Swing Trading

Fancy a middle-of-the-road approach to wealth creation and trading? Does day trading seem too stressful and time-consuming? Do you have spare capital to play with? If so, swing trading might be just your cup of tea. Swing traders make trades over a few days or weeks rather than frantically closing out at the end of the day, but having the luxury of time brings a whole new set of risks.
This article gives you an overview of swing trading versus its counterpart, day trading. It explains how the experts decide their market moves, how you can learn to curate your own trading strategy, the risks involved, and whether swing trading is ultimately for you.

What Is Swing Trading?

Swing traders look to capture short to medium-term gains on stocks or other investment vehicles. It is not day trading, where traders close their positions by the end of the day. Swing traders trade over a few days or several weeks. Thus, swing trading exposes traders to overnight and weekend geopolitical risks. When markets open the next day, there could be significant gaps in prices.

Although swing traders allow the trader more time to analyze the market, time for a cup of tea even, swing trading is not a way to get rich quick. Market reversals can result in substantial losses, and longer-term momentum is often overlooked in favor of short-term market moves.

Swing traders, then, like the more relaxed approach to trading and the techniques that they can use. According to Forbes, Tudor Jones, hedge fund manager and founder of Tudor Investment Corporation, famously built his hedge fund up from a $30,000 start up to a $11 billion asset fund. His secret?

Well, it wasn’t sipping tea. Jones and other successful traders use high-level technical analysis to plan trades including chart patterns, oscillators, fractals, and volume indicators. Yeah. Time to get that cup of tea.

The Pros and Cons of Swing Trading Vs. Day Trading

What differentiates swing trading from day trading is primarily the time frame for trades. Fundamentally, swing trading is better for the disciplined trader for whom patient trading is easy. If that is not you, stick to day trading. Here are the pros and cons of swing trading over day trading.

The Pros

Time – Swing trading requires less time to trade. You do not have to give up your day job to trade. What is more, you can combine day trading and swing trading, and day trade during market hours and set swing trades before the market opens.

Simplicity – Traders can rely exclusively on technical analysis, which simplifies the trading process. This also helps them to keep to a trading strategy and ignore their emotions, which is the reason most traders fail.

Less stress – With strategy and proper risk management, swing trading can be profitable without the stress of day trading. While we are not all Tudor Jones’s, some experts suggest that you can make between 10 to 50 percent a year from swing trading.

Arlie Peyton, a contributor to Medium.com, and author of the article “I Took a Couple of Year Off to Swing Trade. Here’s What Happened,” claimed it’s possible to earn $1,500 to $6,000 a month as a part-time swing trader.

Overnight risk – Overnight risk can be a disadvantage of swing trading, but it can also be an advantage. If the gap favors the direction of your trade, you can make overnight money not available with day trading.

The Cons

Overnight risk – Because trades are held beyond market close at the end of the day, trade positions are subject to overnight and weekend market risk. These gaps mean that a stop loss is useless. The only way to minimize price gap risks is to make small trades without leverage.

Tied up Capital – Positions are held for more than one day, so your capital is tied up longer compared to day trading.

Opportunity cost- Swing traders often miss longer-term trends in favor of short-term market moves, such as a market rally. By entering a new swing and then exiting at a sign of a pullback, a trader could miss a profitable long-term investment.

Fees – Swing trading is less costly in the short term because traders open fewer positions and there are few transaction fees. However, swing traders hold positions overnight and are subject to overnight funding charges that add up over time.

What can be traded?

The same commodities traded by day traders are traded by swing traders. It is not the commodities that differentiate the two trading styles, it is the length of time the commodity or position is held. There are markets and exchanges for swing traders in Forex (foreign exchange), equities, futures, commodities. There is even one for cryptocurrency trading.

Foreign Exchange

Currency is traded electronically over the counter (OTC) on digital networks 24 hours a day, five days a week in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney.

Due to different time zones, when the trading day ends in the United States, for example, it is just beginning in Tokyo. Many forex traders swing trade because positions are held for longer than just one day. Price shifts that turn a profit in forex typically require multiple days.

Equities

Traders use technical indicators to swing trade stocks and identify patterns, trends, and potential short-term changes in trends. One of the strategies based on trading signals are Fibonacci retracement. These charts include trade entry, exit level, and stop-loss points. Timeframes for equity swing trading vary from days to weeks to months.

Other strategies are support and resistance lines, which are the backbone of technical analysis. A trader uses the support and resistance lines to plan trades and place stop losses. Other strategies are channel trading, 10 and 20-day simple moving averages (SMA), and MACD crossover. Swing traders in stocks should be hyper aware of earnings calendars as earnings announcements can cause sudden price movements.

Futures

Futures are derivative contracts whereby the parties are obligated to transfer an asset at a predetermined future date and price regardless of the market price at the expiration date. These contracts are traded across a variety of assets: stocks, commodities, currency, interest rates. Some futures contracts are not completed until the assets are delivered.

Unlike day traders who don’t get involved with the delivery implications of futures contracts, a speculative swing trader should be aware of the expiration schedule. Swing trading futures contracts is different from swing trading stocks because a trader can only close out by entering into a new arrangement with another party.

For example, if you purchased futures contracts for wheat from party A, to close out your position you would sell the contracts to party B. The strategies used for swing trading include the momentum strategy, breakout trading, and mean-reversion strategy.

Commodities

Commodities (also known as derivatives) are traded in four broad categories: metal, energy, livestock and meat, and agricultural commodities. They are risky investments because the factors that affect their prices are impossible to predict.

For example, prices of agricultural goods are affected by weather, war, epidemics, and natural and human-made disasters. Since commodities are always leveraged products, there is inherent risk for swing traders, but the movement is usually less than penny stocks, for example.

Cryptocurrencies

A cryptocurrency is a decentralized digital asset distributed across many computers using blockchain technology. Cryptocurrency exchanges are digital platforms that match buyers with sellers.

Traders can opt to buy and sell cryptocurrency using either a market order (for the best available price) or a limit order (for a price below the current ask or above the current bid depending on whether the trader is buying or selling.)

There are no regulations where cryptocurrencies are concerned, so they are considered highly risky investments. Swing trading then is a good fit for cryptocurrency’s inherent short-term volatility. Swing trading is a popular cryptocurrency trading strategy that requires patience and planning rather than high-frequency trading or intraday scalping.

How do I start swing trading?

Educate yourself on the basics.

The first step to a lifetime of lucrative swing trading is to educate yourself about the basics. There are plenty of tools that can incorporate learning into your lifestyle, whether you prefer to read a book, watch a webinar, or listen to a podcast while walking the dog or driving to the office.

Books

Two top-notch books on swing trading are “Trade What You See,” by Larry Pesavento and Leslie Jouvlas, and “Trading in the Zone” by Mark Douglas. Pesavento and Jouflas are experienced traders and explain how to identify patterns and where to place entry and exit orders. It’s a must-read for swing traders and exposes common market myths and the realities of risk.

Trading courses

There are always unscrupulous people producing low-quality content and educational materials, so you should check with other like-minded swing traders for course recommendations before you whip out your credit card for an online course. That said, Benzinga.com, a well-known educational media platform, recommends a number of swing trading courses based on the expertise of the teachers, the course, and the cost.

Five recommendations are the following: Systematic Swing Trading Using Technical Indicators by Quantra; Guide to Stock Trading with Candlestick and Technical Analysis; The Complete Swing Trading Course; Mindful Trader; and Easy 5-Step Fibonacci Swing Trading System.

Blogs

Feedspot.com recommends blogs for swing traders and ranks them based on traffic, social media followers, domain authority, and freshness. The platform recommends “Trading Heroes Blog | Swing Trading & Currency Trading Education,” which is a blog focusing on forex swing trading. “Morpheus Trading Group – How To Swing Trade Stocks,” a blog that offers top swing trading stock, ETF picks, and a nightly newsletter for bedtime reading.

“Stockbee” teaches trading strategies covering momentum and breakout, anticipation, and position trading using episodic pivots. Ratgebergeld.at – Day Trading & Swing Trading Service offers live chat along with its training. Online Trading to Win features Marcus Lemonis, star of CNBC’s onlinetradingtowin.com.

Forums

You can’t beat forums for interaction with other traders, not to mention getting recommendations for educational resources. Reddit day traders even managed to move the market! Share experiences and ask questions from other visitors. Just make sure that the information you decide to use is good advice to follow. A forum recommended by a trader on Reddit is https://www.reddit.com/r/wallstreetbets/.

Other popular forums are s FXGears, which caters to beginners in Forex, crypto, stock, or futures markets. Trade2Win covers algorithmic trading, index futures, forex, and cryptocurrency for beginners and more experienced traders.

EliteTrader Trading Forum has a broad and active user base. Users discuss the post and can ask relevant questions. However, this forum is not for novice traders and contains advanced content.

Newsletters

Stocktradingteacher.com lists popular newsletters and identifies the top three with swing trading picks. First, is Bullseye Trades led by the guru Jeff Bishop, a self-made options trader. Second, is Jason Bond Picks.

Jason Bond is an American entrepreneur and stock trader with well-researched, timely picks. This newsletter also provides educational content. Third, is Fast Five Trades. Kyle Dennis is the purveyor of Fast Five Trades, and he was originally discovered by Raging Bull colleagues Jason Bond and Jeff Bishop. The trading world is indeed a small one!

Podcasts

There’s no excuse for not expanding your swing trading knowledge with the plethora of podcasts out there. The Razor’s Edge offers interviews and true stories from floor traders, active participants, and hedge fund managers. Stock Talk offers episode recaps detailing swing trading setups, and live trades. Money Control focuses on technical analysis, including methods, charting, and other trading tools.

Swing-Trading the Stock Market focuses on currency pairs and is hosted by top swing traders. Walk your dog while listening to the Top Dog Podcast. Three veterans of the investment world target beginner to intermediate investors who plan on retiring early. Is not that everyone? The veterans offer stock picks and advice on how to leverage dividends.

YouTube

You will find interesting content on YouTube, but be warned that it is not always the most credible. Then again, it is free. Just be sure to bounce off any picks or strategies with more reliable forum members. Do your due diligence before investing and do not be taken in by scammers and fake gurus.

Webinars

Webinars are instructive if they are from a quality source. They can also be a marketing ploy. Do your research on the webinar provider before committing time or money. Your money might be better spent on an educational course for swing traders.

Establish whether swing trading is for you

If you are not into day trading, chances are you already have a full-time job and are busy. Hence, swing trading is more your speed. But what if we told you that long-term buy and hold investing offers greater returns than day trading or swing trading? Would you still want to swing trade?

A study by Brad Barber and Terrance Odean from the Graduate School of Management at the University of California found that between 1991 and 1996, those who traded more frequently earned an annual return of 11.4%, while the average account made 16.4% annually.

A much newer study by the UBC Sauder School of Business shows that active traders end up with more risk and lower returns. So, the more actively you trade, the lower your returns will be over the years. Still want to swing trade?

As a swing trader, you are competing against trading professionals with much stronger technical know-how, computing power, and market information. There is also the added cost of trading fees, commissions, and taxes. Now that we’ve laid out some of the realities, here’s what you need to do if you are still inclined to jump into the pool and swing trade. We get it, trading is fun after all.

What do you have to be prepared to do:

Assuming you are still intent on swing trading, here is what you should know about swing trading. While it need not be a full-time job, prepare to spend a lot of time pouring over Japanese Candlesticks patterns and T-Lines. These charts will help you identify buying and selling pressure.

T-lines will aid investment decisions—if a stock closes above the T-Line, there is a probability that prices will continue to rise. If a stock closes below the T-Line, the chances are prices will fall. You will also need to follow earnings reports and read support and resistance patterns determined by an asset’s historical performance and overall market trends.

You will need time to educate yourself and learn the art of swing trading to minimize your risk—think months or even years on the learning curve. Lastly, you must learn to rely on technical analysis, not your gut. Accept that you will experience losses, so you will have to control your emotions and manage your expectations.

Manage your expectations

Rome was not built in a day, and the same is true for your retirement nest egg from swing trading. It is best to take a “slow” approach to wealth creation through swing trading. The best strategy will show smaller gains in short-term trends by cutting losses quicker. The gains might not be huge, but with consistency they should compound into sizeable annual returns.

At the trade level, it pays to not be impatient. Faced with a strong correction, a trader might be tempted to chase or enter too aggressively in expectation of a follow-through. The ideal way to capitalize on a trend and help minimize risk is to wait for a correction. If you are trading because you like the excitement and you have capital to burn, then gamble away. However, if you are trading for wealth creation, strategize, and be patient when it comes to returns.

Manage your risk

Here’s the number that really matters when trading. NEVER risk more than 1 to 2% of your trading account value. If you have $10,000 in your trading account, your position in any given instrument shouldn’t be more than $200.

Diversity your portfolio by spreading your positions across large cap, mid cap, and small cap stocks, different sectors, and different asset classes including domestic and international securities.

Pick the right broker. Some brokers cater to customers who trade infrequently. They charge high commissions and do not offer the right analytical tools for active traders.

Plan stop-loss (S/L) and take-profit( T/P) points in advance. More importantly, stick to them! Know what price you are willing to pay and at what price you are willing to sell. Measure your resulting returns against the probability of the stock hitting your goals and execute the trade if the return is sufficient.

Use technical analysis to set your enter and exit points, but also consider fundamental analysis and timing. An example is selling a stock before an earnings call if the expectations have become too high, regardless of the take-profit price.

Select a proven strategy with objective rules for entry and exit.

We have established that swing trading is not exactly short-term trading, like day trading or long-term buy and sell trading. It lies somewhere in the middle. It is sometimes called momentum trading, with positions ranging from two days to two weeks or more. So, you need a proven strategy based on technical analysis to plan your entry and exit from positions.

Chart patterns will show if a security is trending upward, in which case you might go long and buy shares, options, or futures contracts. If the chart shows a downward trend, you might short shares of futures contracts or buy put options. Or you might look at parallel resistance and support areas.

Whether you assume a bull strategy and play the uptrend or isolate the counter-trend, determine whether a swing trade is worth it. A rule of thumb for the minimum reward-to-risk ratio is two-to-one, or your potential profit should be at least twice as much as your potential loss.

Open a demo account with a reputable trading platform

Take the time to open a demo account and set yourself up for success. Here are some highly recognized trading platforms.

IG Index

IG’s web trading platform is well designed and user-friendly. The platform offers educational content and options for funding and withdrawing money. Trading options are ETFs, Forex, Options, CFDs, stocks in some countries, and IPOs. Robo-advisory is available to UK investors.

eToro

Founded in 2006, eToro is a social trading platform. It is Facebook for traders. A place where they can share strategies and provide feedback to others. Traders comment on the results of expert traders and comment on market situations in real-time. Users write comments in the “feeds” area and can share videos and charts. Traders can choose among 1,000 assets, although US investors can only trade in cryptocurrency.

AvaTrade

AvaTrade belongs to the AVA Group of companies. It is an international forex broker launched in 2006. It is particularly suited to beginners in swing trading because it has compatible trading platforms for every experience level—MetaTrader 4, MetaTrader 5, MetaTrader for Mac, and the MetaTrader mobile app. Users of the AvaTrade platform can use a range of automated trading tools, such as RoboX, Mirror Trader, MQL5 Signal Service, API Trading, and Duplitrade.

XTB

Founded in 2002, XTB is publicly traded and offers secure forex and CFD trading. This platform is known for exceptional customer support. The tool also provides real-time statistics, risk-management systems, and the ability to remove and add trading systems at any time.

XTB provides access to CFDs on 3,900 stocks and ETFs, 22 commodities, 42 indices, 25 cryptocurrencies, and 49 forex pairs. Furthermore, the broker also provides nearly 7,800 cash equities, including 150 ETFs. Cryptocurrency trading is available through CFDs and trading the underlying asset (e.g., buying Bitcoin) but not for UK residents.

FP Markets

FP Markets is a leading Forex broker based in Australia. The platform offers MetaTrader 4 and MetaTrader 5. The platforms facilitate both fundamental and technical analysis, and the demo account allows traders to learn about base currency, FX pairs, charting tools, and volatility. FP Markets also offer CFD trading in shares, metals, commodities, and indices.

Naga Markets

NAGA is a Fintech company that offers access to traditional financial markets, along with cryptocurrencies and virtual goods. The NAGA Wallet safely stores fiat and cryptocurrency assets with an exchange and a gateway to NAGA Messenger for direct trader-to-trader discussion. NGA is also a social trading platform and offers an algorithm for finding the top traders to copy on the platform. NAGA’s biggest selling point is unlimited and commission-free crypto and fiat trading.

Keep a trade journal of the trades you take

You need a record of your successes and your trading mistakes so that you can minimize the latter and become profitable. Your trade journal will allow you to analyze your trades and pinpoint your weak points. By tracking your trades, you can see which patterns are costing you money. For best results, record what you do before you trade, while you trade, and after you trade.

Take screenshots of your charts and trades. Note your emotions too. Notice if you deviate from your trading plan. That is a no-no! That does not mean that you should not review a losing strategy. That is the whole point of journaling. So that you make periodic changes that make sense after you have stuck to a plan.

Which trading platform is best for beginners?

Some trading platforms are more geared to beginner swing traders than others. They might provide customer support or useful educational materials. Here’s a list of the best brokers for beginners.

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Trading styles and alternatives to swing trading

Day trading/intraday trading

As the name suggests, day trading involves buying a security and then selling it on the same day. Day traders use short-term strategies to leverage small price movements on highly liquid stocks and currencies. This trading style boils down to a day job and more. It is more intense than swing trading and just as risky, if not more so.

A Brazilian study found that only 3% of day traders made money over one year. Day trading strategies include scalping, range trading, news-based trading, and high-frequency trading. This trading style requires boatloads of time, technical analysis, objectivity, and self-discipline.

End-of-day trading

End-of-day trading means making trading decisions very near to, or after the markets close. It differs from day trading because traders do not watch charts and open and close trades all day long. End-of-day traders also continue trading stocks and ETFs in the after-hours market.

The advantage of end-of-day trading is that traders eliminate the noise, reduce costs because they make fewer transactions, and they do not have to give up their day jobs to trade.

Traditional investing

Traditional investing is a more conservative style of trading where stocks and bonds form the main component of a diversified portfolio. This is a long-term strategy. That said, this type of investing strategy can be aggressive if trades include buying undervalued stocks and hedging.

Traditional investors should balance their portfolio with growth stocks, value stocks, certificates of deposit (CDs), domestic and international stocks along with short and long and intermediate-term bonds. According to SoFi, a good rate of return for traditional investing is around 7%.

Copy trading

Also known as “coattale” investing, copy traders use the ideas and strategies of successful investors to drive their own trading. This style of investing has become more popular, but the results have been mixed.

The main problem with this style is the money manager that you replicate may have different objectives and time horizons than you. Also, significant stock movements can occur between the money manager’s actions and your learning about the investment.

Mirror trading

Mirror trading requires algorithms and is not for beginners. This trading style was the impetus for copy trading and social trading. Copy trading and mirror trading differ in that copy trading involves replicating every trade of a money manager, while mirror trading uses complex algorithms to determine a strategy based on the actions of a group of traders.

Social trading

Social traders base their trading on the actions and opinion of peers who they interact with on social platforms. For example, Twitter and eToro are examples of platforms where traders post information about their strategies, charts, market analysis, and market news.

Listening to other traders can reduce some of the risk and is certainly a good way to learn. However, social traders are not experts, and it is easy to be led astray by someone who is not on top of their game.

Trading terminology

Here is a glossary of key trading terminology. This will help you to sound like you know what you are talking about on social trading platforms.

Swing trading: General terminology

• Bullish—rising prices in a market.
• Long/short— an investing strategy that takes long positions in stocks that are expected to appreciate in price and short positions in stocks that are expected to decline in price.
• Bearish—falling share prices in a market.
• Price trends—the direction of a market or asset’s price shown by trendlines in technical analysis. Uptrends show higher price highs and higher price lows. Downtrends show lower price highs and lower price lows.
• Leverage—increasing exposure to the market by borrowing or paying less than the full amount of the investment.
• Reward/risk ratio—a measure of the potential profit an investor may gain for every dollar invested.
• Weekend risk—the risk that stock returns on Mondays can be significantly lower than the prices of the preceding Friday.
• Entry point—the time when a trader decides to enter into a trade based on a predetermined strategy and price level.
• Exit point—the price at which an investor or trader closes a position often as part of a predetermined strategy.
• Stop order—an order to buy or sell a security when its price moves past a particular point.
• Technical indicator—a heuristic or pattern-based signal concerning price, volume, and activity of a security or contract used in technical analysis.
• Price action—the movement of a security’s price plotted over time on a chart and used in technical analysis.
• Technical analysis—financial analysis using market data to identify patterns, trends, and make predictions.
• Take-profit levels—the price level at which a trader initiates a take profit action. One trade may have multiple take-profit levels.

Charts and analysis software terminology

As a swing trader, you will spend a lot of time on technical analysis. Or at least you should. Here are chart and tool terms you will encounter on most trading platforms.

Trend line

Lines that traders draw on charts to connect a series of prices together or show some data’s best fit. The line indicates the direction in which an investment’s value might move.

[insert chart similar to the one below]

Source: Investopedia

Horizontal level

Price value as support or resistance shown by the share history and the level where the shares stop significant moves.

[insert chart similar to the one below]

Source: Simple Stock Trading

Support level

the value area where demand starts to rise so much that it prevents the price from further decline; the level where buyers start buying.

Resistance level

The value area where supply begins to be so high that it stops the price from further growth; the level where sellers sell heavily.
Simple moving averages (SMA)—the average of a selected range of prices by the number of periods in that range to determine if an asset price will continue or if it will reverse a bull or bear trend

[insert chart similar to the one below]

Source: Investopedia

Exponential moving averages (EMA)

A moving average with greater weight and significance on the most recent data points with 10-day, 50-day, and 200-day moving averages.

[insert chart similar to the one below]

Source: Investopedia

Moving average convergence divergence (MACD) & Stochastic

A momentum indicator comparing a closing price of a stock to a range of its prices over a certain period to show overbought and oversold signals.

[insert chart similar to the one below]

Source: Investopedia

Relative strength index (RSI)

A momentum indicator in the form of an oscillator that shows the magnitude of recent price change to evaluate overbought or oversold stock.

[insert chart similar to the one below]

Source: Investopedia

Bollinger Bands

A set of trendlines that plot two standard deviations (positively and negatively) away from a simple moving average of a stock’s price.

[insert chart similar to the one below]

Source: Investopedia

Envelopes

Indicators with upper and lower bounds. For example, a moving average with two moving averages that define upper and lower price ranges.

[insert chart similar to the one below]

Source: Investopedia

Ichimoku cloud

Indicators showing support and resistance levels, momentum, and trend direction by plotting multiple averages. A “cloud” shows where the price may find future support or resistance.

[insert chart similar to the one below]

Source: Investopedia

Standard deviation

The dispersion of a dataset relative to its mean; volatile stock has a high standard deviation while a stable blue-chip stock has low deviation. Hot stocks are examples of volatile stocks.

Fibonacci retracement

Lines that indicate where support and resistance are likely to occur based on Fibonacci numbers. Each level is associated with a percentage, which is how much of a prior move the price has retraced.

[insert chart similar to the one below]

Source: Investopedia

Fibonacci extension

A tool to estimate extension levels or how far a price may travel after a pullback or a reversal.

[insert chart similar to the one below]

8 tips for long-term swing trading success

Here are some eight tips to assist with Fibonacci extensions!

1. Never trade with money you cannot afford to lose – put aside funds each month for trading that you won’t miss and keep to your budget.
2. Be consistent with your strategy execution – don’t let emotions steer you away from your trading plan. That’s how most traders lose money.
3. Keep the risk low –NEVER risk more than 1% to 2% of your trading account value.
4. Trade a proven trading strategy – swing traders “swing” toward technical analysis.
5. Always use a protective stop loss.
6. Rigidly follow your strategy’s entry and exit points. Record them in your trading journal for review.
7. Trade a timeframe that suits your availability and personality. Remember, you’re not a day trader, so chill!
8. Trading is simple, but it’s not easy. Take a realistic and incremental approach to learning to swing trade.

What are the risks of swing trading?

Trading risk can be controlled to a large extent by trading style and strategy. It goes without saying that the more you trade in terms of volume, the greater your exposure.
Because swing traders don’t close out trades at the end of the day, they are susceptible to gap risk, when a stock price goes down overnight or over the weekend. Swing traders also risk missing out on long-term gains in the pursuit of short-term gains, and, of course, they also face the market and investment risks common to all traders.

Conclusion

Swing trading is a good middle road to take if you embark on the journey to asset enlightenment. Swing traders look to capture short to medium-term gains on stocks or other investment vehicles. It is less stressful and time-consuming than day trading, where traders close their positions by the end of the day. There is no get-rich-quick way to trade, but swing trading, done properly, can provide a reasonable return over the long term.

Arlie Peyton, a contributor to Medium.com, documented his experiences as a swing trader in his article, “I Took a Couple Years Off of Work to Swing Trade. Here’s What Happened.” According to Peyton, it’s possible to earn $1,500 to $6,000 a month as a part-time swing trader.

That said, swing traders should consider all the risks. Unlike day traders, swing traders are exposed to overnight and weekend price changes that can bring significant losses. Swing traders make fewer trades than day traders, but they may face higher costs because they are subject to overnight fees. Lastly, successful swing trader should educate themselves on the different strategies and approaches and manage their risk and exposure.

Frequently asked questions (FAQs)

Can I teach myself how to swing trade?

The answer is yes, and this article describes the extensive learning resources at your fingertips, such as books, blogs, podcasts, and discussion platforms. Just make sure your sources are reliable. The hard part of learning to trade is developing good strategy, a steely countenance, and avoiding the risks and common pitfalls.

Can I start trading with $100

You can start with $100. However, your returns may not be worth the time you need to invest in learning to trade. Still, if you invest regularly and look to the long horizon, you should see a steady return, just not necessarily a dynamic one.

How risky is swing trading?

Few traders divulge their real numbers, so it is impossible to measure risk where trading is concerned. Swing trading, however, is considered high risk, and most traders fail. Swing traders hold their positions for longer than day traders, so they run the risk of larger losses.

Can I ensure my trades are diversified enough?

A broad portfolio will reduce your exposure to risk. Include positions in different industries, asset classes, and vehicles. The assets in your portfolio should not be correlated with one another, so that if one group of assets is affected by a market event, another group will be unaffected. One drawback of diversification is that while it improves growth in the long term, it can impede growth in the short term.

How will I know if I am becoming a better trader?

Patience is everything when it comes to swing trading. This is the long game and not for those who thrive on adrenaline and fast trades. So, how can you see progress? Keeping a journal will show you if your instincts have paid off. You can analyze what you did when and make sure you learn from your mistakes. Did you stick with your strategy? If yes, you’re already a great trader! Did you make money? If not, you have a tool that will help you to find out why.