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Originally Posted by NYSEGOP » What is the best swing trading strategy? Someone said buy when 8-day EMA crosses over 21-day EMA, and sell vice versa. Does this work? What do you do? (Sorry, I am fairly new to trading)  |
Asking for the 'best' way to do anything on this forum is a surefire way to produce a thread that quickly degenerates into pointless mudslinging, from what I've seen!
However, as I am a swing trader and not a daytrader, it's nice to have the opportunity to discuss this on TL. A general desription of my approach would be to say that I buy corrective pullbacks in longer term uptrends, and that I short corrective rallies in long term downtrends. This is a form of 'reversion to the mean' trading, and assumes that the market tends to move back in the direction of the longer term trend. Some markets are more mean-reverting than others.
To do this you are going to need three things:
1. A method of determining the long term trend (moving averages, trendlines, and heikin-ashi techniques are all popular).
2. A method of identifying precisely when to trade the correction (overbought/oversold oscillators, fibonacci, and volatility channels are all options).
3. The means to throroughly backtest your strategy over a significant amount of historical market data to ensure that its past performance would have been acceptable to you (a key assumption of which is that future performance will be similar - there are many pitfalls associated with system testing and you should make yourself aware of these).
I hope that's helpful to you.
02-06-2012, 04:50 PM
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