Q: I am interested to know your opinion on Gann Swing Trading as a system. I am in the last few chapters of your Peak Performance Home Study Course and read your newsletters every week. Through both these media the message is constantly conveyed that market analysis is not very important, and a rigid system is most important. I am confused as to where swing trading would fit into this. As a system, it would seem illogical to take every swing generated on a 1-, 2- or 3-day swing chart. And the rules Gann sets out for trading swings can be quite subjective. You do reference him as one of the masters, so I assume his theories are accepted to some degree in the Tharp institute.
Swing trading makes it very simple to calculate reward-to-risk ratios and position size, so it must have some merit also as these are the most important aspects to profitable trading in your lessons.
I guess I am interested to know how you categorize swing trading, and if you have any examples of successful traders that use it as a stand-alone system, or as a rule-based discretionary system.
A: I have no opinion on any specific type or style of trading system; however, if you give me the SQN scores for the system from various market types, I'll be happy to provide you some opinions.
The only way I could really answer your questions about swing trading would be to assume my own criteria about trading and systems, which aren't the same as yours. Furthermore, I'd filter swing trading through all my beliefs, which also aren't the same as yours. You will have to do some introspection and research to generate some answers about swing trading for yourself.
I recently mentioned that Ken Long made 100R during the recent crazy week in early May. That was swing trading.
A lot of your inquiry has to do with finding a system to fit you. But you need to answer a lot of questions before finding such a trading system:
- What are your beliefs about the market?
- What are your beliefs about setups/entry?
- What are your beliefs about exits/reward to risk?
- What are your beliefs about position sizing?
- What are your criteria for being comfortable trading a system?
It's interesting that you interpreted my writings to say I think it's most important to use a rigid system. I don't believe I have ever used the word "rigid" in relation to systems. I also don't recall ever specifically saying Gann was a master; I've just mentioned his ideas as one set of many possible ideas for coming up with a trading system.
For some additional input into your exploration, I suggest you read my recent article on mechanical trading and next week's article on rules-based discretionary trading.