FundVision Classic Collection - Jerry's

Author: Jerry Swanson

In Reply to: Hit and Run trading posted by Salil V Gangal on September 18, 1998 at 15:34:44:

Hi Salil:

Just a response to your request for help on a hit and run strategy. Please bear with me.

You *must* develop your own method. It is the only way that works. Gary Smith is correct in not wanting to know what other people are trading. Below are some observations that may be of help to your own development:

• Swing trading can be accomplished on any time frame.
• Don't try to trade a system; trade a method, but trade it systematically.
• Be consistent. Trading is a numbers game if you are not consistent you don't give yourself a chance.
• Scale in and out of trades. That way you can find win/win situations.
• Always go in with a game plan. Anticipate do not react. Waiting for Captain Price is for trending markets. If you are trading end of day, look at the intraday charts anyway for support and resistence points.
• Anytime you have questions on a trade, get out. It means you have lost your way.
• Don't ask for the opinions of others: that means you have no edge.
• Look for divergencies, you can't expect much help from price. Trendlines, moving averages are out of the question.
• Taking a loss is not taking a loss- it is a reposition for a later entry and profit.

The most important points are the previous day's high and low: is price moving toward or away from that number? Intraday highs and lows are important support and resistence points. Price movement is either a (failed) test or a breakout. Buy retracements (not tops or bottoms), find support or resistence and get out. Sell when others are buying and buy when others are selling rather than sell when others are selling and buy when others are buying. The basic rhythm is "buy", "exit", "sell short", "exit"...."buy", "exit", "sell short", "exit"...etc.

With swing trading momentum precedes price; trade on the roc divergence tied to your anticipated plan. Your plan is your reference point. What is the best momentum indicator? I use a one day roc. As a takeoff on Martin Pring, I call it NST- "No Sure Thing." On a short term swing, five to seven days, once roc is moving in your direction any pullback is the divergence you need. At such a short period you are not interested in avoiding whipsaws, you want to know when the little engine can't get up the hill. If there is a roc pullback, chances are very slim that it will move ahead again. For me roc is the essence of momentum, but other indicators are possible: use what you prefer but keep the lookback as short as possible.

Its hard to beat one day. There is no time to trade on a reaction. That is a luxury for trending markets. Markets tend toward balance between supply and demand and imbalance between supply and demand. Balance is conjestion; imbalance is range expansion where the market is seeking a new level. This is where we make our living.

With breakouts, entry is the hardest part. Often the market does not give you a retracement because it is in a runaway mode. Either you are on board or you are not. Exit on a divergence, don't wait for Captain Price, he wants all your paper gains.

I can't trade a system with success, but one can trade a method systematically. You can't watch price action by itself, you must watch it with respect to a reference point, which is often your entry point. Do not watch price for the sake of watching price; watch price for the purpose of doing something with it.

Always keep in mind today's open, yesterdays high and yesterday's low: these are your most important reference points. The reference of these points to current price action allows you to formulate a game plan ahead of price action. Anticipation, not reaction is the keyword for hit and run trading.

Just some thoughts: don't confront me with my failures *tic*.

All the best.....jerry.....