Things You Need To Know BEFORE Swing Trading

Want To Swing Trade? Here Are A Few Things You Need To Know

Day traders vs. swing traders. The clash of two styles has always been something people are interested in. Holding stocks for days to weeks vs. minutes to hours.

Personally, I believe there is extreme value in both as well as knowing how to do both. When I first learned how to trade, I learned swing trade patterns so I could understand the ‘macro’ view or potential the stock had at the moment. I then was able to drill down from the macro view and time my day trades properly on a micro level.

In trading you must know how to swing trade and day trade. Knowing both will allow you to time your trades better and avoid landmines.

If a stock for example is breaking a huge bull flag with volume on the daily chart, do you really want to be shorting that thing intraday?

Primarily I am a day trader. That requires that I have a certain set of expectations, strategies, and perspective of my trades to be able to properly execute them.

Conversely, pure swing traders have a different set of expectations, strategies, and perspectives on their trades than I do.

Today, I wanted to break down some of the key psychological and strategy shifts you need to be aware of when taking swing trades vs. day trades.

Psychological Shifts

As a swing trader, patience is the key to success. You have to understand that on swing trades you won’t get instant gratification. Swing setups take time to develop and will gradually play out. If you are one of those people that will constantly worry about your positions and check your platform every 10 minutes, you won’t make it as a swing trader.

Focusing on every single tick as a swing trader is just distracting. You will be basing your trades off longer-term time frames, which means they naturally take more time to play out. When you are placing a trade based upon the structure of the daily chart, you need to understand that it will take DAYS (not minutes) for the stock to move towards your target.

As a day trader patience is still crucial, but to a different degree. Instead of waiting weeks for the trade to play out, you are waiting a couple of hours max. Understand that as a swing trader, you are looking for bigger moves that require more patience than day trading. You can’t be hyper-focused on every little move the stock makes. Set the trade and walk away.

Strategy Shifts

As a swing trader, you must shift your focus onto longer term time frames and trends. Zoom out and look at the Monthly chart, Weekly chart, and Daily charts. Some easy patterns you will want to look out for are:

  • Buying Range Breaks (2-3+ Tops Formed and Broken)
  • Shorting Range Breaks (2-3+ Bottoms Formed and Broken)
  • Buying Bull Flag Breaks
  • Shorting Bear Flag Breakdowns
  • Buying Dips into Major Moving Averages (13EMA and 50EMA are Great To Watch)
  • Shorting Pops into Major Moving Averages
  • Buying Dips into Established Uptrends
  • Shorting Pops into Established Downtrends

Always remember this key point as well... A pattern that forms on longer-term time frames like the Daily and Weekly charts will be stronger and will ultimately have more follow through than those on smaller time frames.

If you are scanning through a list of stocks looking for swing trades, make sure to go from ‘bigger to smaller’. Start by analyzing the larger time frames and then drill down to the smaller time frames to time your entry.

Since your time horizon on a swing trade is longer, you need to also be aware of the overall market environment at any given time. Keep an eye on different sectors that are strong/weak, as well as the overall market itself by analyzing $SPY and the Dow Jones index.

Are we looking bullish? Great, then press your longs and maybe lay off some shorts.

Swing trading can be a widely profitable game for a part time trader, or a great addition to a day trader’s income generation. There are opportunities everywhere, you just must make sure you know how to properly find and execute them!

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