Will made a great point today that I wanted to expand on and hopefully help some of the newer traders at the same time, (paying further attention to your request Will). Traders please keep in mind that I am just commenting on it from my own perspective and would further preface this post by saying its only my opinion. Profits are certainly made and lost by each method for sure. I believe it will help you as a trader if you can define your preference between swing and day trading, then build your rules around one method or the other. Spend a lot of time establishing and writing your trade plan, then trade it and track its results. I recommend testing your own day and swing trading plans extensively and separately over 90 days or even 180 days. When I went thorough this exercise years ago I discovered that I did much better swing trading most assets by all statistical measurement tools.
TRADE EXAMPLES: (These are not trade recommendations, just some general areas I am interested in. Please evaluate them with your own rules, strategy and risk parameters).
SWING: There is a clear demand zone on the CL contract around the 59.44 area, if prices pulls back to that in the future. That's a swing trade by my rules, its with the high time frame trend, and I will look to get long somewhere in there. When price gets closer I will plan my exact entry, stop and targets on the 30M chart. May not get there anytime soon but if it does I am ready.
DAY: I may take some shorter term day trades long in the 63.00 area, depending on a tighter set of rules because that demand area is not as good and is a retest of an older area (not fresh). I may also apply an even tighter set of rules and take some counter trend day trades short potentially around the 72.00 area depending on what the approach looked like and how close the demand zone below it formed (that would ultimately determine my risk vs. reward)
NOTE: When I say "tighter set of rules" I am talking about my own written rules and and trade plan that considers things like: risk vs reward (distance to opposing significant supply or demand and distance to stop loss from entry), freshness of the zone itself, the daily trend as well as the higher time frame trend (just to name a few). I also score and qualify each trade in my trade journal before entry. That way I can pass or fail each decision in a repeatable, non-emotional, and analytical way. It also helps me to go back and learn from my mistakes when I make them (and I do).
Sorry if it was wordy, and hope it helped. Bless you all, and best of luck B
- In most cases you will find a better win/loss ratio as well as risk vs. reward through swing trading. Partially because using higher time frame charts for your analysis causes you to take less trades than a day trader who uses the lower time frames and takes more trades. A big one for me is more freedom and less screen time which generates more family time/fishing time. As a swing trader you will experience less of a psychological roller coaster ride than day traders who have to contend with the daily bounces against and through smaller time frame zones.
- If you crave action and like to trade a bunch of contracts at 1:1 or even 3:1 in order to generate daily or weekly revenue, swing trading may frustrate you. It requires more patience and you sometimes have to wait weeks (or months) for your zones to be hit, and your orders filled. Sometimes price does not fall away from your zone right away and you have to sit there for a day or two with price in your zone bouncing around (I hate that).
- Even though visually zones may look the same to you when you switch from the 5M to 4hr chart, or 30M to Daily. They are very different, check the volume ratios using the PFA software, and measure the risk to reward. In addition, go back in time on a higher time frame chart and track how price reacts to zones you id. Next going back for a few weeks on a smaller time frame chart and track the reaction to zones you id on that time frame. It will be an eyeopener for you if you have not already performed a similar test.
- You will also notice that they (larger time frame zones) are usually market turning points, and (if you chose the right ones) not internal zones. The smaller time frame charts show internal zones as active and make them visually look stronger than they really are, unless you use the higher time frame chart for perspective when considering them. Experienced traders call these small time frame supply and demand zones that are internal by nature "noise."
TRADE EXAMPLES: (These are not trade recommendations, just some general areas I am interested in. Please evaluate them with your own rules, strategy and risk parameters).
SWING: There is a clear demand zone on the CL contract around the 59.44 area, if prices pulls back to that in the future. That's a swing trade by my rules, its with the high time frame trend, and I will look to get long somewhere in there. When price gets closer I will plan my exact entry, stop and targets on the 30M chart. May not get there anytime soon but if it does I am ready.
DAY: I may take some shorter term day trades long in the 63.00 area, depending on a tighter set of rules because that demand area is not as good and is a retest of an older area (not fresh). I may also apply an even tighter set of rules and take some counter trend day trades short potentially around the 72.00 area depending on what the approach looked like and how close the demand zone below it formed (that would ultimately determine my risk vs. reward)
NOTE: When I say "tighter set of rules" I am talking about my own written rules and and trade plan that considers things like: risk vs reward (distance to opposing significant supply or demand and distance to stop loss from entry), freshness of the zone itself, the daily trend as well as the higher time frame trend (just to name a few). I also score and qualify each trade in my trade journal before entry. That way I can pass or fail each decision in a repeatable, non-emotional, and analytical way. It also helps me to go back and learn from my mistakes when I make them (and I do).
Sorry if it was wordy, and hope it helped. Bless you all, and best of luck B
Wow,
Thank you so much for putting your efforts into helping the entire PFA Community! Each and every single person has something to offer, whether they know it or not and you've really put the icing on the cake. Again thank you for taking the time and showing such amazing initiative to go above and beyond. Very inspiring
Thank you so much for putting your efforts into helping the entire PFA Community! Each and every single person has something to offer, whether they know it or not and you've really put the icing on the cake. Again thank you for taking the time and showing such amazing initiative to go above and beyond. Very inspiring
Thanks, Bill - I don't trade CL but I do trade the Forex markets. I believe that trading on the larger time frame is an easier thing for me while I'm still in Bootcamp and learning the strategy. It will certainly help me not make bad decisions.
Thank you very much Bill, terrific post!!
Quick question: does anyone have a good video on how to setup and start the multi timeframe NinjaTrader8 strategy-tester?
Take care
Mattias
Quick question: does anyone have a good video on how to setup and start the multi timeframe NinjaTrader8 strategy-tester?
Take care
Mattias
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Thanks for taking the time to write and post this. This is good for traders of all levels of experience to see.
I have two followup questions, if you don't mind. What time frames are you using for swing and day trades? And how many trades do you average on a weekly basis for swing trading?
Thanks!
Initially, I use the daily time frame to really take in the big picture, call it my high time frame (HTF). This is where I find the first indication of trend as well (both the long term and short term trend). I use this HTF to make sure I am not range bound, within an opposing level of higher time frame supply or demand, or about to enter one. This also begins to paint a picture of my potential risk vs. reward that I will complete in the next time frame.
For a medium time frame I use the 30M, call it the (MTF). Its worth noting that Will introduced my to the 25K Volume chart a couple weeks ago and I have been playing with that and the 10K Volume as well for a MTF viewpoint. This is where I typically locate the short term trend, plan my entries, stops and targets for swing trades. Next, by looking at the 15 or even 5M chart I get a look at what the MTF zone is composed of internally (and may see a day trade opportunity). Think of it like this; when day traders see a "level on a level" on a small time frame chart they have to then decide between the proximal (closest to price) and distal (furthest from price) levels for there entry. Most of the time you should take the lower level, (thank you Will for volume ratio/profile tool). As a swing trader my risk is planned for the entire zone most of the time so I can afford to take both of these levels most of the time which will generate an entry more often. So if I see that kind of structure with my "micro scope" time frame I will zoom out to a 60M or even 120M chart and see what that same zone looks like. Then I will remeasure for risk and possibly take the "whole" zone if it meets my risk parameters. Even if it warrants reducing the amount of contracts to accommodate this larger zone. I don't want to become paralyzed by analysis so I move through the multiple time frame analysis, score the trade, pass/fail it. Then execute stop, entry, target actions and move on to the next one. Hope that answered your question. B
Thanks for the additional information. I like the concept of volume charts as well because they tend to take the overnight noise and chop out of the chart.
Thanks,
Kevin