In Swing Trades, Time Frames Are Key

Markets move through multiple swings in different dimensions simultaneously. Meanwhile, trends move independently through these time frames until they come into contact with a larger-scale swing, which then takes priority. This alignment tells us to hang tough when we're playing a large-scale swing and to not give up on the position just because it's moving against us in a smaller time frame.

Simply stated, the most profitable positions turn up when there are few barriers between your entry and the swing you're trading and many barriers between your entry and the swing's inception point. Notably, it's easy to train your eyeballs to find these favorable patterns when flipping through the charts, doing your nightly analysis.

The optimized holding period (OHP) denotes the length of the trade that will produce the most profitable outcome. The OHP for any position combines your strategy with accurate swing analysis. Ask yourself the following question when you find a promising opportunity: How far can it go before hitting the next obvious barrier? The answer is more important than the pattern itself, because it doesn't matter if a stock breaks out when it has nowhere to go.

Let's look at a bullish setup in the financial sector that relies on accurate swing analysis.

Blackstone (BX) -- Daily eSignal

Blackstone Group(BX Quote) rallied to $19.50 during September's "Paulson spike" and sold off to an all-time low at $3.55 in February. It then retraced 62% of this 16-point swing in a strong rally that ran out of steam in May. The subsequent pullback has dropped price into support at the 200-day moving average, where the stock is starting to perk up.