Last Updated on 10 February, 2024 by Rejaul Karim
Is Swing Trading Hard? Many people who want to learn how to trade wonder whether swing trading is a trading form that suits them. They want something that’s not too complicated, that still has great profit potential.
Swing trading isn’t very hard once you have a trading strategy in place. While discretionary swing trading is very hard to learn, it’s easier to go with a systematic approach. So is Swing trading easy? The hardest part of swing trading is to build your own swing trading strategy and stick with it. However, if you buy a strategy that’s ready to trade or find a proven one that works, you could be up and running very quickly.
In this article, we’ll look at what type of swing trading you should focus on to make it all as easy as possible for you. We’re also going to cover how to overcome the most common challenges. Some of them are challenges that most traders never even learn to identify!
Discretionary Swing Trading: Why You Should Look Elsewhere
If you look around on the Internet and watch some videos, you see a lot of people talking about their discretionary swing trading methods. They talk about trend lines, trading indicators, and tell you how and when to enter a trade for maximum profit.
However, most of those people don’t even know how to trade themselves. What they are presenting you with are old and out-dated technical analysis methods that either don’t work anymore, or never have worked.
The markets are becoming ever more efficient, meaning that the edges are waning and replaced with more randomness. And it’s in that puddle of randomness where you are looking to extract tradable trading strategies that aren’t the result of the random market movements.
And as you might understand, doing that by just watching charts, and acquiring a sense for where the market is heading, is incredibly difficult nowadays, if not close to impossible.
Systematic Swing Trading: The Solution
Many traders are stuck in the belief that discretionary swing trading is the way to go. However, for us who have backtested many of the concepts that are taught and advocated by the so-called “trading gurus” , we seldom find something of value in those concepts.
What we also have found from our own testing, is that it’s really hard to know what’s going to work, and what’s not.
Of course, we have a general understanding of what works and not with the things we’ve tested, but when trying new things that we haven’t looked into before, we are close to clueless!
You cannot derive what’s going to work by using common sense. The only way of knowing what works is to adopt a systematic approach. So what do we mean by this?
Systematic Trading And Why It’s Superior
As a systematic trader, you don’t rely on your gut feeling. Instead, you backtest your idea on historical data and see if it has worked historically, or not. For example, if we tested an idea, and got the equity curve below, then that would be a good indication that we are on the right track.
Now, this means that you suddenly can create trading strategies that rely on a real edge in the market. That is, now you have a real chance of success, and can put those concepts you’ve believed in under scrutiny. We are quite certain that you will find that very little works as you expected.
Most things will show no edge at all, and you will be thankful that you tested it before you went live with real money.
However, when you finally have your strategy, things start to get easier. You then just follow the rules of the strategy, and you’re ready to take the signals. If you insert your strategy into a stock screening service, your trading routine doesn’t need to take more time than 15 minutes each day.
You just scan the markets for the entry condition that your swing trading strategy uses, and then take the signals that show up in the scanner. This can easily be done anytime after the market has closed. You just need to be sure to place your orders for the next market open!
The Hard and Difficult Parts of Systematic Swing Trading
While systematic swing trading is the way to go, it’s not without challenges. Even if swing trading indeed is one of the most beginner-friendly and easy trading forms, it’s not a simple plug-and-play solution.
Here are some of the biggest challenges you’re going to face as swing trader:
1. You Have to Follow the Rules
The premise of systematic swing trading is that you take the trades that your strategy gives you. There is no room for spontaneous discretion if that’s not a part of your trading plan already.
Taking the trades when things are going well is something that most people manage well. However, it’s when you’re in a drawdown and fear further losses that it may be hard to stick with the strategy!
As you might have guessed already from the previous point, what proves to be a hindrance often is yourself. The emotional pressures that trading imposes on you could be immense and need to be dealt with. It’s hard to anticipate the feeling of a future drawdown if you never have experienced one yourself. That’s why we recommend that you take it easy in the beginning.
Remember, trading is a marathon, not a sprint. It is perfectly fine and completely normal to make mistakes in the beginning. As such, you should start small, so that those mistakes don’t cost you too much!
3. You Have to Make the Strategy Robust
As we explained, one of the biggest advantages of systematic swing trading is that you know your odds before you trade a strategy.
However, when backtesting you run the risk of curve fitting the strategy. In short, this means that the strategy won’t work, because the results you saw were just random luck, and nothing else. Much of the market action is random, and if your strategy rules happen to catch some random patterns in the market, then the backtest results could fool you.
If you only start considering the robustness of the strategies you build, then you have come further than most swing traders ever will come.
At the end of the article, we’ll link to more resources where you can read more on this, and how to ensure the robustness of the strategies you build.
4. You Must Manage Your Risk Carefully!
This part isn’t that hard, but what we often see with new traders, is that they risk too much on every trade.
One good rule of thumb is to not risk more than 2% of the account on one trade. That way you will cope with a long streak of losing trades, and still remain with enough capital to continue trading!
If you’re starting out in the world of trading, then swing trading is the perfect choice for you! It’s easy when compared to other trading forms, and offers great profit potential. It’s also possible to combine with a full-time job, since the order execution takes so little time, and only requires you to be by your computer after the market has closed.
Just remember to go with a systematic approach. Doing so will multiply your odds of success manyfold, and make swing trading much easier for you in the long run. Discretionary swing trading indeed is hard, and is becoming increasingly more difficult as the markets get more efficient.
Swing trading can be challenging, as it involves making quick decisions based on market movements and potentially holding positions for only a few days. It also requires a solid understanding of technical analysis and the ability to monitor the markets closely.
However, swing trading is not necessarily more difficult than other types of trading. It can be easier for some traders because it does not require the same level of constant monitoring and decision-making as day trading. It also allows for more flexibility in terms of time commitment, as swing traders do not need to be constantly checking the markets.
Ultimately, the difficulty of swing trading depends on the individual trader’s skill level, knowledge, and experience. It is important for traders to thoroughly educate themselves before attempting swing trading and to be prepared for the challenges and risks involved.
In our complete guide to swing trading, we go in-depth on many of the topics we just touched upon in this article.
Here you can find our archive with all our swing trading articles.
What is swing trading?
Swing trading is a style of trading in which traders hold positions for a period of days or weeks, rather than for just a few minutes or hours.
Is swing trading hard?
Swing trading can be challenging for some people, especially if they are new to trading or if they do not have a strong understanding of technical analysis and market trends. However, with practice and dedication, swing trading can become easier over time.
What skills are required for swing trading?
Successful swing traders typically have strong analytical skills and are able to quickly identify trends and patterns in the market. They also need to be able to manage their emotions and stay disciplined, as swing trading often involves holding positions for extended periods of time.
How much time is required for swing trading?
Swing trading typically requires a significant amount of time and dedication. Traders must be able to monitor the markets regularly and be prepared to make quick decisions when necessary.
What are some common mistakes made by swing traders?
Some common mistakes made by swing traders include failing to set clear trade objectives, not having a defined exit strategy, and not adequately managing risk.
Can anyone learn to swing trade?
Anyone can learn to swing trade with the right mindset and dedication. It may be helpful to start with a demo account to practice and gain experience before transitioning to live trading.
What is the best way to learn swing trading?
There are several ways to learn swing trading, including taking online courses, reading books and articles, and joining trading forums and communities. It may also be helpful to seek guidance from a mentor or trading coach.
Is swing trading suitable for beginners?
Swing trading may not be the best option for beginners, as it requires a strong understanding of technical analysis and market trends. It may be more suitable for traders with some experience in the markets.
What is the risk level of swing trading?
The risk level of swing trading depends on the specific strategies and techniques used by the trader. Some swing trading strategies may involve higher levels of risk, while others may be more conservative. It is important for traders to carefully assess their risk tolerance and develop a strategy that aligns with their goals and risk profile.
Is swing trading profitable?
Swing trading can be profitable for some traders, but it is important to note that there are no guarantees in the financial markets. Successful swing traders typically have a well-defined trading plan and are able to manage risk effectively.
What are some advantages of swing trading?
Some advantages of swing trading include the ability to hold positions for a longer period of time, which can potentially lead to larger profits. Swing traders also have the flexibility to adjust their positions as market conditions change.
What are some disadvantages of swing trading?
Some disadvantages of swing trading include the need for a significant amount of time and dedication to monitor the markets, as well as the potential for large losses if trades do not go as planned. Swing traders may also be exposed to increased risk if they do not have a well-defined exit strategy in place.