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Yes, of course to those of a certain mind,  i.e 99% of the male population, Swing Trading brings all sorts of images into our minds. But, for traders, those who swing or position trade often find themselves smiling inwardly at all those daytraders who sit, staring at screens all the time, chasing that elusive last point.

Swing trading is sometimes viewed as a less popular trading strategy than day trading because of how a lot of people are drawn to a “get rich quick” strategy, in the mistaken belief that day trading will lead to huge profits quickly.

In reality, day trading can be tremendously stressful, requiring intense concentration, nerves of steel, and the ability to pull the trigger on a trade when a specific set of rules is met, even if that trigger comes just moments after a losing trade. This is not always as easy as it sounds.

So, swing trading can seem to take the pressure off.

You’re looking for trade entries less frequently, you’re more relaxed, you’re less worried about missing an opportunity because, although your parameters for trade execution really aren’t that different, you’re looking at a longer time frame and so you have more time to evaluate the trade correctly.

With day trading, you often have a very brief period of time during which you can evaluate market conditions and confirm your beliefs.

Swing trading opens up that window of time quite considerably.

Pros and Cons of swing trading

As I’ve said, one of the biggest temptations for daytraders is huge profits. But, it’s rare that amateur traders are in the best positions here, both literally and figuratively. You’re often trying to get small pips here and there – scalping the market – and sometimes going against the bigger trend.

Remember that whole thing, “the trend is your friend”, right?

Day trading is stressful. It’s high pressure, never a dull moment. Adrenaline. Yeah baby, this is the life of the trader! No. Wrong, wrong, wrong. If you’re an amateur trader – and if you’re reading this, you probably are – you’re doing it all wrong.

Day traders are competing with a lot of high frequency traders, hedge funds, automation and a whole heap of market professional who spend their days relieving you of your hard earned.

Have you ever traded around the time of a news announcement?

Then you’ll know what I’m talking about.

Up one second, down the next, and who knows when it’s going to flip on it’s head.

You might be lucky, but look at a chart and you’ll see that the market usually returns to where it was before the announcement and continues on.

So you endured a few minutes of stress, lightning-fast profits and losses in the space of fifteen minutes, or you could have been in a nice profitable position already, stops in place to secure your gains, feeling considerably more relaxed.

So, how do you reduce stress levels by becoming a swing trader?

Swing trading is less stressful than daytrading. It doesn’t have to be a full-time job and if you’re trying to get into trading, the last thing you want to do is give up your job.

That’ll put pressure on you to be making money from trading, and you’ll screw it up.

Trust me, because I’ve been in that place. It’s dark and cold and you won’t like it.

Setup and study

Setup and study is required, just as with day trading.

But, that can often take place the night before or the morning of, because you’ve given yourself time to sit back and evaluate the market conditions clearly.

Some people will trade on the fundamentals, others on technical’s. I’m a believer in price action and volume and so I tend to look at those only, which pretty much makes me a technical analyst – I believe the price shown on the screen has already factored in all the fundamentals.

However, I don’t use indicators at all because I think every single one of them out there is a lagging indicator, often dreamed up in an effort to take money from the market, rather than profit from it.

Swing trades generally need time to work out, and you might keep a trade open for hours, days or even weeks as long as it’s working out.

Like anything, you need to have your entry and exit points pre-defined, but once you’re in a profitable position you might be able to relax your exit point and shift your entry stop loss up in order to lock in profits.

Of course, you can do this when day trading too, and should to some extent, but you’ll have more time if you’re swing trading. I’m a day trader at heart, but I’m trying hard to get myself out of it because it’s a nasty habit!

Margin requirements for swing traders

Margin requirements for swing trading can be higher if you’re looking to hold a position overnight.

However, there are no defined rules for what constitutes a swing trade – it doesn’t have to be overnight – and so initially you should go with your gut.

If you’re in a position and you think the market has the strength to hold overnight, then move up your stops to a comfortable level and walk away, forget about it for a day or two maybe.

Trust what your analytics, be they technical or fundamental, are telling you.

Cut Your Losses And Ride Your Profits

Losses can be greater if you’re not careful.

When I swing trade, I have a tendency to watch the profitable positions more closely; if a trade isn’t yet in profit then the conditions that made me place the stop loss in the first place are still valid, so I shouldn’t mess with that stop level.

The market will tell me if I was right or wrong. However, if I’m in profit then I know I was right – at least initially – and so I tend to be protective of those profits, and move my stops to recent highs/lows to lock them in. After all, we are only here for profits.

If you have a few minutes spare, take our online quiz and find out if margined trading is right for you.

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Matt Vann

Matt has been trading for over a decade, trading with various forms of Futures, Spread Betting and occassionally, CFDs. He'll trade limited markets including Indices, Currencies and selected Commodities such as Silver and Natural Gas.

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