I have already figured out my reference material in the above post, though it is not exhaustive.
Back to the concept again.
We have talked about 30 min/one hour breakout strategy, Support/Resistance Trading. Also we are aware of Pivot Points and their use in trading. Many of us already know how to identify momentum signals using EMA crossovers, NR7, Turtle Trading concepts. Also we are aware that these strategies regularly whipsaw and give us a plenty of losses too.
Members here must be wondering why this thread is started under sub-head "Swing Trading" when most of the posts of related to intraday trading.
So, I am switching gear to Swing Trading. The concepts of intraday trading discussed in above posts can lay a good platform in understanding the concepts which are going to be unveiled from here after.
Prices trend only fifteen to twenty percent of the time. This is true in all timeframes, from 1-minute through monthly. Markets spend the balance of time absorbing instability created by trend-induced momentum. Swing traders see this process in the wavelike motion of price bars as they oscillate between support and resistance. Each burst of crowd excitement alternates with extended periods of relative inactivity. Reduced volume and countertrend movement mark this loss of energy. As ranges contract, so does volatility.
Like a coiled spring, markets approach neutral points from which momentum reawakens to trigger directional price movement. This interface between the end of an inactive period and the start of a new surge marks a high-reward empty zone (EZ) for those that can find it.
Prior to beginning each new breath, the body experiences a moment of silence as the last exhalation completes. The markets regenerate momentum in a similar manner. The EZ signals that price has returned to stability. Because only instability can change that condition, volatility then sparks a new action cycle of directional movement. Price bars expand sharply out of the EZ into trending waves.
Swing traders use pattern recognition to identify these profitable turning points. Price bar range (distance from the high to low) tends to narrow as markets approach stability. Skilled eyes search for a narrowing series of these bars in sideways congestion after a stock pulls back from a strong
trend. Once located, they place execution orders on both sides of the EZ and enter their position in whatever direction the market breaks out.
Paradoxically, most math-based indicators fail to identify these important trading interfaces. Modern tools such as moving averages and rate of change measurements tend to flatline or revert toward neutral just as price action reaches the EZ trigger point. This failure reinforces one of the great wisdoms of technical analysis: use math-based indicators to verify the price pattern, but not the other way around.
Volatility provides the raw material for momentum to generate. This elusive concept opens the door to trading opportunity, so take the time to understand how this works. Volatility is‘a measure of a stock's tendency to move up and down in price, based on its daily price history over the latest 12 months.” While this definition fixesonly upon a single time frame, it illustrates how relative price swings reveal unique characteristicsof market movement.
Rate of change (ROC) indicators measure trending price over time. Volatility studies this same information but first removes direction from the equation. It stretches waves of price movement into a straight line and then calculates the length. Volatile markets move greater distances over time than less volatile ones. But this internal engine has little value to swing traders unless it can contribute to profits. Fortunately, volatility has an important characteristic that enables accurate prediction. It tends to move in regular and identifiable cycles.
As prices ebb and flow, volatility oscillates between active and inactive states. Swing traders can apply original techniques to measure this phenomenon in both the equities and futures markets. For example, 10-and 100-period Historical Volatility studies the relationship between cyclical price swings and their current movement. And Tony Crabel's classic study of range expansion, Day Trading with Short Term Price Patterns and Opening Range Breakout, predicts volatility through patterns of wide and narrow price bars.