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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, day 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 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. In an upcoming Armchair Trader segment in the next few weeks, we’re going to run a little competition between the site authors, and personally I’m going to be trying to implement both a day trading and a swing trading strategy to see which one benefits me the most. If you’ve looked at some of my forum entries of recent months, you’ll see that 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

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 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 and you’re up for a bit of fun, take our online quiz and find out which type of trader you are.

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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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