An Early Warning System, Part 2 by Mike Slattery
Some trading signals are better than others. In this second part of a three-part series, we’ll describe a filter that’ll help identify optimal swing trading buy/sell points.
Last month in part 1, I introduced my early warning system (EWS), which combines two indicators of different origins and defines a window of opportunity for a trade. Here in part 2, I’ll introduce a swing trading system with the EWS as its foundation that produces relative reference points for a definitive and optimal entry/exit signal within that window.
TARGETING THE WINDOW OF OPPORTUNITY
The EWS produces two primary signals that flank this trading window. The first signal serves as a warning or alert, indicating that your stock is approaching a potential turning point (see Figure 1). The second signal serves as confirmation that this turning point has occurred and that the stock or equity has crossed over or under the short-term moving filter that produces the horizontal, center demarcation line for this indicator ...