Why Swing Trading?

I’m often asked ‘What is Swing Trading and why do it, rather than Intra-Day trading?  This post is an attempt at answering that question and also to highlight my view on the Pros and Cons of Swing Trading.

Firstly, what is Swing Trading?  My definition is that as a Swing Trader you are trying to catch the higher time frame market moves or waves and hold for longer, maybe days, a week or even longer.  To do this requires the ability to conduct Multi-Time Frame Analysis (MTFA), to try and nail the bigger picture, thus understanding the Context of any potential trades and also looking for potential Confluences in the market where one might be interested in taking a trade, if Confirmed.  This is subtly different from being a Position trader where a trade may be taken based upon one’s longer term market view and underlying fundamentals.

To become good at Swing Trading requires honed Technical Analysis skills (MTFA!!) and the ability to do ‘What Ifs’ in your prior planning and preparation.  If you have a plan and price does what you think it might, then you should know what to do and be able to execute that trade plan, without doubt creeping in at the critical moment.  You also need a good dose of Patience and Discipline, which should help your Timing as to when you  might enter the market, at a favourable point.

If you can behave and think like a sniper or Big Game animal, this may help.  Both wait for there target or prey and only act at the most opportune moment, in order to increase their probability of success in what they are trying to do. So if you can Plan, Observe, Execute, Manage, and then Analyse your trades, you should be able to start to be a market sniper!

Contrary to popular belief you do no have to be in the market all the time, less can be more.  You only need one decent Swing trade a month to do well, provided you can minimise taking unplanned, impulsive trades and not forcing the market!  Let the market bring good swing trades to you.

The Pros of Swing Trading are:

  • that you are trading the higher time frames, 4 hour charts and above, occasionally I may go down to the 1 hour chart to get a better entry, but most of the market information and noise is inside the 4 hour and Daily candles.
  • Plus, you now have THINKING TIME!  If you are waiting for a 4 hour or Daily candle to close, you can do other things as well and can have a life outside trading.
  • You DO NOT have to stare at a trading screen all day long, which inevitably leads to burnout.
  • It is possible to trade around a day job.
  • There is less emotion.
  • Once you have moved to Break Even, you will have thinking and planning time to see if you might even be able to add to a swing trade.
  • It is far less addictive than trading the lower time frames, where, if in either a winning or losing trade, adrenaline is still produced, which fuels addiction.
  • You should naturally take less trades and thus avoid Over Trading, which will kill your account!
  • You can set alerts at levels where you might start to be interested, when you do your analysis.

The Cons of Swing Trading:

  • You have to be good at Technical Analysis and Trade Planning
  • You have to be Patient and Disciplined and develop a sense of Timing
  • You have to hold your trades open overnight and maybe at the weekends when geo-political and economic factors may come into play and affect the market opening on a Sunday evening.
  • You have to sit through periods of draw down within your stop loss parameters some times.
  • Your trade entry will normally be tested
  • If in profit, at some point the market will correct and test your resolve to hold that trade.
  • You can have long periods between decent trade opportunities.
  • If you suffer from FOMO you may struggle with Swing Trading!

I’m sure there are other Pros and Cons of Swing Trading, however, once I realised that less can really be more, it came came down to a Life Style choice, but you decide…

Top Trading Tip:  If you are struggling with intra-day trading, for whatever reason, then give some thought to the potential benefits of Swing Trading.  If you need help learning to Swing Trade then give some thought to our Personal Coaching and Mentorship Programme.