible that the gap may be a continuation gap. Our own tests suggest that reversals and a move to fill the gap are much more frequent. A trading strategy based on this principle makes fair amount of money even when traded as a mechanical system.

For Bollinger Bands, 95% of all price action will remain inside the bands. But what about the rest 5% ? Sometimes, prices touch the bands, and then do not reverse, instead they continue to move up or down. John Bollinger calls it ‘walking the bands’. You have to keep exit strategies that protect you from such events.

Then, the three bar and one bar exit. If you are long, identify the low of the previous three bars. For short positions, identify the high of the last three bars. If you are trading on end of day charts, then three bars are the past three days. If you are trading on 60 minute charts, then three bars are the last three 60 minute prices. Suppose you are long, and the lows of the last three bars are: 2531, 2542 and 2554. The lowest of the three is 2531, so this becomes the low of the past three bars. In the same way, if you are short and the highs of the past three bars are: 2548, 2544 and 2565, then the high of the past three bars is 2565.

I will add to the clarifications.
Have Fun!