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Swing‐Trading Strategies
John F. Ehlers
Abstract: Conventional wisdom usually errs on the side of conservatism when working with trading systems, and therefore require confirmation before entering a trade. Simple analytics show that the lag induced by the indicators as well as the decision consume most of the swing of a short term trade. Therefore, swing trading must be done by using predictive indicators or anticipating the swing turning points. Since the turning points are predicted, every trade needs a safety valve to exit in the cases where the prediction fails. Stop Losses should not be used as an integral part of the trading strategy, but should be used to limit big losses instead. The best way of evaluating the performance of a trading strategy is through the use of a Monte Carlo analysis because this analysis provides a statistically accurate expectation.