Swing Trading Strategies That Work Transcript (18) .pdf
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Swing Trading Strategies That Work – transcript
2. Good day fellow traders, this is Roger Scott from Market Geeks and I have a new
video tutorial for you. Before I begin, please don’t forget to subscribe to our
channel for new swing trading videos and trading tips.
3. Almost two months ago I created a trading video about determining market
strength using simple visual analysis and trend lines. In case you missed this
video you can watch it on our website or you tube. The video is called Range
Bound or Trend Following, the best way to determine a trend. .The Video has
been watched over 17,000 times in the last 45 days.
4. This video takes you to the next step, and demonstrates how to use visual
analysis to measure relative strength.
5. When I started trading I wanted to learn the Holy Grail, I thought that the more
complicated the strategy the higher the odds that it would help me produce large
6. After some painful lessons, like losing money, I realized that difficulty of a
particular trading method has very little to do with the level of profitability that
method is likely to achieve.
7. Today I want to show you a very simple relative strength method that works well
and is extremely easy to utilize.
8. Don’t let the word relative strength intimidate you, it’s just a term for looking at
several related markets and seeing which one is stronger and which one is
weaker. The key is to make sure there is relationship between the markets.
9. For example related companies, currencies that trade closely like the Euro and
British Pound, or Exchange traded funds that carry similar stocks, or different but
related index contracts. What you want to find is two markets that follow each
other very closely the majority of the time.
10. In this example I will use the two markets that most people are very familiar with,
the two biggest indexes in the world. I will compare the S&P 500 with the Nasdaq
100 index. These two indexes typically have a correlation of above 85 percent,
this means that they move in the same direction or follow each other the great
majority of time. These two markets are a perfect example of two related
11. Take a look at a chart of both the E-mini SP and the E-mini Nasdaq contract
going back a few months .You can tell by looking at these two graphs that the Emini Nasdaq Futures Contract is the weaker one out of the two instruments. This
gives me a good indication of the relative strength of E-mini SP Futures Contract
as compared to the E-mini Nasdaq Futures Contract. Notice I’m not using any
technical indicators other than my eyes and the OHLC bar chart to see the price
12. If I was to place a relative strength trade between these two contracts I would
simply purchase the E-mini SP Contract and Sell the E-mini Nasdaq Futures
Contract. Let’s see how this would work out in reality.
13. Take a look at both charts as they appear on the February 21, 2013. See for
yourself how it would have worked out.
14. You can clearly see from these two charts that the E-mini NASDAQ is dropping
about twice as hard as the E-mini SP Futures Contract. We simply combined
visual trend analysis and took two markets that are related and compared the
strength of one vs. the other. You would simply go long the E-mini SP and you
would short the E-mini Nasdaq contract at the exact same time.
15. You can apply this same method to related stocks or other related markets. But
make sure your positions are of equal size, this is very important .Note: there is a
simple formula I will teach you in the coming weeks that determines how many
shares or contracts to trade so that both the positions taken long and the position
taken short are equalized to each other. Meaning you want the position that you
are taking to the long side to be equal to the position you take to the downside.
16. You cannot simply trade one contract long and one contract short in this situation
because these two markets have contracts that are sized differently, so you have
to equalize the position so that both contracts will be of equal weight. You have
to do each time you trade two separate positions in opposite directions,
regardless of what stocks or other instruments you trade. You have to equalize
your positions so that you are trading apples to apples and not apples to
17. I will be doing a tutorial on position equalization in the upcoming weeks.
18. Thank you for watching today’s swing trading tutorial. Please don’t forget to
subscribe to our ‘you tube’ channel for swing trading videos and trading tips and
visit market geeks to download your free swing trading report. Thanks for
watching and have a wonderful day.