Swing trading has been practiced by traders for many years. Some of them have gained a lot of experience and success in it, while others have failed miserably.
Swing trading is a method in which traders try to profit from a price movement in an ETF in a relatively short time frame. Day trading is another name for it. The main concept is to enter a trade and exit it as soon as you have made a profit.
As a result, while fundamental analysis is a useful tool for learning about the market, most swing traders rely on technical analysis to enter and exit trades.
Is it possible to make a living trading ETFs?
Because they are operated almost identically, making money with ETFs is essentially the same as making money with mutual funds. The key distinction between the two is that ETFs are actively exchanged at intervals throughout the trading day, whereas mutual funds are only traded at the conclusion.
The trader will keep an eye on ETF price movements and decide when and where to purchase and sell. Using limit or market orders, the trader establishes criteria for their chosen trades.
Is swing trading profitable?
Swing trading aims to profit from a security’s price swings, both upward and downward. Traders try to profit from tiny movements inside a broader trend. Swing traders aim for a series of little wins that add up to a large profit. Other traders, for example, may have to wait five months to make a 25% profit, whereas swing traders can make 5% weekly gains and outperform other traders in the long run.
How can you swing trade successfully?
When all available technical tools signal the same thing: the stock is set to soar or fall sharply, highly profitable trades are likely to occur.
There is no such thing as “free money” or a “magic bullet” for lucrative market trading. Technical analysis can only help you make the best swing trading decision possible. Great trade chances, on the other hand, do come with a signature. For starters, several indications in a short period of time all provide the same message (about 2-3 days).
Swing trades are used by professional traders.
Swing trading is a type of trading that combines fundamental and technical research to catch big price moves while avoiding downtime. The advantages of this style of trading include more effective capital allocation and higher profits, while the disadvantages include higher commissions and more volatility.
For the average retail trader, swing trading can be challenging. Professional traders have more experience, leverage, information, and lower commissions; nevertheless, the instruments they can trade, the risk they can take on, and the amount of capital they have limit them. Large institutions trade in volumes that make it difficult to trade equities fast.
Retail traders that are well-informed can take advantage of these factors to constantly earn in the market. Here’s an example of a strong daily swing trading routine and method, as well as how you may replicate it in your own trade.
When is the ideal time to invest in ETFs?
Market volumes and pricing can be erratic first thing in the morning. During the opening hours, the market takes into account all of the events and news releases that have occurred since the previous closing bell, contributing to price volatility. A good trader may be able to spot the right patterns and profit quickly, but a less experienced trader may incur significant losses as a result. If you’re a beginner, you should avoid trading during these risky hours, at least for the first hour.
For seasoned day traders, however, the first 15 minutes after the opening bell are prime trading time, with some of the largest trades of the day on the initial trends.
The doors open at 9:30 a.m. and close at 10:30 a.m. The Eastern time (ET) period is frequently one of the finest hours of the day for day trading, with the largest changes occurring in the smallest amount of time. Many skilled day traders quit trading around 11:30 a.m. since volatility and volume tend to decrease at that time. As a result, trades take longer to complete and changes are smaller with less volume.
If you’re trading index futures like the S&P 500 E-Minis or an actively traded index exchange-traded fund (ETF) like the S&P 500 SPDR (SPY), you can start trading as early as 8:30 a.m. (premarket) and end about 10:30 a.m.
Are exchange-traded funds (ETFs) safer than stocks?
The gap between a stock and an ETF is comparable to that between a can of soup and an entire supermarket. When you buy a stock, you’re putting your money into a particular firm, such as Apple. When a firm does well, the stock price rises, and the value of your investment rises as well. When is it going to go down? Yipes! When you purchase an ETF (Exchange-Traded Fund), you are purchasing a collection of different stocks (or bonds, etc.). But, more importantly, an ETF is similar to investing in the entire market rather than picking specific “winners” and “losers.”
ETFs, which are the cornerstone of the successful passive investment method, have a few advantages. One advantage is that they can be bought and sold like stocks. Another advantage is that they are less risky than purchasing individual equities. It’s possible that one company’s fortunes can deteriorate, but it’s less likely that the worth of a group of companies will be as variable. It’s much safer to invest in a portfolio of several different types of ETFs, as you’ll still be investing in other areas of the market if one part of the market falls. ETFs also have lower fees than mutual funds and other actively traded products.
Which swing trader is the wealthiest?
Dan Zanger holds the global record for one-year stock market portfolio appreciation with a gain of more than 29,000 percent. He transformed $10,775 into $18 million in less than two years. After studying his IRS tax returns and trading data, Fortune magazine published a detailed feature on Zanger that covered his trading outcomes.
Zanger grew raised in the Los Angeles suburb of San Fernando Valley.
His mother was a psychologist and his father was a physician. He started college but dropped out to go snow skiing in Colorado and Idaho for a few years. During his early twenties, he supported himself by working odd jobs like bellhop, cab driver, and prep cook.
With only a high school diploma and no professional trade experience or education, he eventually returned to Los Angeles. He began working for a landscaping company and eventually obtained his contractor’s license in California. As an independent contractor, he began installing pools in Beverly Hills, where he earned a meager livelihood.
Elaine, Dan’s mother, was a stock market fanatic, and he and Elaine would frequently watch business programs on TV together.
Dan saw a stock explode across the ticker tape at the bottom of the screen and hit $1 one day in 1978. He bought his first stock and sold it a few weeks later for more over $3. He was hooked by the activity of the market tape after that transaction, and he carried a quotetrek device with him on his contracting assignments to keep up with stock prices.
Why do the majority of swing traders lose money?
The graph above appears to be a far-fetched future. This is, nevertheless, what happens every second of every day.
- People buying and selling create every up and down gyration in every stock, currency pair, option, bond, and contract. There HAS TO BE people who received better prices and people who got worse prices, and then there will be individuals who sell at better prices and at worse prices as the inevitable ups and downs continue.
- You won’t be a successful trader if you aren’t better than the majority at receiving better pricing on the way in and out than other traders on average. I say “on average” because every trader loses money on a regular basis. We must be successful enough on the trades we win to compensate for our losses (this is known as risk/reward). In this price war, we need to be better than others to be able to get in and out with a profit on average (this where Stock Strategies or Forex Strategies come in). Most traders purchase too late or too early, and sell too early or too late, allowing others to benefit instead of capitalizing on their opportunities. In the sections below, we go through this in greater detail.
The financial market is one of the few areas where you may play with the pros as soon as you establish an account and place a transaction, regardless of how much experience or money you have, or where you come from or what you do in life. That’s quite impressive. It’s also hazardous. Don’t assume that the convenience with which you may register an account and play the game translates to easiness with which you can win. There are powerful systematic forces at work that keep most traders in the red.
Time, Research, and Practice-Related Reasons Most Traders Lose Money
The majority of traders do not devote a significant amount of time to a strategy. For some, being a skilled trader takes at least six months, and for the majority, it takes a year or more. Many people will avoid quitting too soon…or losing all their earnings if they get lucky and start winning right away if they expect to put in at least several months of hard work.
- It takes time to become good at anything. The majority of traders do not devote enough effort to improving their skills. Most would-be traders departed the trading firm where I worked after a few months. People who were successful often took AT LEAST 5 months to start experiencing steady income after that point. People would have had a better chance of succeeding if they had put in more time…if they had practiced appropriately (discussed later).
- Aim for at least 6 months of focused daily practice and research on YOUR trading approach (reading the news, trading groups, or books isn’t research).
- Fast success is frequently the result of luck or extremely advantageous market conditions (easy money). For most of 2020 and 2021, for example, the money environment was the easiest in a decade, luring in many new traders who now believe trading is simple. Over time, the majority of those gains will return to the pro’s pocket (although some of the new traders will join the ranks of the pros, and some pros may fail to adapt and lose or cease trading). Easy money situations don’t last long—usually a couple of years or less—and then “fortunate” folks must spend 6 to 12 months (or more) learning how to truly trade, which includes both making and keeping money.
Unsuccessful traders call their research or practice reading/watching random trading things and dabbling in random techniques. Whatever you want to call it, it won’t make you a better trader.
- You must devote all of your time to your method. Beyond being able to talk with strangers about the market, general knowledge is of little help to a trader. I’d rather hire a trader who excels at one strategy (and is willing to put in the time and effort to improve that approach) than an Ivy League Ph.D. who understands everything there is to know about the market, general strategies, and indicators. General knowledge is meaningless in trading; to be a successful trader, you must master at least one strategy.
You can choose to trade in any way you choose, but you must first become a better trader than the majority. Unsuccessful merchants will never bother.
- If you decide to trade Triangle Breakouts exclusively, you’ll have to sift through hundreds of charts to identify what conditions were present in the strongest breakouts. Then you must determine whether those conditions were present in the losers as well. Find conditions that appear in winning trades more frequently than in losing trades. Define how you’ll know what those conditions are and how you’ll enter and exit the room.
Does the performance of the patterns depend on the broader market conditions (market indexes)? Is it possible that a trailing stop loss would be more effective than a profit target? Did it make a difference if the triangle occurred within a trend? Did the trend’s strength matter? Did the direction of the breakout matter in respect to the trend direction? Was it possible to reduce the stop loss to increase profitability? Is there a pattern within the triangle that enables a better entry point, a lower risk, or a higher profit? Would it be more profitable to wait till after a false breakout?
All of these questions do not have to be answered at the same time. Simply keep looking into that approach until you uncover parameters that result in a profit across a large number of trades. Then you can either keep researching to increase profits or trade with what you have if it continues to work. You can also improve profits by adding another method and repeating the process.
The majority of people do not conduct this type of study. They read a book or an article, or they ask questions in online forums, and they think about it. The stuff you don’t want to do is the true work. Comparing minor modifications of a method and discovering one that works just a smidgeon better than the others is tedious.
Others could argue, “Don’t trade triangle breakouts; you’ll lose money.” Yet, because you put in the effort to find a way, you will KNOW that if you utilize the appropriate criteria, you can earn a lot of money trading them. THIS PROCESS CAN BE USED FOR ANY STRATEGY.
We can’t improve at anything if we do it every day. Consider golf courses, tennis facilities, local basketball courts, and maybe your own bedroom. Perfect practice does not equal perfect performance. Perfect practice merely leads to advancement.
- Most traders believe that reading a few books and learning a method online is enough. That’s not even close. Learning to trade a single strategy properly can take months, because we must not only understand how to trade it, but also when not to trade it. Slight variances occur, and you must learn how to respond in those situations. You must figure out what your common errors are and how to rectify them.
There are numerous things to practice when it comes to trading, but most would-be traders don’t. They only put in a few hours. There is a significant distinction. Here are some particular items to work on.
- Make a trading strategy and stick to it. A trading strategy is a set of rules for trading that tells you when to enter and exit transactions, how much to risk, when to trade, and which markets to trade (see sections above on doing your OWN research). A excellent plan spells out everything you’re likely to encounter. Making a plan takes time; it usually takes months, but it can take a year or more for some people. It takes months because each trader must assess various conditions and minor adjustments before deciding what to do. There are no two trades or trading days that are the same. We need to create rules that account for a variety of trading scenarios while also being exact.
- Most traders fail because they don’t have and don’t follow a trading plan. People who do not have a plan assume they are wiser than others who do this for a job, and hence do not need to prepare, plan, or practice. Wrong. Sign up to spar with a UFC fighter in your region if you believe you can easily and with little effort beat individuals who do things for a job.
- Practice sticking to a plan. It ought to be simple, but it isn’t. If you don’t have a plan yet, find some easy trading principles and try following them in a demo account while you work on one. Even if the rules don’t earn money, merely practicing following a plan will benefit you greatly. It is not a waste of time. If you have a successful strategy in your hands, you have a lot better chance of sticking to it.
It takes practice to stick to a plan. Diets, workout routines, saving money, and so on are not natural for most individuals. Practice sticking to a plan. It’s a talent. All of your other efforts will be for naught if you don’t have it.
Trading-Related Reasons Most Traders Lose Money
All of the topics mentioned in this part are related to others, but because they are frequently cited as causes for failure, I will address them separately.
- Traders fail owing to a lack of capital. When the market is easy to trade, you can make money almost immediately. However, there is always a learning curve, which means you will lose some money at first. After that learning curve, you’ll need enough funds to ensure that any single trade has a low risk. You’ll need enough cash to appropriately size your positions and achieve your objectives. You can’t position size adequately (in most markets) if you’re undercapitalized, and you’re more likely to lose concentration since the gains (in dollar terms) are too slow.
There is plenty of money in the market, but you’ll need enough capital to trade properly and earn those high returns using a risk-controlled method.
If you have a strategy, stick to it. Even if we make money, it’s a mistake if we don’t stick to our plan. Even when trying to stick to a strategy, traders make mistakes:
- We are impatient and enter trades before our signals indicate that we should. This reduces profitability across a large number of trades.
- We don’t want to lose money, so we keep the loss in the hopes that the trade will turn around. Profitability suffers as a result.
- We are frightened to make a trade, potentially as a result of a few recent losers, and as a result, we avoid making certain deals. Profitability suffers as a result. If you gain more money on wins than you lose on losers (favorable reward:risk), missing a winner is more painful than losing.
- We are overconfident, potentially as a result of a winning streak, and as a result, we make more transactions that are not part of the plan. Profitability suffers as a result.
- We gambled either too much or too little. This implies that we choose a position size that is either too big or too little. Small errors pile up over time, and large position sizing errors can be costly.
- We trade our current trade based on previous trade experiences. Instead of following our plan and what is happening now, we allow previous trades influence how we operate. Profitability suffers as a result.
- Rather of following a process, we trade for results. Our profits are determined by our trading strategy. If we stick to it, we’ll get those results. If we try to outsmart our strategy by changing it on the fly, our plan’s profits vanish.
We all make some of these errors from time to time, and there are many more that we could make. If each small error erodes profitability over time, the fewer mistakes we make, the more profitable we are. Pro traders, on average, make less mistakes than amateurs, as stated in the methodical section. The professionals’ tactics are more well-researched and honed, and they are more adept at sticking to that well-planned strategy.
These issues, as well as techniques and improvement approaches for conquering the forex market, are explored in my EURUSD Day Trading Course, along with how to minimize them.
Psychological Reasons Most Traders Fail
Almost all of trading is psychological. Every action we take is processed by our brains. What we see, hear, and do is influenced by our ideas and biases. We’re dead in the water if we don’t train our minds to follow precise protocols and to deal with specific issue areas. It’s no good learning a new strategy if we can’t convince our minds to follow it.
- All of the aforementioned trading concerns can be traced back to psychological factors. Being afraid to trade is understandably psychological, but so is being overconfident, unable to take a loss, or overly eager. Even psychology has a role in under-betting and over-betting, such as being impatient, not having a procedure, or allowing our biases to influence how much or little we take on a trade.
- We are sabotaged by concealed biases and beliefs. This is a topic in and of itself. No matter how excellent a technique a person has, if they believe they will never be wealthy or that they aren’t good enough, those thoughts will obstruct their ability to succeed in trading. I recommend diving into Van Tharp’s trade psychology books and classes if your psychology is getting in the way of making money.
- Time must be invested, but research and practice are psychological as well. We need to figure out how to put that work into practice and improve it. We must overcome the voices that tell us we don’t need to put in the effort, that we are smarter than others, that we should watch a movie instead of doing research, that we should read a book instead of practicing, that practice is for losers…we must overcome any voices that tell us we don’t need to practice or put in the effort required to get what we want (I suggest reading Trading Beyond the Matrix by Van Tharp).
- We can become much better traders if we can overcome our inner critics and put in the necessary effort. And that’s all that matters in the market: that your gains outnumber your losses as a result of the possibilities that other traders provide.
Read My Key Takeaways From the Van Tharp Peak Performance Workshop for more information on how to improve psychological performance.
Which time window is optimum for swing trading?
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What is the greatest indicator for swing trading?
We’ve developed a list of the best swing trading indicators that stand out for their ease of use and effectiveness in generating trade signals. However, it’s important to note that they can’t guarantee you’ll make continuous profits. This is due to the fact that technical indicators do not forecast the future but rather aid in the visualization of the present and past.
Here are the six most popular and dependable swing trading technical indicators:
Relative Strength Index (RSI)
One of the most essential crypto trading indicators is the RSI. It’s a momentum oscillator, and you’ll find it on your chart under the ‘oscillators’ category. It analyzes the magnitude and size of the most recent price changes. The RSI is mostly used by swing traders to evaluate whether an asset is overbought or oversold.
The RSI indicator is represented by an oscillator, which is a line graph that travels between two extremes and has a range of 0 to 100. When the quantity and amount of bullish closing grow, the RSI line rises, and when the magnitude of losses rises, it falls.
When the RSI indicator breaks over the 70 level, it indicates that the market is overbought and may indicate that an uptrend is about to reverse. If the RSI falls below 30, it suggests an oversold market, indicating that the bearish trend may be coming to an end shortly.
Looking for centerline crossovers is another approach to use the RSI. When the RSI indicator, for example, breaks above its centerline, it indicates a rising trend.
Moving Average
The moving average (MA) is the earliest technical indicator that has been employed in technical analysis of commodities and corporate shares for decades. Swing traders utilize MA to calculate the average of an asset’s price movement over a specific period, as the name suggests. As a result, MAs smooth out the short-term volatility that traders may find perplexing.
It’s critical to remember that moving averages (MAs) are lagging indicators that rely on prior price behavior. As a result, rather than predicting future moves, it would be beneficial if you used them to validate a trend.
Depending on how many periods they monitor, we can distinguish between short, medium, and long-term MAs. Short-term MAs, for example, have a period of 5 to 50 days, whereas medium-term MAs have a range of up to 100 days.
Simple moving averages (SMAs) and exponential moving averages (EMAs) are the two basic types of MAs (EMAs). The latter emphasizes recent price movement.
Looking for when a short-term MA crosses a longer-term MA is the best approach to use MAs. This is a bullish indicator if the former crosses the more extended MA from bottom to top, and vice versa.
MACD
The Moving Average Convergence Divergence (MACD) is a more complicated technical indicator that combines the two regular moving averages mentioned earlier. The 26-period EMA is subtracted from the 12-period EMA to calculate MACD, though these parameters can be modified manually to suit your needs. To be clear, the two lines on the MACD chart are not the two MAs that were used in the computations. Instead, here are the MACD indicator’s three components:
- The signal line, which can detect price momentum changes and is used to trigger bullish and bearish alerts;
- The difference between the MACD line and the signal line is represented by the histogram.
Swing traders often purchase when the MACD line crosses above the signal line and sell when it goes below the signal line.
Another method to utilize the MACD is to check for divergence between the histogram and price movement, which typically signals a trend reversal.
Volume
Volume is one of the most important indicators for swing traders, yet it is often overlooked by newcomers. This indicator, which is displayed by default beneath the main chart, provides information on the strength of a newly created trend. The volume indicator, in simple terms, reveals how many traders are buying or selling a cryptocurrency or asset at any one time. As a result, the greater the trend, the higher the volume.
Breakout methods, in which an asset’s price breaks above or below a resistance or support line, benefit greatly from volume. If the breakout is accompanied by a large amount of volume, the new trend is likely to be significant.
Bollinger Band
The Bollinger Band (BB) is a momentum indicator made up of three lines: a moving average, a positive and negative standard deviation, and a moving average. This indicator is preferred by swing traders since it indicates a trend, overbought and oversold levels, and volatility fast. On the chart, it also looks good and clear.
When the market becomes more volatile, the BB widens, and when the market becomes less volatile, it narrows. The lower the volatility, the closer the bands are to each other.
Bollinger Bands perform well in trending markets, but they also function well when the price ranges, i.e. when the price moves up and down inside a horizontal channel. Swing traders may go short if the price crosses the BB’s upper line in this situation. When the price reaches the indicator’s bottom line, it may signal the start of a rebound.
The point is that the price will constantly gravitate towards the BB’s center. If the band begins to widen, a new trend is formed, and you should no longer be trading in a range.
Stochastic
Another momentum indicator is the stochastic, which works similarly to the RSI but uses different computations. The indicator compares an asset’s closing price to its price range over a given time period.
The Stochastic, like the RSI, is represented by a chart with a range of zero to 100. The overbought and oversold zones are, however, above the 80 and below the 20 lines, respectively.
Another distinction is that it has two lines rather to just one, as the RSI does. The current value of Stochastic is shown on one line, while the three-day MA is shown on the other.
Stochastic would be used by traders to assess overbought and oversold levels. They’ll also keep an eye out for the two lines crossing, which usually signals a trend reversal.