What is SwingConfidence™?

SwingConfidence™ is a scoring system that helps us decide position size in swing trading, & take sit-out-in-cash decisions in an objective way.

Here is the SwingConfidence™ tool where you can now calculate the score (on your own) daily:

https://coda.io/@finallynitin/swingconfidence

How to calculate SwingConfidence™?

It takes into account the daily swing state of the 2 benchmark indices (NIFTY, & CNXSMALLCAP). We also need to figure out whether the index is in a weekly upswing or a weekly downswing. It has 3 components:

Weekly Swing
Daily Swing
Concurrence

Let us understand them one-by-one.

Weekly Swing

Use the Simple Swing indicator on weekly charts of NIFTY & CNXSMALLCAP indices to determine whether the index is in a weekly upswing or downswing.

If the color of the weekly ribbon is green, we are in a weekly Upswing.
If the color of the weekly ribbon is red, we are in a weekly Downswing.

Daily Swing

Use the Simple Swing indicator on daily charts of NIFTY & CNXSMALLCAP indices to determine the daily swing state. There are 6 swing states on a daily chart:

Early Upswing (close above red ribbon)
Confirmed upswing (green ribbon)
Upswing under strain (close inside green ribbon)
Early Downswing (close below green ribbon)
Confirmed downswing (red ribbon)
Downswing under strain (close inside red ribbon)

The swing states have already been explained in detail in the Simplifying Swings article.

SwingConfidence™ Scoring

You just need to select the Weekly & Daily Swing states from the dropdowns. If the daily swing states of both the indices are the same, then select the Concurrence dropdowns as *same* (in both indices), else select *different*. The sum of the scores is the final SwingConfidence™ score.

How to use SwingConfidence™ to decide position sizing?

If the SwingConfidence value is 100%, then we go with full position size (1% capital-at-risk).

If the value is 0%, we sit out in cash.

Between these 2 extremes, we reduce/increase our position size accordingly (either 0.25% CAR, or 0.75%CAR).

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