The smoother a trend the better is it. This is especially true for very rough or swingy trends. If a trend has since a month no single day a pullback, it may be more or less equal to one with a one or two day dip. But if the pullbacks are stronger, we need a chartist…
If there are wide swings and the trend needs help to look as a trend by supporting it with a ruler under its feet, the downlegs, than this pattern may be more an oscillation than a trend. The trend component that is overlaid on top of the swings even hasn’t to be a trend. It could be also random that looks like a trend to the uninformed. Chart pattern believers are often way too much impressed by the exactness, with which their ruler can connect the bottoms in a trend. This sort of precision is meaningless, as stochastics tells us. It is only a human illusion.
Swing trading in the sense that a forth and back swinging price gets exploited and trend trading are for that reason two different animals. But going back to the original maxim that a trend has to be smooth, gives the green light for the combination of these two different trading styles.
Watch out for a trend with a deformed swing. A swing where the down and up move are highly asymmetric. At its best this looks like a base in a trend and the restart is then the upswing. Trends having such bases and restarts are perhaps even better than totally smooth ones, because they offer an intrinsic trading signal, the restart.
Degenerated swings are in general a good trading signal. A swing compressed towards one side indicates ongoing trend pressure and allows the fusion of swing and trend trading, which are otherwise somewhat mutually exclusive.
On the other hand, every base is not only the base for a restart or breakout, but also the base for a manipulation by larger and better capitalized market players. There is always the tendency to provoke well known chart formations, perhaps by actively shaping them, loading the gun early and igniting the run by breaking through some chart line. The technical trader is the sucker here who pays the bill.
Still, this a valid trading method. Its probabilities can be increased by selecting only trends that seem to be legit otherwise. A growing company with a product of the future comes to mind here. If the growth is strong enough, the long trend of such growth stocks often show indeed a reluctance to pull back, e.g., when the whole market is weak. Instead they form a trend base, often many month long, and then go ahead with a trend restart.
But it is also possible to trade in such long running trends of growth stocks the smoother looking intermediate trends. Most likely they also have little bases, lasting not for month but days, in them. The moving force behind these smaller trends within the main one, is of course also the growth of the company, which means that the trading probabilities are also skewed in favor of the procyclical market raider.
