Prior to Wednesday’s close on November 25, many Swing or Oscillator based trading plans were on sell signals. Many markets including Asian and developing markets were near highs. A Trading System using Swing Trades or Oscillator based trading rules had Swing traders uncomfortable.
In the last 48 hours markets dropped significantly and many Swing Trading and Oscillator based trading Plans are giving Buy signals for Friday’s open or close and many for Monday.
I am often asked which style of trading is better, Swing Trading Systems or Trend Following Systems. Trend Following Systems can beat Buy and Hold Strategies and certainly Swing Trading Systems can too.
Here are factors to consider in determining if a Swing Trading Systematic style of trading is right for you.
1. Could you follow a plan to have bought this morning with 100% of all S&P 500 stocks down?
2. Do you feel comfortable buying when there is “blood on the streets”? For example: Could you have bought in February 2008 after the Bear Stearns failure? It turned out to be a great buying opportunity.
3. Do newspaper, radio, and TV headlines scare you?
4. Do you understand that fear and greed cause the masses to over react? A situation may be bad, but is the herd acting irrationally?
5. A Swing Trade usually last for 5-10 days. Do you want to trade that frequently?
6. Can you take a quick loss when wrong without remorse?
7. Do you like to Buy retracements?
8. Are you comfortable being different than the crowd.
Your own personality is important in determining your systematic trading approach. If you can follow a systematic plan that would have you Buying in the middle of this Dubai crisis, then a Swing Trading Systematic approach may be for you.
If you are comfortable sitting through a few down days, but like staying with the trends, then a Trend Following Systematic approach may be for you. China, (FXI) Emerging Markets, (EEM) Latin America, (ILF) S&P 500, (SPX) Gold (GLD)are all in confirmed up trends and you should have done nothing today.
If you panic at news and sold positions today because you are fearful, you may want to consider if being in the markets is for you at all. Bulls can make Money, Bears can make money. Emotional traders may not want to be trading.
For more information on Systematic Trading, mark@seleznovcapitaladvisors.com
