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2012issue C0540-43

Classify momentum, velocity, or volatility before the swing signal

This archive case study starts swing trading with market-condition identification, then asks the trader to distinguish a momentum-run, a velocity-run, and volatility-action. Candlestick and volume readings are treated as incomplete until that classification is in place.

  • Begin price-action analysis by naming the market-condition, then sort the chart into a momentum-run, a velocity-run, or volatility-action.
  • Seek stocks that move with momentum or velocity, and treat volatility-action as a condition to avoid rather than trade.
  • A resting-day-candle can keep a momentum-run intact, while a fading-volume-pattern or high-frequency-trading-exhaustion warns that a velocity-run is ending.
  • A candlestick or indicator entry remains incomplete until the trader can classify the condition that produced the signal.
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Current trackSwing trading44 readingsCandlestick patterns100 readingsVolume-price analysis129 readings

Classify the condition first

The historical workflow frames price-action analysis as beginning with market-condition identification. The archive describes six primary stock-market conditions, and each of those broader regimes contains multiple trading conditions.

Swing traders are instructed to distinguish momentum, velocity, and volatility inside that regime. The aim is to seek stocks that move with momentum or velocity and to avoid volatility-action.

What a momentum-run looks like

A momentum-run is an abrupt directional move with inconsistent energy, uneven volume, and frequent resting-day candles or brief consolidations. It typically appears in moderately trending or trading-range conditions.

A resting-day-candle forms at or near the prior day's high and is treated as a continuation pattern. It is cited as a reason a momentum-run can last longer than a velocity-run, because those pauses ease the angle of ascent.

Stops on a momentum-run are described as needing daily review and upward adjustment to protect gains. They are not set as tight as velocity-run stops, because resting days and overlapping candles can otherwise force an early exit. Those runs are said to last from a few days to more than a week.

What a velocity-run looks like

A velocity-run is a sudden move in which price and volume energy accelerate together. Successive candles typically lengthen and seldom overlap, and the new day's candle often starts at or near the prior close.

Volume is said to rise incrementally with or ahead of price. A volume drop as price continues higher is treated as a fading-volume-pattern and an early exit warning of profit-taking risk. The run commonly ends with high-frequency-trading-exhaustion or that fading-volume-pattern.

How participation can change the run

Stocks are described as often starting in a momentum-run and later shifting into a velocity-run as participation changes. The eight-levels-of-market-participants model places longer-horizon institutional investors first, short-horizon institutional traders next, and high-frequency firms as the usual source of the final heavy-volume day.

Read energy on a bicolored-volume-histogram

A bicolored-volume-histogram is presented as the preferred energy readout for distinguishing velocity action more quickly and reliably than a single-color volume display.

Candles are incomplete without the condition

Candlestick and indicator entries are treated as incomplete unless the trader can also classify whether price is in a momentum-run, a velocity-run, or volatility-action. Volatility-action is described as a professional-avoidance zone because those patterns produce whipsaw trades.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
9 of 35 in the Swing trading track
20138-9 pp.Next on Swing tradingSwing rules as a portable entry and exit procedureThe author said the technique can be applied to any market or tradable that produces regular moves of sufficient size for swing trading.
All readings on this track · 35 readings
  1. 2001Swing trading with trailing stops and fixed loss exits
  2. 2003Linear regression swing alerts and trailing stops
  3. 2005Range-width gates for swing entries at base edges
  4. 2006Beyond setups: a six-factor trading process
  5. 2007Angle of ascent, chart scale, and style-fit
  6. 2010Stacking a short-horizon oscillator with a moving average and swing hold rules
  7. 2010A weekly contest long treated as one swing procedure
  8. 2011Four-color volume-price states for long-only swing actions
  9. 2012Classify momentum, velocity, or volatility before the swing signal
  10. 2013Swing rules as a portable entry and exit procedure
  11. 2013Constructing paired percent-b and stochastic swing oscillators
  12. 2013Give the fast band line and the slow stochastic complementary jobs
  13. 2013Smoothed percent-b divergences for numbered swing-wave rules
  14. 2013Portable swing rules for candle turns and a 1-2-3 wave count
  15. 2013A three-average swing and breakout case study
  16. 2013Constructing swing trades with a fifty-day average and a five-bar exponential average
  17. 2014From aliasing and dilation to a roofed stochastic swing
  18. 2014Channel width and trend-filter lookback as separate swing-trading choices
  19. 2016Constructing volume-confirmed multiday breakout swings
  20. 2017Constructing swing signals from a volume-weighted average cross
  21. 2017Golden-cross swing entry with a trailing-stop exit
  22. 2017One swing procedure: group leadership first, then a volume-price leave
  23. 2017Four-day green-candle breakout entry as one swing procedure
  24. 2017Swing pivots need a 100-period crossover and a breakout candle
  25. 2017Supply and demand zones as bounded swing maps
  26. 2018Three-bar volume-confirmed swing breakout
  27. 2018Tight stops first on swing breakouts with a range filter
  28. 2018Constructing trend and swing rules from horizon to crossover
  29. 2019Decade-level breakouts as one closed swing procedure
  30. 2019Inverse-pair swing trading with a shared buy-stop
  31. 2019Week-range next-day breakout on bitcoin pairs
  32. 2019Ranking strength before confirming a multi-timeframe breakout
  33. 2019Forty-five-degree multi-week swing breakout as a closed procedure
  34. 2020A dual pending-stop pair as one bitcoin swing construction
  35. 2020High-low activator, directional oscillator, and momentum swing agreement
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