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Registered User
Joined: 1/29/2006
Posts: 6
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I am Swing trading and looking to be in my trades no longer than 3 to 5 days. Would you please tell me what the best settings for this type of trading for the MACD, Bollinger Bands, Stochastic and Wilder's RSI? Thank you very much for your help. It is greatly appreciated?
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Worden Trainer
Joined: 10/1/2004
Posts: 18,819
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We trainers cannot recommend settings for your trading. I will move this to the MARKET TALK forum so others can offer their opinion.
- Craig
Here to Help!
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Registered User
Joined: 12/8/2004
Posts: 1,301
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I think the better question is why do you want to stay in a trade for only 3-5 days? Personally I think that is more dangerous than day trading.
Very few people can beat the market by limiting their upside potential.
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Registered User
Joined: 12/19/2004
Posts: 457
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I get the feeling this is a very new user just learning about the market.
I hope this doesn't seem harsh or critical, because I don't intend it to be that way. This is strictly an observation I've come to by looking at the ads for newsletters, investment managers, etc.
Keep in mind the psychological biases that investment managers take advantage of when advertising their services are the same biases that make most people market losers.
Your question reveals a mindset that others are readily willing and able to tell you how to make massive market profits, for free. It assumes market data is strictly objective, and that just having the "right" parameters will guarantee profits in the long term.
A highly reliable swing trading system that you desire could produce returns in excess of 100% annually, given compound growth. Do you really think someone is going to give out such info for free? Do you think just because the system is profitable for that person, it will be profitable for you?
There is NO such thing as "easy money" in the market. Of course, the "work" a trader puts in is entirely mental, but it is still work. Some people find pouring over market data or business statistics drudger, others, like myself, find it fascinating.
Market data is objective in one sense. It isn't revised constantly like GDP, or earnings estimates. But, market data needs to be interpreted in context. Not all high volume breakouts are bullish, and not all breakdowns are bearish. It takes experience and observation to sort them out.
Ok, Sunday's sermon is over. I'm not sure how helpful the following will be for you, but I'll give you some hints on what to look for. Keep in mind that you need to incorporate these settings on the daily with an analysis of the action on the weekly chart to figure out how deep the swings are supposed to be.
If I were to swing trade, I'd use what is called a "counter trend" system. Here are my settings:
Top Window:
1. Price: Candle
A. Moving average 21 days simple
B. Bollinger Band 21 days 20 Width.
C. Bollinger Band 21 days 10 Width.
Middle Window Custom Indicator--Detrended Volume Oscillator (Volume MACD)
1. Custom Indicator ((v-avgV55)/avgV55)*100
A. Moving average 21 day Simple
B. Bollinger Band 21 days 20 Width
C. Bollinger Band 21 days 10 Width
Bottom Window: Any momentum indicator, to spot divergences. I prefer to use momentum indicators derived from the Price Rate of Change, as I can fit 3 different time series in one window.
For Longs:
1. Stocks with a downward sloping 21 day moving average, and the closing price outside of the 2 SD Bollinger Band. Preferably, the stock closed down on high volume, with a spike in the volume oscillator outside the 2 SD band.
2. Look for a positive divergence on a momentum indicator.
3. Look for a candle reversal--ie. hammer, piercing bottom, etc. Once this is noted, it is safe to either buy at the next market open, or market on close. Stop is a CLOSE below the recent low. The TARGET is the 21 day moving average OR the 1 SD band ABOVE the 21 day moving average.
4. A trailing stop using a short term exp moving average--ie. 8 day ,with a positive slope, is used to keep profits. The alternate exit is a candle reversal at price target points--(the moving average, or the bands).
For shorts: reverse all of the above settings.
Sometimes the stock makes a short term rally to the 21 day moving average, and then decides to test the lows.
This is likely to happen when the stock appears very oversold, but there isn't a momentum divergence suggesting the trend is close to being complete. It is a judgement call to decide whether to take the trade, because the initial target (21 day average) makes a good risk/reward ratio, or to wait for a test, (and see a divergence).
The low this time will usually be on LOWER volume, and the candle reversal up should be on HIGHER volume.
In this instance, volume isn't as helpful an indicator to confirm the upward move. But you can see that the selling pressure is decidedly less than at the prior low. The peaks in the volume indicator will show a series of lower highs.
The profitability of these set-ups and exits depends upon the state of the major trend. If you just got a reversal from a long term downtrend on the weekly, then short setups aren't likley to provide deep enough swings to be profitable.
Long trades on the daily in the context of an uptrend are slightly lower risk. Tops are somewhat harder to forecast than bottoms, and have a tendency to overshoot the price targets, so by trading in the direction of the major trend, your risk is a bit less.
I like to take these counter-trend set-ups when I get the feeling the major trend is also in the process of reversing. So I also like to see divergences on the weekly too. But that isn't absolutely necessary.
Some other authors to look up: JM Hurst (Cycle Analysis) and the Taylor "Book" Method.
For others who decide to look at this system, post back here if you find it helpful or not.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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adnilsito
The general rule of thumb is the shorter the period length on your indicators the more frequent your trading will be.
If you use a dual moving average cross as a buy/sell signal a
15 and 40 (mav lengths) value will hold a stock for a longer period than
a 3 and 11 value.
I would encourage you into looking for a technical indicator method or previous low as a method to exit your trade. You should try to make winning trades last.
"Cut your losses short---Let your profits run."
It may seem smart to take a "quick" profit but its the "big" winners that can take care of the "false starts" and
the general rule of thumb is the longer the trade the more potential profit there is. Rather then an arbitrary timeframe.
Hope that helps
Good Luck
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Registered User
Joined: 1/29/2006
Posts: 6
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Thanks Craig S for sending this out to Market Talk and thank you very much to HaveNOcents, RMR1976 and Diceman.
To HaveNoCents: I agree with you. This makes a lot of "cents."
To RMR1976: You are correct. I am a newby and I appreciate your information to the utmost. Because of your response, I an no longer a 10 in terms of market unawareness, but a 9.9. I need a little time to make your comments digest, however, it helped very much. Thanks again.
To Diceman: I agree with you as well. It better than rolling dice. Thank you very much.
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Registered User
Joined: 12/12/2005
Posts: 9
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This is helpful to me too. Thanks everyone.
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 Gold Customer
Joined: 11/13/2004
Posts: 102
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I am impressed beyond words with the personal time these discussion participants will take to help others - especially you rmr.
Soc
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Registered User
Joined: 10/27/2005
Posts: 71
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Good stuff RMR1976
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Registered User
Joined: 4/14/2006
Posts: 1
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I am restarting with Worden's software after a few years away. I used to watch a money flow indicator that I found very useful. As I come back I expect to make use of the MACD and proprietary money flow indicators. I want to trade options using the trend I see from the software. When the trend has changed and the money flow and MACD are inline I will buy an option reflecting the direction of the trend. I will using trend lines to watch the trend change and confirming with MACD and money flow. I will also be watching the candles for change in momentum with dojis and small candles.
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Registered User
Joined: 4/10/2006
Posts: 27
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I'd like to second Soc and thank rmr1976 for the gift of his time and the sharing of his knowledge.
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Registered User
Joined: 4/28/2006
Posts: 5
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rmr1976 mentioned Taylor's book method - published 1950.
Do you recommend the 3-day-method or the "tape-reading-method" using the Buying Day, Selling Day and Short Sale Day?
I would not recommend the book for beginners - especially not when Taylor describes the way "Buying Day Low Violation" must be managed.
In all - a book that is not easy reading!
Taylor's big idea - how to handle swings - is the value of the book.
(This is my first post from "Down-There" - South Africa. Thank you for the high standard of the general "talking"!)
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