Swing Trading - The Sane Way to Go


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The combination of high-frequency trading, and staring at intra-day charts all day long carries a heavy weight of physiological burden. Most day traders are failing because their patience wears out. They begin to carry out unplanned and reckless trading decisions, mainly out of boredom, fatigue or frustration. I have been there, so I know. There is a natural tendency to follow the shorter time frame intra-day charts because seemingly, that’s where all the action is taking place. It took me a while to realize that this vicious and almost inevitable attraction towards the intra-day charts is nothing but a rush of dopamine, just like a drug addict who can’t keep his hands off the what typically consumes him. Eventually (and after quite a bit of money down the drain) I found out that the less I’m involved with the markets, the better I do. That’s how I discovered swing trading and over time became a full-time swing trader (Also known as position trader).

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Swing traders like me, use the core movements from the higher timeframes to ride out longer term trends. We chase the dominant market direction in much of a stress-less fashion. By analyzing and trading mostly with the daily and weekly timeframes, I don’t have to spend much time in front of the screens. It gives me the freedom to set my trading plan and structure, without the burden of constantly having to monitor my trades for hours on end. It is very easy to slip into overdrive mode, which results in over-trading and the inevitable loss of money.

So, is there a light at the end of the tunnel? You bet there is! Believe it or not, I spend no more than 60 minutes per day to carry out all of my trading activities. That is the beauty of swing trading. Not only that it keeps your sanity intact, but it also requires a lot less engagement with the markets thus, leaving most of your day free and available to other activities (such as writing this article…) and pastimes.

Swing trading is all about the medium to long-term cycles. These cycles are best observed, and cross-analyzed against the monthly, weekly and daily timeframe charts. From here, we can easily identify three different cycles: Short-term, medium-term and long-term. Short-term cycle represents price movements lasting from a few days and up to a couple of weeks, but usually no longer than 3 weeks. The medium-term cycle generally lasts between a couple of weeks and up to a couple of months, while the long-term cycle can define the underlying trends that usually lasts from several months and up to a year or two, in many cases.

As far as I see it, there are 3 main reasons behind failed traders, who by the way make up the vast majority of all market participants. The first would be lack of adequate method of analysis. The second would be the lack of adequate risk and money management system, which basically means the lack of a solid and fully systematic approach. The third, is simply trading misconduct with the high-speed short-term timeframes of the intra-day charts.

Adopting swing trading style allows us to remove the third issue out of the way and focus on dealing with the remaining two. From that point on, it’s all about tackling those remaining issues, and eventually removing them out of the way just as well.

Roy Levine,

Head of trading