Psychology plays an important role in trading and is very important for swing trading. Sadly, most traders completely ignore psychology and never give it the attention it deserves. It could be said that the true key to being successful at swing trading lies in understanding the psychology of it.
Psychology here is all about how you manage yourself when trading. Trading usually brings out the best and worst in people, more so when a trade they have just placed begins to make a large profit or loss. Many people lose control when it comes to trading and the thought of how much money they might possibly earn clouds their judgement.
If psychology is so important then why would so many people ignore it? The idea of finding out bad things about yourself is what keeps most people away from learning about psychology. This is the same kind of fear that ruins a good trade.
If you succeed at swing trading or not depends on you as a trader. Are you ready to suffer that loss or enjoy that win? Changing your thinking is crucial to being successful in trading.
Managing your trading funds well is the key to winning at swing trading. If traders have poor money management, it is not uncommon for traders to increase the size of their trades too quickly. The main goal of this is to increase the speed and rate at which they make a profit. However, this style of trading thanks to poor money management usually results in traders blowing up their trading accounts and losing more money than they make.
Proper money management should address the following issues:
Detach yourself emotionally from the money.
Never trade more than you are comfortable with.
Never risk more than you stand to win.
First, learn to detach yourself from any money you plan to use for trading. It is best to use money for swing trading that you know you can live without. This isn’t about failure or the worry of failure. It is about being smart. Trading with your child’s college funds will only add unwanted stress. Do you really need to make trading any more difficult by worrying about how you will feed your family if you lose next week’s paycheck? Of course not.
Second, start trading with small amount. Don’t rush yourself. The market has been around long before you began trading and will still be around after you are gone. Just how small should you start trading? The answer to this depends on you, what do you feel comfortable with. During trading, you should be focused on trading and not on how much money you may win or lose. To avoid having this happen, only trade with amounts that you feel ok with. You may even start trading pennies at the beginning, but that is ok. The important thing is that you are in control of yourself, your emotions and your trading.
Swing traders could not ask for much more than an indicator that could offer the chance of knowing in advance when the market they were trading was at its breaking point. Knowing when markets were about to rally or retrace would make it easy to pick the perfect entry points for your trades. Luckily, such indicators already exist and make trading much easier. These indicators are known as momentum indicators.
The majority if indicators are known as lagging, but momentum indicators are leading and lead price. Basically, momentum indicators offer an insight into what price may do in the near future. Momentum indicators work on the basis of measuring a currency pair’s level of momentum. As the speed of change in price begins to slow down, momentum indicators alert you to this change in speed or momentum and that a retracement of price may soon be approaching. By plotting a currency pair’s momentum, a trader can know in advance when markets may be preparing to pull back.
RSI is one of the most popular and widely used momentum indicators. The RSI (relative strength indicator) shows levels of a currency pair that are considered overbought or oversold. When the indicator is in these areas, a trader should be on the lookout for potential price retracement. If a market moves into these overbought and oversold areas, more often than not price will experience some kind of adjustment in the near future. By knowing in advance when this may happen, you are able to close out trades and lock in any profits before price moves against you and wipes out any profits you may have.
If you are looking for someway to know in advance where price may go, check out what momentum indicators. No other momentum indicator comes close to the popularity of the RSI. You may find that the RSI is just the indicator you need to increase your trading edge.
Do you know about swing trading? Swing trading is about a trader taking advantage of the swings in price or oscillations of price as it moves up and down over time. Swing trading is an extremely popular style of trading can you can apply to almost any market. The most common methods of trading are day trading, swing trading and trend or buy and hold trading. Swing trading finds a middle ground between day and buy and hold trading and is the preferred style, no matter what you trade. Let’s take a look at the other styles.
Day traders typically keep their trades confined to a single trading day, hence the name. Scalping is also considered a day trading style of trading. Scalping typically involves high risk but in turn offers potentially high profits. The other end of the trading spectrum is where you find buy and hold traders, holding their trades sometimes for many months. Without large trading capital, you will find that the buy and hold trading style can be difficult to profit from.
Swing trading fits in between the above two styles and usually involves holding a trade for around 1 to 4 days, less than a week. Do traders hold trades for longer periods? Of course, but this is just a general rule of thumb. Swing trading is a style that can be applied to any market, but some markets may be more suitable and as a result more profitable. Swing traders benefit from having low risk with high rewards. This is the perfect balance for trading profitably.
Buy and hold trading typically involves high levels of capital that far exceed the profit potential. Only swing trading offers high rewards with low risk. A trader can apply swing trading to any market regardless of where they may live in the world.
The ways in which a trader can trade markets is almost endless, regardless if you prefer stocks over FOREX or options over futures. With such risk involved in trading, it would be advised to take some time and find out which style of trading offers the best and safest return on your investment. Use swing trading to gain a true advantage over the market and other players.
There are two main reasons why swing trading is the best. The first being that you do not need to be glued to your monitor 24 hours a day watching and waiting for a suitable trade setup. It is common for many new traders to think they need to spend all day watching charts. For the majority of traders, this results usually in a loss of time and a loss of money. There is no need to wait in front of your monitor all day just to place a trade. The benefit of swing trading is the freedom that it gives you away from the computer. Trade setups don’t need to be calculated down to the second.
There is no other style of trading that offers such low levels of risk as swing trading. Swing traders see the big picture. By watching higher timeframe charts, swing traders can spot trends with much more ease. People who trade on the lower timeframes watch charts clouded in noise and false signals. These trends can be so short lived that they are almost impossible to trade. Higher timeframe trends can last for days, weeks or even months and as a result are much easier to trade. By being able to trade in the direction of these major trends, returns on your investment are increased greatly while the chance of a loss is reduced significantly.
There are so many different styles of trading because traders are different, however, only swing trading offers the best of both worlds with high reward and low risk. Swing traders usually follow the smart money thanks to their preference of trading higher timeframes and only trading in the direction of the trend.
Swing trading is the only style of trading which reduces the risk a trader faces while at the same time offering a high rate of return. Swing trading is not limited to any specific market and can be used on any market around the world. However, there are two factors a market must posses to allow you to swing trade with maximum potential.
First, to swing trade a stock it must show signs or have a tendency to trend. There are markets where there seems to be no trend with price jumping up and down with almost no reason as to why. Swing traders need a stock that trends or typical trends more than it moves sideways. This is necessary for you to be able to take slices out of the market with your trades.
Secondly, the stock must not be too volatile. Volatile stocks, while offering the potential of a good income if you happen to be on the right side of the trade, make it difficult to swing trade. Swing trading takes time and as a result if a stock moves too fast or too abruptly in any one direction, it does not give you time to plan your entry and exit. The best kind of market to trade is one that is traded heavily.
Anyone can swing trade stock as long as they first make sure that it is one that tends to trend more than it moves sideways and that it does not move abruptly or erratically without explanation. Keeping this in mind will help you to gain an edge over other traders and be profitable at swing trading.
