The Swing Alpha trading strategy is not based on picking the latest hot stock, nor do we encourage our clients to go ‘all in’ on just a handful of stocks. Our clients are busy people who do not have time to micro-manage positions or lose sleep from worry. We also won’t promise 20%+/month gains, an aggressive strategy that will end in disaster.
Portfolio TradingOur strategy involves ‘trading the portfolio’, where we treat the portfolio as one single trade. Several dozen small trades are made so that the risk of any individual position is negligible. If some unforeseen event gaps down a stock 50% overnight, and your position size is only 4% of your entire portfolio, you wouldn’t wince at a 2% total account draw-down. This strategy protects you from the occasional losing streak – the number one way a retail trader blows his/her account.
Like a Traditional Hedge FundBlack swans are those unforeseen events that can destroy a years worth of profits in a single week. Here at Swing Alpha trades are carefully selected to counter hedge for a market neutral portfolio. We perform intense correlation analyses to maximize portfolio diversity, investing in large caps, small caps, commodities, currencies, metals, treasuries, VIX, and even the occasional penny stock.
We also provide temporal diversity – some trades are short term, others more long term focused. Here at Swing Alpha it is about conservative risk adjusted returns, to prioritize capital preservation over out-sized gains. You can sleep well knowing your portfolio is protected.
Asymmetrical GainsOur trades are designed to be asymmetric. We are not always right, but our winners win big and our losers lose small. In fact, with our 3:1 profit/losses (risk/reward) ratio we’d need to lose on 76% of all our trades just to take a loss. The below Fig. 1 shows how a trader can make higher profits with a 50% win rate than with a 87.5% win rate using asymmetric trading. We also look for stocks that are fast movers, so that profits are made quick and capital is efficiently re-invested into the next trade.
What to ExpectExpected holding times are between 5 to 100 trading days, with 3-5 trade alerts per week. While it is always ideal to enter trades ASAP, our trade alerts are not so time sensitive – you often have between hours and days to enter the trade. At any time your portfolio could have between 10 and 30 positions, not unlike a typical hedge fund. For a $50k account, that would mean a typical position is around $3k, and a per trade risk of only $300. We do all the complicated position sizing calculations for you so that the more volatile trades do not overwhelm your account. And lastly, we give you carefully determined stops that protect against the unforeseen – without normal daily volatility stopping you out too early.
New Members: Building Your Portfolio (Important Notice!)
The Swing Alpha strategy is slow and conservative. After joining we will slowly build your portfolio up, allocating about 6% per week in positions until your portfolio is approximately 90% allocated. This ideal allocation could take approximately two to three months, depending on the market situation.
During the initial build-up phase, for the first several weeks, your portfolio may not be well hedged. This is dependent on present opportunities and market conditions.
Do not be surprised when stopping out only days after entering a position – we cut losing trades fast. Profitable trades however may take 1-2 months or longer to hit price targets. As such in the first few weeks you might notice taking occasional small loses (average -10%) but few if any large wins (+30% or higher). This is normal when starting our strategy.
After the initial buildup phase, within 2 months or so, expect to exit 1-2 trades/week with either a small loss or a large win.
!! Always immediately enter our recommended stops !!