technicians, arelikely to assign importance when price changes between the two days
12
THE BIG PICTURE
show large gaps, or when a low-volume day is followed by a high-volumeday. These are examples of the kind of changes occurring between daysthat will be viewed as important to swing traders, and it further supportsthe belief that to establish the two- to five-day window to identify aswing trading opportunity, you need to have the complete day and notjust hour-to-hour change. A day trader is inclined toward recognizingand grabbing profitable opportunities as they occur, but day trading is afar less sophisticated market strategy than swing trading. So while sometraders may prefer the excitement of continually watching a stock’s priceduring the day, swing traders employ a more methodical system.Chapters 3 and 4 provide you with a far more detailed explanationof the exact signals and methods of finding them. The purpose here is toprovide you with an overview of how swing trading works and how youcan use short-term trends to zero in on profit opportunities.The basic swing trading rule is to act after three or more consistentsignals occur. When the price has been moving to the upside, the signalis to sell; and when price has been moving to the downside, the signal isto buy. Remember, the swing is the key. The theory of swing trading isbased on the belief that short-term price change occurs in predictablerhythms and cycles. Upward movement is followed by downward movement in these short-term trends, and vice versa.There are several attributes required in order for these “rules” ofswing trading to go into effect. These are:1. Recognize an uptrend. A true two-to five-day trend consists of aspecific pattern in opening and closing prices. In an uptrend,each day should exhibit a series of higher highs, offset by a seriesof higher lows. So each day’s price passes the previous day’s peakon the upside; and each drop is less than the previous day. Figure1.1 illustrates this principle on a simplified line graph; note thatthe trend lines for both high and low price levels conforms to theuptrend rule.2. Recognize a downtrend. The downtrend also develops over a twoto five-day period. But it is characterized by a series of lower highsand lower lows. So each day’s high will be lower than the previousday; and each day’s low is lower than the previous day. The swingtrading downtrend is shown in Figure 1.2. This figure shows theswing trading downtrend; the high prices are progressively lowereach day, and the offsetting low prices are lower as well.
The Swing Trade Approach: The Strategy in a NutshellKey Point
Price
Swing trading is so called because of the tendency for price toswing back and forth in a two- to five-day window. This occursbecause day-to-day trading is dominated by emotion.
26252423222120191817161514
H
s
h
i g
L o
1
w s
2Day
3
Price
FIGURE 1.1 The Uptrend
26252423222120191817161514
H i
L o
1
g h
w
s
2Day
FIGURE 1.2 The Downtrend
s
3
13
THE BIG PICTURE
14
setupa signal to act in aswing trade pattern; the setup atthe top of anuptrend is a sellsignal, the setupat the bottom of adowntrend is abuy signal.
narrow rangedaya day in which thehigh-to-low priceof a day is muchsmaller than thetypical day, andwhen it occursafter three or moreestablished trendday patterns.
3. Identify a setup. The setup is a signal that it istime to take action. The setup at the top of thetwo-to five-day uptrend is a sell signal. And thesetup at the end of a two- to five-day downtrendis a buy signal. In other words, the swing tradeis premised on the idea that these specific signals can be used to time decisions and to profitfrom the cyclical swings in price.4. Look for the narrow range day. All signals arestronger when they are confirmed. The narrowrange day is a day in which the distance fromhigh to low price is much smaller than preceding “typical trading ranges. For example, if astock has been trading in a range of two to threepoints and the two- to five-day trend is established, a narrow range day at the end of the established trend is a strong confirming signal.Remember that the narrow range day pattern isimportant only after a substantial price move. Atypical narrow range day at the end of a downtrend is a strong buy signal. This is illustrated inFigure 1.3.
HighClose
Low
TypicalTrading Days
NarrowRange Day
FIGURE 1.3 Typical Trading Days and Narrow Range Day
The Theory of Chart-Watching
15
Key PointNo single indicator should be used alone for timing trades. Theprinciple of confirmation makes sense and is a valuable way tocombine different types of information to time your trades.
5. Keep an eye on changes in volume. Stocks tend to trade with “typical” daily volume, but when that level changes it often signals achange in the interaction between buyers and sellers. For swingtrading, an exceptionally high-volume day accompanied by a narrow range day is a strong signal to act. So when the breadth oftrading narrows and volume increases substantially, that signalsthat the established trend is probably on the verge of reversing.These signals should be used in conjunctionwith one another. When a two-to five-day uptrendhas been established, look for the setup. Confirmation is a very important concept in swing trading:when you are able to confirm the trend with asetup, you have an exceptionally strong buy or sellsignal. The confirming indicators are a narrowrange day and increased trading volume. When yousee both of these together, you have exceptionallystrong confirmation that it is time to act (to sell after the uptrend or to buy after the downtrend).
confirmationa signal thatprovides additional indicationto another signal,that reinforces theindicated timingof a buy or sellmove.
The Theory of Chart-WatchingThere are two general schools of thought about how to pick stocks andtime buy and sell decisions. The fundamental school relies on financialreports and trends and the technical school of thought bases these decisions on price.
THE BIG PICTURE
16
Key PointThere is no reason to shun one type of analysis and favor theother. You can gain valuable insight from both fundamental andtechnical analysis.
OHLC charta type of stockchart summarizing the open,high, low, andclose for a dayusing a singlevertical line andtwo horizontaltabs. The top ofthe vertical line isthe line and thebottom is the low;the left tab is theday’s openingprice and the righttab is the day’sclosing price.
point-andfigure charta stock chartreflecting risingprices withcolumns of Xsextending fromhigh to low price;and columns ofstack’s Xs. Thischart does notdistinguish trading days, onlytrends.
While both points of view have merit, itmakes sense to use not one or the other, but both intandem. Swing trading is a technical strategy, butthe stocks you pick to use for swing trading may beselected based on fundamental strength. To the extent that you are going to rely on technical signals,you will use charts as a primary timing tool. Investors use many different kinds of charts, the mostpopular being the OHLC chart. This consists of avertical line extending from the high to low pricefor a day; and two horizontal tabs. The one appearing to the left is the day’s opening price, and the oneto the right is the day’s closing price. This type ofcharting tool is illustrated in Figure 1-4.The OHLC chart is popular because usingonly three lines, it conveys the essential information about activity over a period of time. This is efficient. A more obscure chart is the point- and-figurechart. This consists of stacks of Xs and Os withoutany regard for the time involved. The Xs are shownwhen the price rose, and the Os when the price fell.This chart gives technicians a quick view of tradingrange trends, but for most investors it is not as easyto use as the OHLC chart.Time is usually important to traders in orderto make sound judgments for their stock decisions;for this reason, the point and figure chart providesa particular kind of information for some purposes,but is not as valuable as the OHLC. Today’s charting services invariably include a moving average as
Price
The Theory of Chart-Watching6462605856545250484644424038363432302826
17
Close
HighOpenLow
10 11 12 13 14 15 18 19 20 21 22 25 26 28DayFIGURE 1.4 The OHLC Chart
well as daily changes in the stock’s price. In addition to showing the important open, high, low andmoving averageclose price points, charts also include one or morea statisticalmoving average lines. The most popular are 200method of showday and 50-day moving averages. These do awaying a trend that isrepresentative ofwith the distractions of short-term volatility andchanges withoutshow how a stock’s price has evolved over time.short-term volatility. The average isA final type of chart, and one used in comingcomputed bychapters in this book, is the candlestick chart. Thisadding up thedescriptive term is given because each day’s tradingfields in the period, and thenhas a body that is either white or black, with vertidividing by thecal lines extending above and below the main body.number of tradingdays.This type of chart was developed in 18th CenturythJapan to track rice prices. In the 20 Century, U.S.technical analysts and chartists began to recognizethe value of candlesticks for tracking the OHLC but also to get an immediate picture of whether a trend is moving upward or downward. Chapter three explains candlesticks in detail.
18
THE BIG PICTUREKey PointCharts display the short-term tendency of prices to swing backand forth. These trends are not erratic or random; they reflect visually the dominate market forces of greed, fear and uncertainty.
Charts all summarize the flow and pattern to a stock’s price cycles,both short-term and long-term. There is a natural rhythm to price trendsthat reflects the interaction between buyers and sellers and the dominance of one of the three market emotions: greed, fear and uncertainty.Technicians may consider themselves to be chartists, people whorely on specific price patterns to predict the next direction of a stock’sprice. Chapter two explores the many popular charting signals and explains how to recognize them. The chartist tends to believe that fundamental analysis has limited value because it ishistorical and does not affect the forces of supplyand demand that determine price movement.chartistsSome chartists acknowledge that long-term trendstechnical analystsare dominated by fundamental strength or weakwho rely primarilyon recognition ofness of a company, but rely on chart price patternsspecific pricefor the short term.patterns andshort-term trendsThere are both pro and con arguments conto predict andcerning taking the chartist’s approach. On the posianticipate thetive side, the pattern of price movement doesnext price direction in a stock’scontain a specific predictability. This is not theprice.same as a guarantee, but there is a tendency forprice to move in a pattern. Swing trading is a typical charting strategy because it is designed to observe and predict pricemovement. When prices move in one direction and in specific ways forthree or more trading days, the tendency is for price to then reverse andgo in the opposite direction. Because you cannot know how many periods a trend involves, swing traders look for reversal signals in order totime their decisions.
The Theory of Chart-Watching
19
Key PointNo investment decisions should be made in isolation. Fundamental information is not merely historical; it also indicates whether acompany is financially sound—or even solvent—today.
Chartists believe that buyers and sellers continually interact. Whena stock’s price rises far enough, current owners want to sell to take profits;and that causes the price to fall. When price falls far enough, the stockbecomes a bargain so new buyers place orders. The outcome of thisnever-ending interaction is the two- to five-day wave action of stocks.On the negative side, charting is focused only on price and volumeand those who track price movement may ignore fundamental news.This is a mistake. For example, in spite of how a stock’s price patternsevolve, when a company misses a deadline for filing a financial reportthat is a danger signal. For example, in October 2005 Krispy Kreme (thedoughnut chain) stock fell below $6 per share and the stock chart mayhave looked to some chartists like a buying opportunity. But somethingmore profound was going on. The company had missed its filing deadline with the SEC and it was disclosed that improper accounting practices had been in place for several years. The company’s stock recoveredsomewhat by late 2006 but continued to report quarterly losses. In thissituation—where profound fundamental problems were evident—relyingstrictly on chart patterns would have been a mistake.Chartists do better when they combine fundamental and technicalsignals. You may use charts as a primary timing mechanism for shortterm swing trading; but selection of stocks for this play should be madebased on at least a preliminary review of fundamental issues:• Is the company solvent?• Has a profit been reported (recently or, more significantly, ever)?• How much debt is the company carrying?• Does the company compete well within its industry sector?
20
THE BIG PICTURE
Even without looking at a financial statement, you can learn a lot justby reading the recent headlines. Online brokerage services provide newsfor each company. For example, if you research Krispy Kreme (KKD)on Charles Schwab & Company’s brokerage service—https://investing.schwab.com—you find the stock price, reports of rating services, comparative price performance data, and recent news headlines. Obviously, usingboth fundamental and technical information provides fast and reliable information, and vastly improves a chartist’s information base.
The Primary Emotions: Fear, Greedand UncertaintyChartists employing a variety of strategies will usually agree on onepremise: Short-term price movement is predictable most of the time.Some chartists depend entirely on some specific patterns and tests withina price pattern. Others, like swing traders, believe that the cornerstone ofthe strategy is the three-part emotional trend that rules how most of themarket works. So greed, fear and uncertainty determine price patternsand make it easier to time and predict price movement.Some swing traders describe the strategy as one that trades emotions, not stocks. But this is not entirely true. A wise trader will always beaware that stock selection is key to a smart program, so a starting pointshould be to pick stocks that are going to act and react to the normalmarket forces. If you pick a distressed stock (such as that Krispy Kremein 2005) or a stock that has risen in value beyond any fundamental explanation (like Amazon.com or eBay in the recent past), you cannot relyon the normal cyclical patterns of short-term charting; so those situations may not provide reliable signals either. Later in this book, you willfind guidelines for picking stocks for swing trading.Once you have limited your range of potential swing trading stocks,the timing of trades can be based on the three emotions that rule themarket. Market observers and the financial newsmedia like to give names to these emotional trendsother than the raw emotional names. When greedrallyis in control, it is called a rally. When fear domia period whennates and prices begin to fall, it is called a correcprices are rising,tion. And when a period of uncertainty isalso known as acondition wheredominant, that is referred to as a period of consoligreed dominatesdation. The three market conditions are summathe market.rized in Figure 1.5.
Greed
r
6462605856545250484644424038363432302826
21
Fea
Price
The Primary Emotions: Fear, Greed and Uncertainty
Uncertainty
10 11 12 13 14 15 18 19 20 21 22 25 26 28DayFIGURE 1.5 Emotions and the Market
The consolidation period—when uncertaintyrules—is sometimes described by analysts as a timeof “agreement.” In other words, under this interpretation, the current price range is agreeable toboth sellers and buyers. This is inaccurate. It is nota time of agreement at all, but rather a time whenneither buyers nor sellers dominate the market.During periods of uncertainty, the buying and selling activity tends to be well matched, so that nochanges in supply or demand are evident. There isno agreement at all; both sides have no idea wherethe stock’s price is going to go next.In all three market conditions—characterizedby the emotions of greed, fear and uncertainty—one fact remains constant: most traders do notlearn from their past mistakes. Logically, everyoneknows that no direction remains forever. When astock’s price begins to rise, there is going to be alimit but greed ignores this. When the price is
correctionthe description ofa market in whichprices are falling,when the emotionof fear dominatesthe market.
consolidationa time when priceis not movingupward or downward, but remaining within anarrow tradingrange; a marketdominated byuncertainty.
22
THE BIG PICTUREKey PointThe market likes to give exciting names to upward-trendingprices, and to soften downward-trending prices. Thus you hearabout a rally (up market) versus profit-taking (down market); orenthusiasm (up market) versus caution (down market).
falling, it cannot fall forever and at some point shares drop to a bargainprice level, but fear ignores that fact. And when uncertainty rules themarket (even if for only a few days) traders tend to become impatient.They either lose interest in the stock or make an uninformed decisionwhich is likely to be wrong at least 50 percent of the time. So holders willsell right before prices rise at the end of the uncertainty, or they buy rightbefore prices fall. These actions occur because traders act impulsively andemotionally. So with this in mind, you may add a fourth emotion: impatience. The impatient investor acts too quickly and makes a lot of timingmistakes.Swing traders manage their emotions and simply observe the interaction between the emotions of other traders and market prices. Thiscontrarian approach is more sophisticated than the common definition.A swing trading contrarian does not simply buy when most people areselling and vice verse; the more advanced version involves making decisions contrary to the dominant emotion of the moment. When pricespeak in a frenzy of greed, the swing trader looks for the sell signal. Whenprices fall rapidly in the ravages of fear, the swing trader remains calmand looks for the signal that the price has bottomed out. When uncertainty is the dominant emotion, swing traders resist the temptation to“do something” and remain patient until a signal emerges.Before delving into more about specific swing trading examples,you need to review the basic rules of technical analysis and chart interpretation. The next chapter goes through these basics as a building blockto turning swing trading into a powerful market tool.
2Chapter
The Basic Technical Rules
he tools used in technical analysis are price-related for the mostpart. They are visual in nature. Trading and price patterns are givengreat weight by technicians. In comparison, fundamental analysisis a numerical study using financial results to establish recent trends andto predict future value—and thus price growth.While fundamental analysis is backward-looking, technical analysisis intended to anticipate future price trends. Investors may use both ofthese approaches effectively to improve identification of risk, stock selection, and the timing of decisions:
T
1. Identification of risk. When people hearabout risk, they tend to think of only onekind of risk—losing money versus makingmoney. This is market risk and every stockinvestor faces this risk continually. Theidentification of this risk is elusive, however, because so many aspects of the company and the stock have to be considered.Chapter 6 explores the question of howto pick stocks based on financial condition
23
market riskthe risk that astock’s value willfall rather thanrise (or rise afteran investor sells).Market risk can becompared andjudged based onfundamentaltrends and technical price history.
THE BASIC TECHNICAL RULES
24
and capitalization; and those questions arethe starting point for identifying market risk.volatilitythe degree ofmovement in astock’s price, andthe number ofpoints of movement from day today. The greaterthe price swing,the higher astock’s volatility.Most investorsdefine market riskin terms of pricevolatility.
trading rangethe normal trading area extending from thehighest to thelowest typicalprice. Stocks tendto trade within aspecific range.The broader therange, the greaterthe volatility andthus the greaterthe market risk.
Technical analysis includes comparisons ofprice and volatility, which is another aspect to market risk. The ideal swing trade stock is one with adegree of volatility. The price swings are required toachieve the variation needed in swing trading, so avery low-volatility stock will not work. On theother end of the spectrum, highly volatile stocks areunpredictable and not suitable for most swing trading. The most suitable stocks, based on market risk,are those that tend to be moderately volatile, andthat trade within more than just a few points’ trading range.2. Stock selection. Picking stocks is, of course,the determining step in whether you achieveprofits or suffer losses. There is a tendencyamong investors to use methods for stock selection based on rudimentary technical signs,but these are often wrong. For example,some people buy stock because the price hasbeen climbing recently, or they sell sharesthat they already own because the price hasfallen. A rational method for stock selectionmay include fundamental analysis and athorough study of some key financial ratiosand trends; and technical analysis for thetiming of trades, among which swing tradingis one of the most effective.
Key PointSwing trading requires a moderate degree of volatility. Too littleswing in prices involves no trading opportunity; and too muchremoves the predictability of price trends.
Support and Resistance
25
3. Timing of decisions. Fundamental analysis is based on recent historical financial results—and this is a problem. The market is continually changing, moment to moment. Technicians correctly pointout that fundamental analysis cannot be used for timing of trades.While the fundamentals can and should be used to pick stocks,you need to rely on technical signals for proper timing of buy andsell decisions. Swing trading is a valuable tool for this purpose.
Support and ResistanceThe trading range of a stock is the price area in which that stock is beingbought and sold. This range establishes what is “normal” so that whenthe stock’s price moves above or below that range—or even when theprice tests the edges of the range—those events are significant. In a nutshell, this is how technical analysis works. It is all about setting up andunderstanding a few rules, and then deciding what it means when thestock’s price breaks those rules.Trading range can take several different shapes. The most basic one isbased on price, so that the trading range remains stationary. The top andbottom price do not change. A second type is the evolving trading range,in which the spread of the range remains approximately the same but theprice edges upward or downward. These three typesof trading ranges are illustrated in Figure 2.1.When a trading range is evolving, techniciansspreadcall this pattern parallel price channels, and are usuthe point difference betweenally interpreted as foreshadowing a change in thehigh and lowtrading range in the near future. The level andprices within atrading range; thespeed of an evolving trading range, a phenomenonlarger the spread,called momentum, is also considered key in identithe greater thefying how and when the trading range is going toprice volatility.adjust in the future.Key PointThe trading range establishes the borders of what techniciansconsider normal for a stock. Any trading above or below thatrange offer a signal that important changes are about to occur.
THE BASIC TECHNICAL RULES
26
wnDo
Price
gvinolEv
Stationary
UpngivolEv
Stationary
FIGURE 2.1 Trading Ranges
parallel pricechannelsthe top and bottom edges of atrading rangewhen price levelsare evolving tothe upside ordownside, asopposed to arange in whichprices remainstable within therange.
momentumin technical analysis, the rate andspeed of changesin price and trading range, believed to be adetermining factor in how soon atrading pattern islikely to adjust.
The trading range is also defined by the allimportant to and bottom price levels. As long as astock remains within a defined trading range, theselines remain intact. But when price exceeds theseprice lines, that means that big changes are occurringand a new trading range is going to be established.The top line of the trading range is called theresistance level. This is the highest price that tradersare currently willing to pay for the stock. At thebottom is the support level, which is the lowestprice that sellers will accept to relinquish stock. Inthe never-ending interaction between buyers andsellers, the support and resistance lines provide adefinitive, price-based summary of the stock’s current supply and demand levels.Resistance and support are the foundations oftechnical analysis. They provide the standard bywhich a stock’s performance is measured, in severalrespects. These standards include:1. The spread and thus the volatility of the stock.The greater the swing in price from high tolow within the trading range—the spread—the greater the volatility. High volatility is themost commonly used measure of marketrisk, so the technician will judge stock safetybased on the spread itself.
Support and Resistance
27
Key PointOnce the current trading change is violated and a new trend is set,a new trading range will be established for trading in the stock.
2. The trend itself—flat, up or down. The trendmay be flat or evolving and this also helpsto define the stock. Swing traders dependon a degree of volatility or the strategy simply will not work; most short-term traderswill agree that they need some price swingsin order to put their trading strategies inplace. This is a short-term concern. Astock’s price performance over the longterm depends on the strength of the fundamentals for the company; short-term priceperformance is dominated by market emotions, and this is where moderate volatilityis advantageous.3. The degree to which the trading range limitsare tested and what those tests imply. Technicians find themselves describing pricemovement as though the price itself wereconscious. So they describe a price trend as“indecisive” or “aggressive.” When the priceapproaches either resistance or support levels, technicians say that the price is “testing”those limits. A test that does not succeed isusually taken as a sign that price is about tomake a move in the opposite direction;when the price does break through, that istaken as a significant development thatthrows the existing trading range into complete disarray and often leads to establishment of a new trading range. Manytechnicians like military analogies; so a
resistancethe highest pricewithin a tradingrange, representing the top pricethat buyers arewilling to pay forthe stock undercurrent conditions.
supportthe lowest pricewithin a tradingrange, representing the lowestprice at whichsellers will releasetheir stock undercurrent conditions.
supply anddemandthe forces determining whetherprices rise or fall.Increases in demand create upward pricepressure, andincreases in supplycreate downwardprice pressure;supply and demand are thecauses of all stockprice changes.
28
THE BASIC TECHNICAL RULES
price breakthrough is described in the same way as a militarybreakthrough. It creates confusion and chaos and may lead to adisaster (or in the case of trading range, establishing a new “frontline” for resistance or support).4. Actual changes in the trading range when price moves above or below established borders. Once a breakthrough occurs, a period ofvolatility often follows, after which a new trading range is set.This is inevitable. Stock prices cannot be expected to remainwithin a narrow trading range indefinitely, so emerging changesin trading range and even in levels of volatility are part of astock’s life cycle. From the technicians’ point of view, the changesare interpreted based on how the price settles down. The newtrading range may be more volatile than the previous one, or lessvolatile. The previously stationary range may be replaced with anevolving one. The differences in price trend from one period toanother are the interesting features of technical analysis. The unpredictability of price trends can be overcome, from a technicalpoint of view, by accurately interpreting the signals.5. The implications when a stock is so volatile that a trading range cannot be established. In some cases, a stock’s price is behaving so erratically that no actual trading range can be established for theshort term. The price is entirely unpredictable. This creates aproblem for everyone because no technical interpretation is possible. The volatility is caused by some important uncertaintywithin the market, but instead of the price settling down to a flatshort-term pattern, it becomes wildly unpredictable. This patternis invariably short-term and caused by a passing problem or perception. An astute technical analyst knows that at such times, anexamination of the underlying causes can help to estimate howlong the high volatility is likely to last.Key PointResistance and support are the defining attributes of a stock’sprice behavior. For swing traders, short-term trading is more important but the concepts of resistance and support provide important signals.
The Advantage of Short-Term Chaos
29
The study of resistance and support and the way that price actswithin the trading range is important to swing traders because it helpsyou to anticipate likely price behavior in the next three to five days.While you are likely to depend on chart patterns and signals described inthe next three chapters, always be aware of the trading range as well. Itrepresents the price-based premise of a stock’s risk level, price behavior,and future trends that have not yet developed fully.
The Advantage of Short-Term ChaosTrading ranges bring a degree to order to an otherwise chaotic situation.No one knows what a stock’s price is going to do next, just as no one canaccurately predict the broader market. The auctionmarketplace in which stocks trade is unpredictablebecause there are so many competing forces and ininstitutionalterests involved. An economic model discusses supinvestorslarge investorsply and demand as though buyers and sellerssuch as mutualoperated with single interests and motives. In pracfunds, insurancetice, supply and demand is much different.companies orpension plans,Because supply and demand are complexholding diversiforces that interact on many different levels, pricesfied portfolios ofstock and tradingnever move in one direction indefinitely. When ain blocks ratherstock’s price rises, some owners will take profits andthan only a fewsell. The more shares that are sold, the more priceshundred shares.Institutional inmove downward. This interchange is continual. Itvestors accountalso makes a difference when large institutional infor most of themarket’s treadingvestors (such as mutual funds, insurance companies,volume.and pension plan managers) buy or sell blocks ofstock in a single move.The individual investor, also known as the retail investor, accounts for only a small portion of toblockstal trading volume. This does not mean thatlarge trades ofstock executed byindividuals have no control in the market. Instituinstitutional intional investors tend to make the same errors as investors in mostdividuals; to trade on short-term emotion rathercases, usuallydefined as 10,000than logic; and to misread market signals. This isor more shares orhow you can use swing trading to your advantage.stock with currentvalue of $200,000Institutions are too complex and have too manyor more.stocks in their portfolios to make fast decisions; as
30
THE BASIC TECHNICAL RULES
an individual, you can ride the waves of short-termprice change and move in and out of positionsretailrapidly.investorShort-term chaos is the retail investor’s advanan individual, intage. Because your concern is for a small number ofcomparison to