Last Updated on 3 November, 2022 by Samuelsson
Swing trading is a popular style of trading that is often recommended for people who are new to the financial trading world since it is not as fast-paced as day trading. As a new trader, you may want to know how you can become a successful swing trader.
Becoming a successful swing trader is not a short-term thing; you achieve success in swing trading over the long term if you follow the right strategies and are consistent in executing your trade setups as they occur. Success comes from having an edge in the market and the mental skills to consistently implement that edge.
In this post, we will discuss what success in trading means, the factors that determine your trading profits, how to become successful in swing trading, and some trading tips that can help you. But first, let’s find out who a swing trader is.
Who is a swing trader?
A swing trader is one who leaves his/her trades open beyond the trading day but usually not more than a few weeks. Notwithstanding the financial market — stock, bond, forex, or commodity market — he/she trades, a swing trader lies in the middle of the spectrum between day traders who close their trades on the same trading day and position traders or investors who leave their trades for several months and years.
Swing traders aim to profit from medium-term price moves. Those price moves occur as individual price swings, especially the impulse swings, on the daily timeframe, and they tend to last from a few days to a few weeks — although they can last for several weeks on rare occasions.
Most swing traders make use of the technical analysis approach when searching for tradable opportunities in the market. They usually analyze the price charts on the daily timeframe but may step down to the 4-hourly timeframe to pick better trade entry levels. Some swing traders may also consider fundamental factors when making a trading decision.
Unlike day traders, who spend all day monitoring and analyzing the price charts on the lower timeframes, swing traders only check their charts at the end of the trading day (or every 4 hours when a trade setup is in sight). Thus, swing trading is a more realistic trading approach for a beginner or an experienced trader who wishes to trade part-time while keeping a full-time job or private business.
What it means to be a successful trader
You would agree with us that success is not a word that one can easily define — its meaning varies according to an individual’s goals. If you Google the definition of success, you will find something in the line of ‘an accomplishment of a purpose or an aim’.
So, success is more of a concept than a word. It expresses the idea of achieving the aim for which you embarked on a journey, and this is how to think of success in the trading world. As you know, trading is a journey — a long and tortuous one. The beginning of the journey may be a little rough, but once one learns how to handle all the difficulties, the person becomes better at it.
While money may seem like the ultimate end in the trading journey, success in trading does not necessarily mean to make money from a trade. It goes beyond that; it encompasses a lot of things, including the mindset, consistency, lifestyle, and all about life.
A successful trader is one who is consistently making profits almost every month and certainly making positive returns every year. Not just that, the profits must be big enough to take care of his normal lifestyle, and the work of trading does not take all his time to the extent that his personal life suffers.
The latter is very important because it makes no sense to be consistently pulling money out of the market without having the time to enjoy it with loved ones. A successful trader wins in the market without leaving out other essential aspects of life. Trading success, as with success in any other career, is an all-round accomplishment in the trading career.
Factors that determine how much money you can make in swing trading
As we stated above, being successful in trading is not just about money. However, profitability and money lie at the center of it, which is why we want to take a look at the factors that can determine how much you can make in swing trading. Surely, there are many factors that can determine how much money you make from your trading, but we will focus on these four most significant ones:
- The trading strategies you use
- The number of trade setups you get
- Your ability to properly execute your strategy
- Your position size
1. The trading strategies you use
One of the key factors that determine how much you can make is the number of trading strategies you use and how effective they are. These will have a significant effect on what you can get from your swing trades. If the strategy you use has a high win rate and reward/risk ratio, you have the potential of making more profits.
You should know that one strategy doesn’t work in all market conditions, so if you have different strategies that work in different market conditions, you stand a chance of making more profits too because whatever the market condition, you have a strategy that can make you money.
There are many strategies for swing trading, but not all of them are very profitable. However, let’s briefly take a look at a few of the strategies that work quite well in swing trading, and they include:
- Mean reversion: The mean-reversion strategy is commonly used in swing trading. The strategy is based on the fact that the market tends to make over-exaggerated moves to either side of the mean price and subsequently tries to revert to the mean. However, in trying to go back to the mean, the price overshoots again and tries to revert to the mean again. So, the price keeps swinging up and down, thereby creating tradable opportunities that, with the right indicators, traders can profit from. The key is to identify when the price is in an oversold or overbought condition and has a high chance of reversing. Some of the indicators you can use to identify when the price is oversold/overbought include the RSI, Bollinger Bands, moving averages, and price action setups.
- Price momentum: The price momentum concept is also known as the trend-following strategy, and the idea is to trade in the direction of the trend after the price makes a temporary pullback. You are seeking to trade the impulse wave in the direction of the trend and readily jump out of the trade when the next pullback starts to avoid losing the profits you’ve made. When making use of this method, you must have a way of knowing when a pullback is about to end for the next impulse swing to start.
- Price breakouts: With a breakout strategy, you are waiting for the price to rise above a specified price level where it had reversed in the past. The price breaking above that level shows that there is a huge buying potential in the market, and the price is likely to continue moving higher. For instance, the famous Turtle strategy believes that when the price closes above a 20-day high, it has the potential to move higher, so you are expected to place a buy order.
2. The number of trade setups you get
Another key factor that determines how much money you make from swing trading is the number of trade setups you get from your strategies. This can determine how often you place trades in the market, which, in turn, affects your profit potential. The thing is, the more the number of trade setups you get in a week, the more the opportunities to make money.
3. Your ability to properly execute your strategy
It is your executed trades that put you in a position to make money. You won’t make any money if you get tons of trade setups without executing them. You must execute those trade setups to stand a chance of making money, and to do that, you need to have the psychological skills to effectively implement your strategies.
4. Your position size
One other thing to consider here is the size of your position in each trade since that can affect how much you make from your trades. For example, if you trade more shares in a trade, you can potentially make more money from that trade than you would have made with a fewer number of shares.
However, it all comes down to how much of your capital you want to risk per trade. If you risk 3% per trade, you will potentially make more money than when risk only 1% per trade. But you may also lose more, especially when you risk more than your mental skills can handle.
How to become a successful swing trader
There are a few things you can do to make your trading journey a successful one, and these are the major ones:
Have a source of income
If you want to trade with a free mind, you need to have a stable source of income that pays your bills. Without a source of income, you will be dependent on your trading profit, which can affect the way you execute and manage your trades. An alternative source of income helps you to put your emotions in check when trading.
The truth is, the stock market is not where you come to get money to pay bills. In fact, you need to have money to be able to make money from stock trading. If not, you will be in a hurry to make money and end up making dangerous trading mistakes like overleveraging and holding on to a losing trade for long.
Acquire trading education
You need to get the right trading education to know what works in the market, the factors that move the market, and how to handle every situation that arises in your trading. Apart from those, your trading success also depends on acquiring the right mindset and the mental skills to execute your trading strategies.
While you can learn how to trade on your own by reading trading books, watching free trading tutorial videos, and practicing with paper trading, you will waste a lot of your time and may end up not learning the right trading strategies for you. You will learn swing trading faster if you enroll in the Robust Trader’s Swing Trading Course.
The swing trading course teaches you four ready-to-trade strategies that the Robust Trader team — a trading team headed by a veteran trader with over 20 years of successful stock trading experience — uses in their own trading. You will also learn how to manage risks and how to train your trading mind to think like a successful trader.
Have a plan
There is an adage that if you don’t have a plan, you plan to fail. You must have a comprehensive trading plan that covers your trading strategies and specify which strategy you use in which market condition. It should also cover your risk and trade management strategies, such as your stop loss and profit-taking plan.
You should also have a plan on how to use your monthly profits. Do you withdraw them or retain them for your account growth?
The easiest way to make money from swing trading without doing the hard work
You can start making money without doing the hard work of searching for trade setups and choosing the stocks to trade. You can do this by subscribing to the Robust Trader’s Swing Trading Signal Service, which delivers high-quality trading signals to your inbox every morning before the New York Stock Exchange opens.
The signal service has a 6-years record of success, with more than 74% winning trades and a profit factor of 2.2, which makes it about the best swing trading signal for stock trading. It is easy to follow and tells you which stocks to trade and whether to buy, sell, or hold your position in those stocks.
Some trading tips that can help you
Here are some trading tips that can help you achieve success in your financial trading journey:
- Understand your motives: What is your motive for setting out on this trading journey? Sure, it could be to make more money, but that has to be realistic. You need to define your goals and make sure they are achievable.
- Identify the type of trader you are: This is very important. You need to understand your trading personality. If you are the type that likes to work in a fast-paced environment and can make quick decisions in the heat of the moment, you may be better off with intraday trading than swing trading.
- Think long term: Success in trading is achieved over the long term. Trading is not a get-rich-quick scheme, so you have to think and plan for the long term.
- Have a consistent method of selecting the stocks to trade: The way you choose the stocks you trade matters. There are many stock screeners out there. When using them, make sure you are consistent with your selection parameters, such as the trading volume, price range, and so on.
- Have a trading plan: With a trading plan, your work becomes easy. You know what to do at any point. All you do is just to implement the plan.
- Always align your trade with the overall direction of the market: Whatever your trading strategy is, it is safer to take trade setups that occur in the direction of the market trend than to take trades that occur against the market direction.
- As a beginner, look for buying setups only: The price of a stock can only fall to zero, but the upward potential is limitless. As a beginner, avoid short positions. Look for buying opportunities only until you understand how things work.
- Start small: Trading is a long-term journey. It can never make you rich overnight no matter how big you want to start, instead, you stand a chance of losing the bulk of your capital. It is wise to start small until you understand how things work, develop the necessary skills, and grow in confidence.
- Focus on execution and not on the outcomes: Don’t bother yourself about the outcome of individual trades; simply focus on executing your trading strategies properly. Your trading edge will play out good over a series of trades.
- Trade in sample sizes: You need to define what constitutes a good sample size for your trading strategy. Once you have done that, keep executing your trades without considering the outcomes until you reach that number of trades.
- Review after a sample size: When you have completed a sample size of trades, review the outcomes to know what changes you need to make if any.
- Address your trading mistakes: From your review, note the areas you need to improve on and work on them.
- Don’t stop investing in your trading education: In trading, learning never stops. Continue to invest in acquiring more knowledge.
- Try a trading signal: A trading signal may give you a new perspective, so you may try that out.
Success in trading is achievable, but you have to work for it. The key is to acquire the right trading education and have a trading plan. You also need to have another source of income to take the pressure off your trading.
Here you can find our archive with all our swing trading articles.