What Swing Traders and Surfers Have in Common
“There are an infinite number of ways of making money in the market. It’s just that everyone has to find his own way.” – Van Tharp
Beginner investors look for the holy grail of making money in the stock market.
They search high and low for the one key that will unlock the secrets of profitable stock market investing.
Experienced investors do the opposite.
They know that there are many ways to make money in the market.
Consider the following…
You can make money in the markets by day trading. You spend your days glued to a computer screen, looking to make big short-term gains trading stocks, options, currencies and commodities.
Or you can look to hold the best-performing stocks and options over a three- to 12-month period. You try to latch on to the latest and greatest investment trends.
Or you can buy and hold a portfolio of blue chip stocks (much like Warren Buffett does) and let the miracle of compound interest work its magic on your portfolio.
Or you can take the advice of Vanguard founder John Bogle and invest in a diversified portfolio of low-cost index funds. This simple “set it and forget it” style of investing will still likely outperform most professional money managers out there.
Like most experienced investors, I manage my money using a combination of these approaches.
Here’s the good news…
The Oxford Club has investment and trading services to match each of these strategies.
And today, I want to tell you about yet another approach that rounds out the range of The Oxford Club’s offerings.
And that approach is called swing trading.
How to Surf the Markets
Ed Seykota is one of the greatest traders in history. He turned a $5,000 account into $15 million over a 12-year period.
Seykota gave the following advice to newbie traders in one of his rare interviews in Jack Schwager’s Market Wizards: Interviews With Top Traders (1989):
If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves. Some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right.
Thinking of yourself as a surfer riding the market waves is a terrific way to approach trading.
Experience tells a surfer when the right kind of wave will come and how big it will likely be.
Only then do they commit themselves to ride a wave.
This same approach applies to the markets.
Instead of surfing the ocean waves, traders surf their trades.
Like a good surfer, the smart trader knows that not all waves are created equal. The small waves far outnumber the big ones.
But when the trader does catch a big one, the profits make it all worth it.
Traders have a name for this approach to trading.
They call it swing trading.
Swing trading is an active approach to trading that profits from short-term moves in a stock.
The process of swing trading goes something like this…
- Identify a stock that is likely to move soon.
- Enter a position (stock or option) to bet on a profit from the upcoming move.
- Wait for the stock to rebound to its primary trend.
- Sell your position two to 10 days later to lock in your gains.
It’s remarkably straightforward once you get the hang of it.
Oxford Swing Trader
My trading research service, Oxford Swing Trader, recommends trades just like this.
Let me take you through the process of how I make a recommendation.
First, I screen more than 4,000 stocks for ideal swing trading candidates.
Second, I run each candidate through a handful of quantitative algorithms. I do this on a special computer dedicated exclusively to this task.
Third, I recommend the stock that has the best overall profile based on these algorithms. Each recommendation also includes a related option.
On average, I make two swing trade recommendations each week.
That works out to about 100 per year.
In each Oxford Swing Trader alert, I provide a recommended buy price, a carefully selected stop price and a target price for the stock.
The goal with swing trading is to generate relatively quick gains from a rebound in a stock.
That’s why I aim for a two- to 14-day holding period.
As a quantitative system, Oxford Swing Trader is all about the numbers.
Its algorithms don’t care about politics, hurricanes or even wars. Oxford Swing Trader recommendations are based on cold, hard analysis.
And as long as stocks are trading, there will be short-term swing trading opportunities in the market.
Good investing,
Nicholas
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