The hundred year old art of swing trading Part3 | stockbee

6/25/2009

The hundred year old art of swing trading Part3

Sometime back we looked at the basic philosophy behind swing trading . In that post we also looked at some of the books on swing trading. In next series of posts we will look at some of the details of method discussed in these books.

We will start with Dave Landry. The basic idea behind all the Dave Landry set ups is "pullback" in a strong thrust. The objective is to capture the thrust after the pullback. The method works only in stocks with momentum.


Dave Landry's Persistent Pullbacks

Persistent Pullbacks is Dave Landry's favorite strategy out of the 10 strategies he details in his book. Persistence as he defines it is stocks ability to follow through from one day to another. He offers his set up conditions for buy and sell for this strategy as follow:
  • Stock should have 20 bar persistence before a pullback.
  • It should be up at least 10 points in 20 days.
  • It should have a pullback.
  • Enter when the trend resumes after pullback
  • Rule for shorts are reverse of the buy criteria.
Now this is the basic concept. Not everything is spelled out completely. But there is enough to recreate a scan. How can this be done in Telechart. If you think through each condition you can build a scan which will help you find such stocks.
Basic building blocks will be :
  • Scan for 20 day persistence.
    • One way to do this is using our relative linearity or fractal efficiency scan.
    • Other ways is by linear regression.
    • Or another way is by defining persistence as ability of stock to make say a new high every 3 days
  • Stock should be up 10 points in 20 days prior to pullback
  • Condition to indicate a pullback in stock meeting above condition.
  • Condition to show trend resumption after such a pullback.
  • Some liquidity condition to eliminate low volume stocks
So if put your Telechart thinking hats on and give it a try there are many ways to build this scan. Some scans will give you very few good candidate some will give you lots of them, then you have to manually select candidates. The Yahoo Telechart group has scans for this if you go through the archives.

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