was successfully added to your cart.
pendlande

Swing Trading – All You Need to Know

By 9 April, 2019 April 11th, 2019 No Comments

What Is Swing Trading?

Swing trading is one of the most popular trading styles out there.  In short, it means that you buy shares and hold for a couple of days up to a few weeks.  You can use many methods to determine when it is favourable to enter a trade. Most traders use technical analysis to analyse things like trends, reports, and patterns in price data, to identify favourable conditions.

Most often, trades are entered either on the open of the next day or the close of the day. This makes swing trading perfect for those short on time and means that you can keep your day job while simultaneously trading on the side. Once you have your strategy and routines ready, swing trading must not take more than around 15 minutes of your time every day.  This also makes it perfect for beginners who want to try out trading to see if it is something for them!

 

The Day Trading hype

When we ask new traders what type of trading they would like to learn, the most common answer is daytrading.  Daytrading seems to be the most searched for and noticed of trading styles and that is not too strange. We are fed with the view of the day trader as someone who nearly possesses magical forces, and is at one with the market to such an extent that he or she knows precisely when it is about to turn around. In news magazines and all around the Internet we are fed with articles about people who day traded their accounts and made returns of several hundreds of per cent in very short time

Most of what we may read is most likely not true, but that is not to say that day trading is an impossible occupation. There indeed are people that manage to carve out considerable profits and more than double their accounts every year, but they are very few. So few, that you might, at least for the beginning, give up the idea of beginning your day trading career. That’s when swing trading comes to your rescue!

Swing trading over day trading?

As mentioned in the introduction, swing trading is a great way to start your trading career. It is relatively easy compared to other trading styles, and it offers some great profit potential with very little time spent each day. With a good strategy, you can start trading immediately, and once you feel ready, there is plenty of room to make things more advanced. You may begin to trade more markets or start developing better strategies with new fresh logics. Swing trading could suit everyone and is a scalable trading style that suits a range of traders; from beginner to advanced.

With this in mind, you might ask yourself why don’t more people choose swing trading over day trading. It is easier, takes much less time, and the chances of success are much, much higher. We ask ourselves that too! While daytrading can be learned, it is by no means suitable for beginners. Again, swing trading is what a majority of traders should start with, and that is what this article is about. Let’s leave daytrading behind and delve into the beautiful world of swing trading!

 

So How Do I Start Swing Trading?

So, you are interested in starting your very own trading career by wisely choosing swing trading to start with! There are many things that you must know, so let us not waste time!

Table of Content

1. Capital And Costs

Covering how much money do you need and what costs are associated with swing trading.

 

2. What Is an Edge?

In this part, we will learn what an edge is, and why it is the most important thing in trading.

 

3. Swing Trading strategies

Covering the most common types of swing trading strategies.

 

4. Trading psychology- Take control of your inner demons

In this section, we will look at biases that might affect your trading, as well as why having a trading plan and keeping a journal is so important.

 

5. Position sizing and risk control

Experienced traders know that controlling risk is critical if you want to stay in the game for longer periods.

 

6. Where to find information

There is plenty of resources on the internet! In this section, we will give you some tips on where you can find high-quality content

 

7. Swing Trading Tips

To round of we will list some valuable tips.

 

 

1. Capital And Costs in Swing Trading

First of all, you will, of course, need some capital. Swing trading is  great out of many reasons, but one significant advantage it has over other trading styles is that you do not need much money to start!  Depending on the price of the stocks you buy, you could start with as little as a couple of hundred dollars. However, regardless of how much capital you start with, it is paramount that you do not trade money that you can’t afford to lose. In the beginning of your trading career, you WILL make mistakes, and it is important that you can afford to lose it all, one or several times before making money consistently.

However, do not get us wrong! We are not saying that it will happen to you!  If you follow the advice put out in this article, the chances are quite small. But still, they should not be neglected completely! Swing trading, like all types of trading, comes with its risks!

Keep You Profits For Yourself

When you are about to start your swing trading career, it is imperative that you choose a broker that does not charge you significant amounts of money in commissions and fees. What many beginners forget is that swing trading means a lot of trades and in turn a lot of commission payments. If your broker is an expensive one, it could cost you a large amount of your profits. The smaller your capital is, the more important it gets. For traders trading tiny accounts, a profitable strategy could even lead to losses, just because you are charged so much for every trade.

Trading Costs

Here are some of the costs that you will have in your swing trading:

  • Commission- This is the price that your broker charges for the execution of your trade.
  • Slippage- This is when you place an order, and it is not executed at the price where you placed your order. This could be because the market moved slightly in the time it took for your order to reach the exchange, or only because there were no bids at that level.
  • Taxes
  • Trading software – More and more software is becoming free as competition tightens.
  • Live data- Depending on what market you want data for and your broker, this could range from being free to costing several hundreds of dollars each year.
  • Historical data- If you want to develop your own strategies for your swing trading, you might have to buy additional data that goes further back in time.

 

When reading about how many fees you could incur on your swing trading adventure, we hope it becomes quite clear that you need to keep all fees as low as possible. Do not fall into that pitfall of letting you broker take all your profits! Today there are many alternatives to choose from and the competition is getting tougher and tougher, leading to constantly lowered commissions and fees. Do your research before opening a brokerage account, and you will save a lot of money!

2. Why Do I Need an Edge?

3. Swing Trading strategies

4. Trading Psychology – Take Control of Your Inner Demons

This is an aspect of swing trading and trading in general that is often neglected. Those who have not yet exposed themselves to the emotional stress that inevitably comes with trading, have a hard time understanding the size of this issue. Of those who have a profitable strategy, most traders fail not because they do not know how it is done, but because they cannot stand the stress imposed by trading. They begin to question their decisions and become unsure of what they should do, even if they have a written trading plan. By the way. Let us talk about trading plans! It is a great way to keep yourself from making decisions that could hurt your swing trading!

 

Biases in trading

biases

The Importance of Creating Your Own Swing Trading Plan

When we plan our trading, look at our strategy and note how great it is, it might be hard to understand that the sense of calm and control soon will soon turn into anxiety, fear, and trepidation. We persuade ourselves that we will be in control also when we start swing trading.

Well, that is the nature of the human mind. We overestimate our future abilities and like to believe that we will cope with more tomorrow than we do today. How often have you not postponed a chore to the upcoming day, only to find that it still needs to be done one week later?

This belief could become very dangerous. It leads us to not prepare enough to endure the emotional and psychological stress that comes with trading. That is why we need to carefully define our trading plan so that we know exactly what to do in every given moment. Every time you are hesitating to carry out a trade in your swing trading, you want to have a solid plan that tells you what to do. This is where your trading plan helps you to make the right decisions.

What Should My  Swing Trading  Plan Look Like?

If you do not understand any of these points, do not worry. Continue reading, and we will cover them soon!

To be effective, your trading plan should cover a lot of things. Here are some questions you might want to have answered:

1. Have I Set a Goal?

Decide what you want to head for. It could be not having a greater drawdown than x per cent, or making a return of x per cent per year. It is up to you!

2 . What Are My Rules?

You must define what strategy or signals you will use in your swing trading. At least the following has to be determined:

    • Entry
    • Exit
    • Stop loss

3. What Is My Position size

How much should you risk on every trade? Are there particular occasions when you are allowed to risk more, or should risk less? Do you have any set limit on how many open positions you are allowed to have simultaneously?

4. What Markets should I trade?

Try to focus on one market or market type, at least for the beginning. Define what you will trade. It could be that you only want to trade the most liquid stocks, conversely or some other rule.

5. Have I Prepared for Different Scenarios

Make sure that you know what to do if the unexpected happens. Here are some suggestions on scenarios you should prepare for in advance:

    • A drawdown bigger than what you expected.
    • Market turmoil and end-of-the-world type headlines
    • A black swan event

Your swing trading is reliant on you being able to ride out these types of events! They will come, sooner or later!

6. How Am I going to log my results?

It is important that you keep a record of your trades so that you easily can return to your results if you suspect that you have made mistakes in your swing trading.

7. Keep a swing trading journal!

Having a trading journal is of great importance for your progress!

Final words on Trading Plans

Having a trading plan to guide you in your swing trading is of utmost importance! Unfortunately, many traders overestimate their capabilities to remain rational amidst great emotional stress, leading them to quit their swing trading career before it even started. As you probably understand by now, we recommend everyone who starts with swing trading to define their trading plan BEFORE they start trading. Trust us, following our advice will make everything much easier for you!

Trading Journal – Logging Your Swing Trading

At first glance, the trading journal and trading plan might seem to be the same thing. Of course, it is not, because then we would not dedicate a whole section for it

The trading plan is, as we have learned, is where you define how and by what rules your swing trading will be carried out. The trading journal, on the other hand,  is different in that it does not dictate how your swing trading should be carried out. Your trading journal is an ongoing document where you take notes of how your trading is proceeding. It is an invaluable document that enables you to clearly see what you are good at, and where there is room for improvement!

Here is a list of some of the things that could be included in your swing trading journal:

1.A log of your trades.

This is one of the most common things to include. Many swing traders choose to log their entry, exit and time in each trade.

2. Your emotions

This is another very important thing to include. Did you experience any difficulties executing your swing trades? Use an index of 1-5 to specify how much you struggled to stick to your trading plan. Also, try to jot down more specific details. Maybe you were not in your best mood that day or had much to do outside your swing trading? Could it be that some of these factors impacted you swing trading negatively? Simply make quick notes of everything you find to be important!

3. Mistakes

Make quick notes of your mistakes and figure out what you could do to prevent them from happening again! If there was any specific reason to why it was made, write that down too!

Common Mistakes Traders Make When Writing Their Trading Journal

There are some things that you should be aware of when you write your journal. here is a short list:

1. Too Much Information

Keep in mind that your swing trading journal is something that you will be doing every day. It is understandable that you are enthusiastic in the beginning and choose to include a variety of statistics and information. Do not do that! You want your journaling to take as little time as possible, while yet including the most important information. Otherwise, you will most likely grow tired of it quite soon and quit!

2. Only Including Mistakes

While you will make mistakes in your swing trading, you will also do many things right! Many new traders dive headlong into their journals as soon as they have made an error, which is exactly what they should do! However, once they make something right, they forget to write it down. Do not forget to journal your great moments! How are you going to make a correct analysis of your swing trading, if the journal is biased already from the beginning?

3.  Not Reflecting on Experiences

A swing trading journal is not only about what happened in the past. Make sure that you reflect on what there is to learn from your experiences.

And do not forget to write it down!

4. Too Vague Solutions

Once you have made a mistake, you want to take preemptive action and to do that you need a clear action plan. Do not write things like “remain longer in trades” if your issue is that you exit too early. Isolate the problem and find clear solutions. Otherwise, the chances are that you will keep repeating the very same mistakes over and over again.

How to Start Keeping Your Very Own Swing Trading Journal

To round of this section about trading journals, we thought it would be nice to give you  some tips on how to make it easier to begin:

 

1. Make It A Habit

Make a habit of adding one journal entry every day by committing yourself to do so for at least one month. Ensure that the journal entry is the first thing you attend to every day so that you never run out of time. Another effective measure is to set a reward by the end of the month to stay focused and motivated!

2. Start Slowly

Put a time limit of 10 minutes that you never exceed. Do not try to write long-winded and extremely detailed entries. You will soon abandon the whole concept due to lack of motivation. Furthermore, long-winded journal entries will make quick reviews of your journal very time-consuming. The longer and more complicated entries you make, the smaller chance of you finding the time to look it through later. Remember, one of the reasons why we wrote a swing trading journal was that we wanted to review it later! BE concise and clear, and you will probably not have this issue!

 2. Be Organized

Make sure that you have a solid and organized structure before you make your first entry. A nice structure will make it easier to scan through the pile of entries that your journal will become in only a few months time. As said before, try to stay as concise as you can!

3. Make It Fun

If you enjoy using software like excel, word or maybe a physical notebook, that is fine! However, for those of you who find that boring, switch to something more fun. There are tons of services that could be used to keep a swing trading journal. Here are some of the most popular services geared towards traders:

Edgewonk

Tradingdiarypro

Tradervue

tradebench

4. Seek Help From Others 

If you know somebody that already is a trader him or herself, you could share your progress and ask for feedback. Learning from others is a great way of fast-tracking your swing trading career!