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Swing Trading

Concepts & Edges


Rob Hanna
Co-Founder & VP of Research, InvestiQuant

9/16/2015

Copyright 2015 InvestiQuant

Disclaimer
It should not be assumed that the methods, techniques, or indicators presented
here will be profitable or that they will not result in losses. Past results are not
necessarily indicative of future results. There is a high degree of risk in trading.
Hypothetical or simulated performance results have certain inherent limitations.
Unlike an actual performance record, simulated results do not represent actual
trading. Also, since the trades have not actually been executed, the results
may have under- or over-compensated for the impact, if any, of certain market
factors such as lack of liquidity. Simulated trading programs in general are also
subject to the fact that they are designed with the benefit of hindsight. No
representation is being made that any account will or is likely to achieve profits
or losses similar to those shown.

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What is Swing Trading?


A short-term trading approach that looks to take
advantage of market swings that typically last from
1-7 days.
Most swing approaches will look to buy short-term
weakness and sell short-term strength.
Often traders will use the intermediate/long term
trend to further filter opportunities.

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A Simple Swing Trading Approach

Buy 5 Day Low & Sell 5 Day High

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Buy 5 Day Low & Sell 5 Day High


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A Simple Long-Term Trend Filter Doesnt Help


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Few trades, fewer days exposed to the market, bigger average wins,
smaller average losses, and more total profits
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IQ Swing Trading Concepts


Acceleration
Momentum
Seasonality

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Acceleration
How fast is the market moving and from
where?

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A Strong Move Down From A High No Edge

A Strong Move Down From A Low Big Bullish Edge

A Strong Move Down Within A Range Small Bullish Edge

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While Big Drop From A Low Point Suggests A


Strong Bullish Edge, A Small Drop Does Not

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Acceleration Summary
Both the magnitude of a move and the place that
move is occurring make a difference in price action
moving forward.

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Momentum
How persistent has the move been over
the last few days and weeks, how strong
is the movement, and where are we
trading in relation to the long-term
trend?

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Persistent drop from high no edge

Persistent drop to a new low bullish edge

Persistent drop within a range in between (mild edge)

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Momentum Summary
Like fast moves, persistent moves can provide an
edge but should be examined within the context of
the longer-term trend.

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Seasonality
What long & short-term seasonal forces
are in play, and how has the market
performed during similar periods in the
past?

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Seasonality Fed Days

Fed Days have seen strong gains over the years.

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Seasonality Non-Fed Days

All other days combined have managed very small gains.

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Seasonality Summary
Certain days, times of the month, times of the year
and other cycles can exert a seasonal influence on
stock market prices.

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Acceleration & Seasonality Combo

When price & seasonality-based edges combine it can make for a very strong setup.

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IQ Swing Guides

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IQ Swing Acceleration Ensemble (stand alone)


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IQ Swing Momentum Ensemble (stand alone)


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IQ Swing Seasonality Ensemble (stand alone)

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The average of all 3 approaches is better than any one of them on their own.
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Summary
Swing traders look to take advantage of short-term market
imbalances & price extremes.
Many techniques can be used to swing trade, but most
involve combining short-term overbought/oversold
indicators with long-term trend.
IQ utilizes 2 price-based concepts (Acceleration &
Momentum) along with Seasonality.
Combinations of edges often provide better forecasting
information than any individual component.
IQ Swing Edges can be used on their own, or as an
additional input/filter for other systems.
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