You Could Have Turned $1 Into $27,000

 
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Note from Managing Editor Allison Brickell: As Nicholas Vardy writes below, swing trading has been used by the world's greatest investor to generate massive returns. And quantitative algorithms - which pick up on predictable patterns no human could - allow traders to score big gains without human emotion getting in the way.

So it makes perfect sense that the most powerful investment approach is to combine swing trading and quantitative algorithms.

Nicholas is revealing exactly how investors can put that approach to work in this special swing trading presentation. He pulls back the curtain on how you can use the cold, hard logic of quant investing and the fast-paced gains of swing trades to your advantage. In fact, in his Oxford Swing Trader research service, he offers subscribers an average of two swing trade picks a week... with stunning profit potential. Click here to learn more about Oxford Swing Trader and this knockout investing approach.

THE SHORTEST WAY TO A RICH LIFE

Secrets of Successful Swing Trading

Nicholas Vardy | Quantitative Strategist | The Oxford Club

Nicholas Vardy

In a previous column, I discussed how the world's greatest investor - Jim Simons of Renaissance Technologies - owes his remarkable investment success to short-term swing trading.

Renaissance has crushed the returns of other investment approaches by relying on swing trades generated by computerized algorithms.

You may have never heard of Simons.

But are you a fan of the late, great Jack Bogle, the founder of Vanguard and index investing?

Well, $1 invested in a Vanguard S&P 500 index fund in 1988 would have turned into $20.

Do you admire Warren Buffett? The same $1 invested in Berkshire Hathaway would have grown to $107.

But had you been lucky enough to invest in Simon's Medallion Fund, your $1 would have been worth about $27,000 now.

What's the most important conclusion for you as an investor?

A quantitative approach to short-term swing trading is by far the best way to make the most money over the shortest period.

The "Inhuman" Success of Quantitative Trading

This headline on CNBC highlighted Renaissance's greatest edge: "The secret behind the greatest modern day moneymaker on Wall Street: Remove all emotion."

Put another way...

Quantitative investing algorithms are superior to human investors in every way.

They can pick up on predictable patterns no human could. And they use these patterns to collect massive profits over very short periods.

Algorithms act on only cold, hard logic. Never emotion.

As The Wall Street Journal's Gregory Zuckerman, author of a book on Renaissance Technologies, put it, "Too often we get caught up in stories when it comes to stocks... By deferring to models and the scientific method, you don't fall for things like behavioral biases."

In short, quantitative trading solves the problem of cognitive biases that typically cloud an investor's judgment.

The Secrets of Successful Swing Trading

Swing trading is key to successful short-term trading.

Yet the secret behind this approach is surprisingly simple.

Like the ebb and flow of water washing against an ocean shore, stocks move in waves.

So getting in tune with a stock's rhythm is essential.

In the past, human traders like Paul Tudor Jones II relied on their finely honed instincts to trade these movements.

But today, quant traders take swing trading to another level.

They translate these ebbs and flows into computer algorithms.

These algorithms then home in on the few potential swing trades with the highest probability of success.

Instead of following a trader's instincts, swing trading has become all about playing the odds.

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Oxford Swing Trader

Oxford Swing Trader is my VIP Trading Research Service that uses swing trading algorithms similar to those used by some of the world's top hedge funds.

Today, I want to delve into how I research and place a trade.

I've written in the past about candlestick charts.

The one below offers a terrific overview of swing trade candidate Chipotle (NYSE: CMG) - a well-known blue chip stock.

Chipotle
 

Having to page through 4,000-plus stock charts to find a chart like this would take me several hours each day.

Luckily, there's an easier way...

Quant investing allows me to translate this technical pattern into a computer algorithm.

Each day after the market close, I download the closing prices of 4,000-plus stocks to a computer dedicated to this task.

I then run them through an algorithm that identifies those stocks that fit a specific set of swing trading patterns.

By running a series of algorithms, I can identify these swing trading candidates in 10 minutes instead of 10 hours.

The first proprietary algorithm is the bread and butter of a swing trader's arsenal: the "five days down" pattern.

As the name implies, a stock forms this pattern when it has been driven down for five (or more) days, each close lower than the last.

When a stock does that, statistically speaking, it's primed for a reversal.

After that initial screen, I run the remaining stocks through another half-dozen proprietary algorithms.

One algorithm identifies a trading channel.

Another algorithm targets an overreaction pattern.

Another tracks a "washout" pattern - when a stock moves sharply by at least one standard deviation.

The combination of these algorithms narrows the candidates down to the stocks most primed to bounce.

The ideal stock will trigger on all or most of these algorithms.

I will also recommend a stop price, a price target and, whenever possible, an options recommendation to turbocharge your returns.

And remember, as a purely quantitative system, Oxford Swing Trader removes humans from the decision-making process altogether.

My final decision will always be based solely on the numbers. And I will always give my expert research and analysis with each issue.

I recommend an average of two swing trades like this each week in Oxford Swing Trader.

That's about 100 opportunities a year to generate quick swing trading gains.

So join me at Oxford Swing Trader. You can sign up here. And prepare yourself for profit opportunities.

Good investing,

Nicholas

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