Swing trading has allowed hedge fund managers like Paul Tudor Jones II to become billionaires. Here's how you can you apply this strategy to your portfolio.
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How Swing Trading Lets You Bet on a Market Bottom
Nicholas Vardy, Quantitative Strategist, The Oxford Club
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Swing trading has allowed hedge fund managers like Paul Tudor Jones II to make billions of dollars.
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Today, Nicholas Vardy explains what swing trading is and how you can you apply it to your portfolio.
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Editor's Note: What the heck is swing trading? Well... it's one of the most compelling and profitable short-term investment strategies you've never heard of.
But now you're in luck! Nicholas Vardy has spent the last eight months perfecting his swing trading strategy. Today, he's explaining exactly how swing trading works - and if you're ready to get in on the action, make sure you join his free [Swing Trader Summit]( tomorrow, May 20, at 1 p.m. ET. Just [click here]( to register - it's completely free!
- Christina Grieves, Senior Managing Editor
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[Nicholas Vardy] Â
Paul Tudor Jones II is one of the most successful hedge fund managers of all time.
Today, he ranks No. 320 on the Forbes 400 with a net worth of $5.1 billion.
How did Tudor Jones accumulate his vast fortune?
He did it primarily by generating profits in the stock market from short-term "swing trading."
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 As Tudor-Jones puts it, "I have always been a swing trader, meaning that I believe the very best money is to be made at the market turns."
The good news is that - thanks to the explosion in computing power - today you, too, can replicate Tudor Jones' swing trading success in your portfolio.
Let me explain...
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So, Just What Is Swing Trading?
Whether the market is in a bullish or bearish trend, a stock will always fluctuate, or "swing," around a longer-term or "primary" trend.
Investors buy and sell stocks at the extremes, buying at the bottom and selling at the top.
But short-term price swings around the primary market trends allow swing traders to generate substantial gains while keeping their trades short, sweet and profitable.
This focus on short-term moves means that swing traders are only in the market between two and 10 days.
This approach also allows swing traders to make money no matter what the overall stock market is doing.
How to Spot a Market Bottom
Candlestick charts were initially developed in 18th-century Japan to track short-term movements in rice prices.
Today, they are an indispensable weapon in the arsenal of every successful swing trader.
Candlestick charts focus on the open, high, low, close and trading range of a stock each day. As such, they convey a lot more information than a standard stock chart.
Take a look at the chart for Chipotle (NYSE: CMG) - a well-known blue chip stock.
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[Chipotle]
 What you see here is swing trading in action.
As a swing trader, what you're looking for is streaks - periods where every day is the same color.
Each of these bars represents ONE trading day.
The red bars tell you that sellers pushed the stock down for the day. Ten consecutive red bars tell you that traders pushed the price down for 10 straight days.
See the green bar in the middle?
That's what I call a "reversal." It means the buyers are about to swing the stock back in the other direction.
And sure enough... What happened? The stock swung back up into the green.
So all you had to do to profit was place an order to buy Chipotle when you saw the reversal.
Why Stocks Are So Predictable
You may be wondering how a major blue chip stock like Chipotle could be so predictable.
Blame the machines.
Computers drive up to 90% of trading on Wall Street today.
The computers determine when a stock is oversold in the short term... and then start buying.
They also determine when a stock is overbought... and start selling.
Computers drove the feedback loop that pushed Chipotle's share price down for 10 straight days. These same computers drove an even more substantial rebound in Chipotle's stock price.
Think of the drop in Chipotle's stock price like the coiling of a spring. It can be compressed only so far before it rebounds, hitting new highs.
Your Edge Over Hedge Funds
Let me share with you two pieces of good news.
First, as a small investor, you have a massive advantage over the Tudor Joneses of the world.
That's because you can turbocharge your returns by buying call options. Options allow you to generate double- and even triple-digit gains in a matter of days.
Second, swing trading takes less than 10 minutes a day.
Once you place a trade at the market open, you can forget about it.
Your work is done for the day. Play a round of golf. Spend some time with your kids. Go about your life.
After a few days, you book your profits. That's all it takes!
That's why I am launching [Oxford Swing Trader]( - a new VIP Trading Service that uses swing trading algorithms similar to the ones used by some of the world's top hedge funds.
And I'll be revealing all the details behind the Oxford Swing Trader system during my live [Swing Trader Summit]( tomorrow, May 20, at 1 p.m. ET.
It's completely free to join - just [click here]( to register!
Good investing,
Nicholas
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About Nicholas Â
Nicholas Vardy is the Quantitative Strategist of The Oxford Club, head of Oxford Wealth Accelerator, and contributor to Liberty Through Wealth and [The Oxford Communiqué](. He is a widely recognized expert on quantitative investing, global investing and exchange-traded funds whose work has been cited in a variety of publications, including The Wall Street Journal and Financial Times. He holds a B.A. and M.A. from Stanford University and a J.D. from Harvard Law School. He is also an associate of the Adam Smith Institute and the Chatham House think tank in London.
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