The Switch uses the daily price bar to trade long or short based on a fixed set of rules, it is a simple but a complete trading strategy
The benefit of the Switch strategy is that it’s a ‘Mechanical’ CFD Trading Strategy, this means you can control your dollar risk and your emotions to a degree by applying the basic Switch trading rules. It’s a great way to learn to trade CFDs short term 1 – 10 Days
Introduction to the Switch
CFD trading strategy course
There are about a dozen modules, so you can learn at your own pace, you can also contact us for any personal assistance or mentoring which is included with being a TradingLounge member.
What is the Switch and how does it work?
The Switch is used on stock CFDs; it’s an End of Day CFD Trading Strategy that trades long and short.
The Switch uses the Daily Price Bar to set the Entry Order and The Stop Loss Order above and below the Daily Price Bar making it an End of Day trading strategy.
All new Entry orders and Stop Loss Orders are set before the market opens each day.
There is no need to watch the market during the day,
all the work is done before the market opens, that is, finding trades, entering new trades and moving stops is all done any time before the market opens, leaving the whole day free.
How long does it take to find the trades and place the trades and move the stops, well in the beginning it can take well over an hour but as your knowledge of the process improves you can get that down to 30 minutes, if you’re in a hurry?
How long do the trades last?
Most of the trades are under 10 days; average length of trades can be 3 to 4 days and can be short as 1 or 2 days, so the Switch is a short-term trading strategy which is perfect for CFD trading.
As you know using CFDs you can trade long or short and the Switch does the same, there is no difference in trading long or short, your aim is to become well balance in trading both sides of the market, after all the market is either going up or down or sideways, so being able to short a market creates another leg of opportunity within a market giving you two thirds of the market to trade
What is this type of trading called?
In a nut shell there are two basic styles of trading Discretionary and Mechanical
Discretionary trading is more of a freestyle approach, this could mean, reading the price and volume action, seeing the pulse of the market or news trading etc, this type of trading requires more experience.
Mechanical trading is a fix set of trading rules that you follow no matter what, even if you think something else is going to happen, you must simply follow the rules, but this is easier said than done, this is why there are many books on teaching discipline and TradingLounge has a meditation that can help with this in the course.
A Mechanical trading method with its fixed set of rules is a much safer trading method for beginners and intermediate level traders to trade.
Benefits of a mechanical trading strategy that they are less emotional to trade, because simply follow the rules, you don’t get stuck in the decision-making process, you can just get on with it.
The rules make up the Trading Plan, that’s the Trade Set-up pattern, the Entry trigger price and the initial Stop Loss price point, then that’s order is done, your work for the day is done.
The next morning before the Market Open you move the Trailing Stop Loss order to protect your capital and keep moving the Trailing Stop Loss Order until the trade is stopped out, that’s also the exit strategy, as a trailing stop loss is the best stop loss.
All the parameters are set, this makes trading less emotional, and it will still be an emotional experience, but a more controlled process that will improve over time.
Following the trading rules will also give you accurate data that you can use to understand your strength and weaknesses, this is a professional approach to moving forwards and TradingLounge has the CFD Portfolio software to help you build a better trading results.
Money Management
In the course you will learn Money Management, that is how much to risk per trade and how many share CFDs to buy with each order and why.
Once you have completed say thirty trades the CFD Portfolio will display usable trade data, such as Expectancy, R-Multiples, win/loss ratios etc. all critical data as the foundation of moving your trading forwards. Money management is simple, but it’s the most important element of trading, it’s the only thing that all professional traders that have different trading styles agree upon, but most new traders do include it in their initial year of trading, make sure you do!
Switch – How long does it take to learn?
This is a very simple trading strategy, but you not only need to learn it, you need to become familiar with the process, from finding the trade set ups through to keeping a trading journal, you will need to prove to yourself that you can do it, without risking your capital, so practice a CFD trading demo account first!
Becoming familiar with the whole process simply takes time; you will know when you are there.
But getting there, I can assure you that you will make all types of errors, such as key board typing errors with the orders, forgetting to move stops or write something important down or simply just not feeling up to it today because you had four losses in a row yesterday.
We are all human and initial errors will occur in difference parts of the process, so, the better organized you are the better results you’re going to get.
Give yourself three months to become comfortable with the process and you will learn that trading is a process.
Is the Switch successful?
When talking about profit, it’s also important to talk about risk and how profit is generated, especially with CFD Trading, as it’s highly leveraged, the CFD Deposit Margin can be 5% deposit for stock CFDs this high leverage can be a double edge sword, so it must be respected, the Switch respects this by only risking 1% of capital per trade including brokerage costs and uses a stop loss that changed each day keeping reasonably tight risk management
Profit
To be fair, let say out of 10 trades you get 5 losing trades and 5 winning trades.
You cap your risk at 1% of your capital per trade, that’s a 5% total loss from the 5 losing trades.
The 5 winning trades would be a variety of results, different percentages, some trades will do well other only a small percentage.
To average the wins, the 80/20 principle works well, so as a starting point you will make 80% of your money out of 20% of your trades, I cover this in the course.
You can watch all the videos in one day and learn a lot, but knowledge comes from experiences and time knowledge.