There are a couple of reasons why secondary trade filtering is of use, although it is not essential.

1. I have had a number of traders saying that at times there are too many SST trades triggering or that there are too many prospective trades to leave opening orders on and how can they select the trades with the best potential.
   
2. The perfect trading combination is a good mechanical system (SST SwingTrader) together with some of your own trading expertise and experience in the selection of trades. The Plug-in will give you quite a number of trades and to maximize your results it can pay dividends to filter these further and select the ones with the highest chance of success. The trades we are trying to filter out are the ones where the stock or Index is stuck in a consolidation period because these are the ones that are most likely to be stopped out for a loss. There are times when the stock or the market as a whole is going sideways (consolidation period) and if there are no swings in price long enough to make money on an end of day basis we need to try and identify times when trades should be refused even if they are offered using the SST SwingTrader. No swing trading strategy can make money unless there are swings in price to trade!

Here are a few ways I suggest you use to add additional or secondary filtering to the trades offered by SST SwingTrader in order to help (not guarantee) to reduce whipsaws (reversals in price which stop you out for a loss very soon after entering).

The first thing to say here is that you must be looking at symbols that show a green traffic light PLUS the Equity Curve must look as smooth as possible - only trade the symbols with the best potential in the first place.

Overall Market Direction

There is a way to improve your chances of success and that is by trading with the overall market direction. Some traders try to determine overall market direction from the Index which includes the stocks they are trading. The SST strategy is looking for comparatively small swings in the market - perhaps only a few days - and the trouble with this method is, how do you determine what the market direction will be over the next few days from the Index? Do you only trade a stock long when a long trade is triggered on the Index? NO, this is often not reliable enough. If it were we would all be trading the index rather than the stocks.

There is however, something you can do. You will notice times when your watch list of stocks has a real mix of long and short prospective trades and other times when the majority of trades you see are in the same direction. Very often if you see a roughly equal mix of long and short prospective trades which tends to indicate a market with short term lack of direction. If you see the majority of prospective trades all in the same direction then it tends to indicate the underlying market direction. I have found this more reliable than simply studying an Index. In times when there is no clear market direction it can be wise to hold off opening new positions or scale down market exposure and wait for an indication that the market will trend once more - even if it is only for a few days.

High Risk Trades

If market direction is unclear then one thing you can do is to eliminate the trades that are higher risk in points. These are the trades where your initial stop is further away from the entry point than on other trades. You want to take trades where you can maintain a good position size while not losing a great deal of money should the position move against you to your initial stop.

Trend Lines and Support / Resistance

There are three separate conditions to look for here.

1) TREND BREAKOUT - This is where you can draw a line across recent highs or lows and the price is now breaking through that line at the same time as showing a prospective trade with SwingTrader. The trend break in conjunction with SST strategy in SwingTrader is a powerful indication of a trade with good potential.

2) WITHIN A TREND CHANNEL - The trend is identified by joining the highs with a line and then joining the lows with a line or you can use the facility in your separate charting software.

Take long prospective long trades from SwingTrader only when the price is in the bottom half of an upward sloping trend channel and only take short prospective trades that in the top half of a downward sloping trend channel. You should also look for trend reversals where the price breaks out of the channel.

3) SUPPORT / RESISTANCE - The other consideration is to look at strong support (if short) or resistance (if long) points that would be hit before you would be in profit. Reject those in favour of the "better quality" trades where strong support/resistance levels will not interfere with the trade in it's early stages.

PRICE RESISTANCE - The chart below shows a good example of this. The price rises to the blue resistance line and retreats again on several occasions so you would not choose to go long if the price is rising just under the blue line because the odds are that it will go down again. You can see that later the price eventually broke through this resistance, this would have been a good opportunity to go long if a prospective trade showed in SwingTrader at the same time as the break through the resistance.

After the break through you will notice that the price dropped to test the blue line price as support. The odds are in favour of the price now bouncing off this support level so a prospective long trade would then be looked on favourably but a prospective short trade just above this support line might be rejected.

This additional filtering is not about perfection and always being right, it is just about increasing the odds of being right. With SwingTrader you already have the odds in your favour but if you can add some additional skill and expertise to further improve the odds then your results will improve substantially BUT don't expect perfection, it does not exist in trading. You will always be wrong some of the time.

Refusing Trades
If you wish, you can use the above techniques to help select ALL your trades. Sometimes this may mean that you have NO prospective trades for a period. In these circumstances it can be dangerous to go hunting to find a trade just because you want one.

"Sometimes the best trade is the one you don't take."

Enjoy your trading!

David