Understand Swing trading

What is swing trading?

   It is a trade practice where in the trader tries to profit from market swings of a minimum of one day and maximum several weeks.

How swing trading is different from intraday trading?

   In intraday trade all the trades end in the same day hence 1st difference between swing and intraday trading is time. 2nd big difference is in intraday profit objective is from scalping in other words the number of trades is more and each trade must be exited with small profit or small loss.

Who invented Swing trading?

   Swing trading is invented by W. D. Gann in 1930. Though many others too claim to be the inventor of swing trading.

What are the important rules of swing trading?

   You will find more than 100 rules in different Gann courses however few important rules I will define below

• a. If price give uptrend breakout above 45-degree resistance line and fail to achieve 180-degree target, then avoid buying rather wait for the sale trend breakout.
• b. If uptrend fail to give 1st target and hit the stop loss and down trend also fail to give 1st target and hit the stop loss and this process continues for 3 or 5 times, then we can say price is in congestion band and demand and supply situation is equal and this may lead to a Large up move or a Large down move.

How to identify whether large up move will come or large down move will come? if this situationhappens after a rally, then it is manifesting for a large correction or vice versa.

• c. After achieving the uptrend targets if the price retraces or correct and come back to your buying entry price point then do not buy rather wait for the sale entry.
• d. 45-degree resistance or support is the most critical price point as per Gann. After a single day rally or single day big fall more then 2 to 3% if the succeeding 5 days price point consolidate below the 45-degree price action point then 6 day onwards the trend will reverse for at least 3 days.

Example:   say nifty close +200 gain on some day at a price of 18350, then 45-degree resistance and support come to 18418 and 18282. Five Days following this big gain day if nifty consolidate and never close above 18418 or below 18282 then we can day from 6th day Nifty will correct that too till 180-to-360-degree support point.

   If you practice above swing trade rules, then your trade career will become auto discipline and successful. Write to me your thoughts