Can You Make A Living Swing Trading – Since becoming an active participant in the stock market 7 years ago, I have always done swing trades. But for the last 2-3 years I have tried trading futures, stocks and sometimes options. Although I made good money in the short term, I always found it difficult to maintain consistency and discipline when the price action was moving rapidly, which meant giving back profits through emotional triggers.
On the other hand, with swing trading, I have had consistent success following my game plan as I have seen my equity curve continue to rise. Here are 3 reasons why I only trade now:
Can You Make A Living Swing Trading
What is that statistic: 90% of retailers lose money. I really think this is because many people try to give stocks and options without a game plan. A new trader may experience some intraday losses in a row. Unable to cope with the sudden realization that you just lost $1000 in less than 5 minutes, you suddenly feel the urge to double down, or worse, move on to another trade, which eventually leads to huge losses and exploited accounts. . above.
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New traders try to get rich quick by risking more than they should without a strategy, they only focus on $$$ signals and don’t treat trading as a business. I think there is also a huge psychological component where many new traders struggle.
With swing trading you focus on the big picture (daily, weekly and monthly charts). Price action is significantly reduced so you can easily manage your risk and emotions, have time to study the market and develop a trading strategy based on what you see as profitable.
When you focus on the big picture, you can better gauge the overall trend of the stock and increase your patience. Support and resistance levels are more important and provide greater risk/reward opportunities. The best part is that you won’t close your stop loss (you better use it) rather than just stopping out and seeing the stock climb higher.
Swing trading made a big difference for me in how I was able to manage my emotions compared to day trading. When I was in day trading, I tended to be disciplined for a maximum of 3-4 days before going on an incline. The emotional mistakes you make while trying to take a loss or profit, whether by re-entering, averaging a loss, or simply increasing your position size, will cause significant damage in the short term. Not to mention going to the shops was not part of my game plan. Everything happens faster when you day trade, which requires a lot of mental capital.
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Now when I change trades the price action seems to slow down. I focus more on daily and weekly levels, ignoring intraday stocks unless an important support level is missed. Before the market opens, I know which stocks I’m looking at, entry triggers and stop loss to control my exposure to a certain percentage of my account. After that, I just wait for the price to get closer to my entry to see if there is an increase in volume, i.e. big buyers are increasing. If I get stopped, I know that the stop loss is likely to be in the right place because a strong low pivot has been taken. You are less likely to want to take a revenge trade after stopping at a daily or weekly support level.
Most new traders are attracted to day trading because you can make money in seconds. But as a day trader you are only capturing a small portion of what might be a large macro move.
Take the AMZN chart above. In April 2020, if you bought the 2185 breakout, you would have made ~62% profit by selling after a strong uptrend broke in September 2020. As a day trader, I’m sure there were opportunities. However, the daily chart does not show you the intraday volatility of how the stock moves. I highly doubt it is capturing significant intraday moves compared to macro breakout moves.
If you still day trade or are a swing trader, let me know what you think in the comments below! Swing trading is a style of trading that attempts to capture short to medium term gains in a stock (or any financial instrument) over a period of several days to several weeks. Swing traders use technical analysis to find trading opportunities.
Swing Trading: Explanation And Examples
Swing trading usually involves holding a long or short position for more than one trading session, but usually no longer than several weeks or a couple of months. This is a common time frame, as some trades may last more than two months, but the trader may still consider them swing trades. Exchange trades may also occur during the trading session, although this is a rare outcome due to extremely volatile conditions.
The goal of swing trading is to capture a portion of a potential price movement. While some traders look for volatile stocks with a lot of movement, others may prefer quieter stocks. In either case, swing trading is the process of recognizing that an asset’s price is likely to move to another location, entering a position, and capturing a portion of the profit if that move materializes.
Successful swing traders try to capture only a portion of the expected price movement and then move on to the next opportunity.
Swing trading is one of the most popular forms of active trading, where traders look for medium-term opportunities using various forms of technical analysis.
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Many swing traders evaluate trades on a risk/reward basis. By analyzing the asset’s chart, they determine where they will enter, where they will place the stop loss, and then estimate where they can exit with a profit. If they’re risking $1 per share on a setup that could reasonably produce a $3 profit, that’s a favorable risk/reward ratio. On the other hand, risking only $1 to win $0.75 is not so favorable.
Swing traders use technical analysis, due to the short-term nature of trades. That said, fundamental analysis can be used to improve analysis. For example, if a swing trader sees a bullish setup in a stock, they want to verify that the asset’s fundamentals look favorable or are improving.
Swing traders often look for opportunities on daily charts and can look at 1-hour or 15-minute charts to find the right entry, stop loss, and take profit levels.
The difference between swing trading and day trading is usually the holding time of the positions. Swing trading often involves at least one overnight hold, while day traders close out their positions before the market closes. To generalize, day trading positions are limited to one day, while swing trading involves holding for several days or weeks.
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By holding overnight, a swing trader affects the unpredictability of overnight exposure, such as a position versus a gap or a bottom. By taking on overnight risk, swing trades are typically done with smaller position sizes than day trading (assuming both traders have accounts of the same size). Day traders typically use larger position sizes and may use daily trading margins of 25%.
Swing traders also have access to 50% margin or leverage. This means that if a trader is approved for margin trading, for example, they need to put $25,000 in equity for a trade with a current value of $50,000.
A swing trader looks for multi-day chart patterns. Some of the most common patterns include average crosses, cup and handle patterns, head and shoulders patterns, flags and triangles. Key reversal candlesticks can be used in addition to other indicators to make a solid trading plan.
Ultimately, every swing trader comes up with a plan and strategy that gives them an edge in most trades. This involves finding trade setups that lead to predictable movements in asset prices. It’s not easy, and any strategy or setup works every time. With favorable risk/reward, you don’t need to win every time. The more favorable the risk/reward of the trading strategy, the more trades you need to win in order to make an overall profit.
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Using a historical example, the chart above shows a period of strong price growth for Apple (AAPL). This was followed by a small cup and handle pattern that often indicates a continuation of the price increase if the stock moves above the handle’s high.
In addition to risk/reward, the trader can also use other exit methods, such as waiting for the price to make a new low. With this method, an exit signal is not given until $216.46, when price breaks below the previous retracement low. This method would have resulted in a profit of $23.76 each
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