By Andrew Wong      2nd Sept, 2004

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On Big Swing

In my previous article, “The big money must necessarily be in the big swing.” – Jesse Livermore, and subsequently I made a remark "Big profit is from bigger capital at big swing", a reader made the following comment : "Big swing comes once every 12 years."

This comment makes interesting discussion and learning.

• Cycle Theory

There are many theories to guide investors in their investment. Cycle theory is one of them. Researchers or analysts find that from the stock market patterns exhibited, there seem to be a regularity of market up and down over a period of time. There are experts who advocate 12 years of periodicity, others 10 years. 

 

I prefer to take such theories as guide, not fixed rule. Otherwise, investors can close their eyes in a mechanical manner to wait for the time period and wait for the big profit from the big swing. Seasoned investors know that there is no fixed rule, no absoluteness of any theory that can help one make big money. But, use the established theories, principles, tools as guide to build one's own credible trading system from disciplined practice and learning.

• Implication of "Big swing comes once every 12 years."

If an investor believes in the above, there are a few scenarios that need to be managed:

1. If today is the peak of the previous 12-year big swing, he should wait for 12 years before he could invest to make big money! This can present many difficulties : there aren't many 12-year periods in our life span. One might as well forget about such investment. Of course, one should not be so rigid about such theories, and can still make big profit. (Discussed in more details later.)

2. If it is not the peak just experienced, how many more years left before the next big swing. If one cannot figure out which part of the 12-year period we are at now, then it is difficult to make the investment decision.

We must then devise some good strategies if we want to make use of the above theory. This is covered in QuaSyLaTic Investment System training

• What actually is "The Big Swing"?

This should actually be the key question to ask. 'What do we mean by Big Swing?" Roughly we can guess that it is a swing that can give us significant profit, if we manage to buy at low price, sell at high price. Or, if we sell at high price and buy back at low price.

 

We will take a real case study for discussion ie. KLSE market. 

There was this  Big Swing, see  black curved line  from 1986 to 1996  approx. with KLCI  at 170 to 1300,  a rise of 665% gain,  or 66.5% per year.   We can also say that there was another  big swing, see orange curved line from 1998 to 2000, with KLCI  at 360 to 995, or  176% or 88% per  year.

 

So, what is "The Big Swing"?

 

It is a swing with very good return or rate of investment to an investor's satisfaction. If we anticipate 20% return in 6 months as a next possible swing, then that should be the big swing to that investor.

 

In the case of day trader, he notices from the 5-min market graph of many swings, some small some big. If the big swing in that day can gives him 5% return per day (net gain, after commission and other cost), then that is the big swing to him.

 

In the above example, if one believes in 12-year period or 10-year period big swing, then he should expect market to go bearish till 1996+10=2006, or 1996+12=2008 before he should start investing. But sticking to such rigid rule is not so wise, as between now till 2008, there maybe swing that can bring 80% return, why not do your homework well and take that 80% first.

 

What is Big Swing with respect to this QuaSyLaTic Investor and Coach?

Using the current available investment instrument that gives fairly consistent 10% per year return, the Big Swing should be something better than 10%, with net 50-150% gain without having to spend 24 hour a day closely monitoring the market, i.e. without the need to be bothered with the irritating up and down, small and medium swings. This is because this investor and coach also has many other interesting things to do every day.

Hence, throw away the notion of "Big swing comes once every 12 years." which can be confusing or not able to help you make good money, unless you design good strategies with that only as a guide.

 

End.