TLM Q&A Blog: Managing Swing Trades

Q: I always seem to leave money on the table when managing a swing trade or hold the trade way too long and end up in a bagholding scenario. How do I manage swing trades properly?

A: Managing swing trades is different than managing day trades. Sure, there are similarities, especially in your trading plans. You need proper stops and targets that coincide with a 1:3 risk reward profile, but there are certain things you need to change about your mentality and trade management strategy when swing trading.

Without making these adjustments, you won’t be able to squeeze the maximum amount of value out of a long or short swing in a SAFE manner. Today, we are doing to take a dive into my top tips for managing swing trades regardless if they are longs or shorts so you can squeeze as much profit and potential out of the setups you come across as possible.

  1. Use Longer Term Targets

Whenever you are swing trading, your primary judgement of a setup should be based upon longer term time frames. When you are generating ideas for swing setups, you want to look at the Monthly, Weekly, Daily, and Hourly charts primarily to get a good grasp of the macro trends the stock has established. At this point, once you have spotted your prime entry on the swing trade, you have to use targets on these longer- term time frames.

You may be tempted to take the ‘short’ or ‘quick’ money by scaling out at an intraday target like a pre-market high or an intraday high if your swing trade starts to move in your direction, but you must remember your goal on the trade. It is a SWING. You want to hold this for multiple days and multiple points potentially. So, zoom out on the chart, and find the best key resistance zone on the daily, weekly, or monthly charts to use as your main target.

  1. Change Your Mindset

Be patient. Swing trading is all about patience and perspective. I did a whole blog on the mindset shift you have to have when swing trading vs. day trading, but the main concept here I want to drive home is you must let your swing trades ‘breathe’. You are holding positions for multiple days, meaning there will be volatile swings. If they are within your stops, don’t worry about the pullbacks. Be patient and let the macro trade play out like you originally planned. Resist the temptation to turn your swing trade into a day trade due to your impatience.

  1. Use A Trailing Stop

Using a trailing stop on swing trades will help you squeeze the maximum amount of value out of the trade as it moves in your direction. I like to use a 13ema to trail shorts and longs on the daily chart. Implementing this concept will help you stay in trades longer, as you have a visual element in the chart telling you the stock is still trending in your favor. If the trend is in your direction, stay patient, and keep holding until it ultimately hits your target or breaks your training stop (the moving average).

  1. Scale Out Along The Way

As the trade starts to play out in your favor, “paying yourself” along the way will help control your emotions and stack your bankroll. If the trade starts to move in your favor and is approaching a key level, resistance level, or psychological level, taking off ¼ or ⅓ size at those levels will allow you to pad your account and make sure you are always pulling something out of a trade. The difference between pro traders and non-pros is simply that the pros make money. You never truly know when a stock will stop moving up or down, so scaling out allows you to avoid that uncertainty and make sure you make some money as it moves

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