In the world of investing and trading, there are two types of traders, the Day Traders and the Swing Traders. Swing Traders are people who are interested in short or medium-term gains in a stock that lasts for days or weeks. If you are interested in becoming a Swing Trader, here is some of the essential information for you to become one.
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As we have said, a Swing Trader is someone investing in short/medium-term gains inside stocks for a few days or weeks. Unlike a Day Trader, Swing Traders have their positions held overnight instead of closing them out as the market closes. The way they analyze the market is also different, Day Traders use technical analysis and charting system. Swing traders check on the swings of a stock or commodity in the past few days/weeks.
It is also worth noting that Swing and Day Traders operate with different schedules. Usually, Swing Traders are doing their traders part-time compared to Day Traders who are doing it full-time. Swings Traders will also have another job where they can gain income to mitigate any losses from trading. This also a great way for young traders to gain experience and understand how trading works.
Swing Traders will often look at multi-day chart patterns to build their strategy. Based on these charts, traders will look for trade setups for assets with a predictable price movement. Of course, not every strategy and setup will always work. For example, having a favorable risk/reward would not require a trader to win a lot in order to make a profit.
You also wanna do some backtesting, this is when you are testing your ideas against historical or past ideas to see if they will work. You will need to learn code language and there are many that are easy to learn even if you don’t know anything about programming. Although you will need to learn about curve fitting, which is fitting in the best data points that are subjected to constrain. This something traders may fall into easily and lose sight of why they are backtesting in the first place.
When you are Swing Trading, you wanna go for the stocks that have large caps. Why? Because they have definitive high and low extremes making them the most actively traded stocks in the market. Traders can ride the waves of these stocks for days or weeks until the direction of the stock changes. And when that happens, swing traders will also change directions in line with the stock they are riding.
In the market, you have two extremes, the bear and bull market. Active stocks sometimes don’t share the oscillation commonly found in the market. This makes Swing Trading operate differently because the indexes are stable for weeks or months. The best position for a swing trader is when the market isn’t going anywhere. This pattern shows an index going up for few days and after that, it goes down for a few days.
That being said, swing trading’s success is based on identifying the right market that is currently being experienced. How you approach your trading based on the trends in the market right will determine your success.
It is no secret that traders will experience fear or greed when they are trading. While that is natural to have those emotions, you do need to learn to control those emotions and learn from them. You’ll definitely want to keep some sort of journal for you to track the days when you have a good or bad trade.
Having that journal will help you learn what emotions you were feeling at the time of trading (good or bad). Acknowledge what you are good at and what you need to improve will be key to your success as well as adapting to the ever-changing environment in the stock. Failing to do so will leave your trading business stagnant and taking unnecessary losses.
To wrap things up, becoming a swing trader is an excellent way for someone to gain experience in trading. You can set your own schedule for when you want to trade stocks as well as understanding how the market works. But be careful with your trades because there will be days when you will receive losses. Consider those strategies we have mentioned here to help you build your career in swing trading.
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Majaski, C. (2020, December 02). The difference between day trading and swing trading. Retrieved February 17, 2021, from https://www.investopedia.com/articles/active-trading/052815/pros-cons-day-trading-vs-swing-trading.asp
Mitchell, C. (2020, December 15). Swing trading. Retrieved February 17, 2021, from https://www.investopedia.com/terms/s/swingtrading.asp
Samuelsson. (2021, January 13). Can you swing trade with a full time job? Retrieved February 17, 2021, from https://therobusttrader.com/can-you-swing-trade-with-a-full-time-job/