Swing Trading Strategies
Figure 38.2 shows what a rectangle top looks like. Prices are trending up leading to the rectangle. Then they bounce between support at 54 and overhead resistance at 59.50. The wide, tall rectangle has plenty of trend-line touches. If you are lucky, you might be able to get three or four trades from this formation (as marked by the numbers on the figure). Each side-to-side pass represents a price change of about 5, plenty of profit opportunity to be of interest to swing traders.
Time Frames and Trader Behavior The concept of different time frames was introduced to help explain the behavioral patterns of market participants. Market activity is divided into two timeframe categories, short term and longer term. The short term activity is defined as day time frame activity where traders are forced to trade today (e.g., locals, day traders and options traders on expiration day fall into this category). With limited time to act, the short term trader is seeking a fair price. Short term buyers and sellers do trade with each other at the same time and at the same price. Longer term activity is defined by all other timeframe activity (e.g., commercials, swing traders, and all other position traders fall into this category). Not forced to trade today and with time as an ally, these traders can seek a more advantageous price. In pursuit of their interests, longer term buyers seek lower prices
The Results Snapshot lists the important details of the earnings flag, a pattern that sometimes occurs after a surprisingly good earnings announcement. With a comparatively low break-even failure rate in a bull market (10 ) and decent average rise (34 ), this pattern does well for both swing traders and position traders.
Within 10 days of the IPO, Mary and John had filed with the SEC their personal report on Form 3, disclosing the amount of company stock that each owns of record and beneficially. Mary reminds John that these forms will have to be updated periodically by filing other forms, Forms 4 and 5, with the SEC whenever there is a material change in ownership. Section 16(b) of the Securities Exchange Act of 1934 will also require John and Mary to forfeit any profit they make in so-called short swing trading the law requires automatic dis-gorgement of any profit made by corporate insiders who both buy and sell securities of their company within six calendar months as an automatic disincentive to trading by insiders based on their possible possession of material inside information.
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