Read how swing trading is done and types of swing traders.
What is Swing Trading
A lot of people get confused when they are told about Swing Trading. Lot of them assume that Swing Trading is same as Day or Intraday Trading.
Most of the positional naked traders especially Future traders are swing traders. It is important to note that they themselves do not know that they are Swing Traders.
In technical terms even day traders are Swing Traders, but Intraday trading is based purely on small moves so it cannot fall under proper Swing Trading.
Traders do know that for every fall in a stock there is a support and for every rise there is a resistance.
Swing Traders try to capture and benefit from the stock’s or any financial instrument like Options and Futures, movement especially support and resistance.
It is a different story that most Swing Traders end up in huge losses, so hedging is highly recommended.
How Swing Traders Get The Support and Resistance of a Stock?
Novice Swing Traders speculate the movement of a stock and initiate a swing trade by buying or selling a future, and they lose heavily.
Experienced traders study Technical Analysis to look for stocks with huge volatility or short term momentum.
Swing Traders come into action during the results season. As soon as quarterly result of a stock is announced they find the support and resistance of a stock and take entry of a trade.
How Many Types of Swing Traders Are There?
There are two types of Swing Traders:
1. Short Term Swing Traders.
2. Long Term Swing Traders.
Short Term Swing Traders are those who trade in derivatives like options and futures and hold the position till expiry only. Which means it may be one day till expiry day.
Long Term Swing Traders usually do not trade in derivatives. They buy stock in cash when they see support and hold for the long term. This may be from one month to many months. Warren Buffet is the world’s best Long Term Swing Trader. He buys a stock when he sees a strong Economy MOAT, and sells when it loses its MOAT.
What is “Economic Moat”?
Economic moat is the competitive advantage that one company has over other companies in the same industry; this term was coined by Warren Buffett, a renowned investor and executive at Berkshire Hathaway. The wider the moat, the larger and more sustainable the competitive advantage of a firm. By having a well-known brand name, pricing power and a large portion of market demand, a company with a wide moat possesses characteristics that act as barriers against other companies wanting to enter into the industry.
Economic moat describes a company’s competitive advantage derived as a result of various business tactics that allow it to earn above-average profits for a sustainable period of time. Companies that obtain defensible competitive advantage from patents, cutting-edge technologies and other cost advantages can have a wide economic moat that curbs competition within their industry. Also, firms that enjoy strong economic moat tend to demonstrate solid financial performance and rising returns on capital over time. The most common sources of economic moat are cost advantages, switching costs, efficient scale, intangible assets and network effects.
Who Are Swing Traders?
Mainly retail traders who are Swing Traders. Large financial institutions do not do Swing Trading as a lot of money of their clients is at stake. One big bad trade may wipe out a huge portion of wealth from a single trade. They fear that. Even if they want to do Swing Trading they do it only on a portion of their cash like 10% or less and hedge it to protect unlimited loses.
My course can help retail traders like you learn proper hedging methods to protect huge losses. Even small retail traders sometimes take wrong trade and keep it in the hope that markets will reverse direction and they will make a profit. It does not happen and one day they exit with a huge loss. Therefore it is highly recommended that you learn hedging methods and non-directional trading strategies where there is no need to find direction and still you can make a profit without bothering about where Nifty is heading the next day.
Time Involved in Swing Trading
Too much time is involved in Swing Trading. The trader has to keep monitoring the trade as long as the markets are open. Institutional traders do not like too much monitoring as they have other jobs like fundamental analysis to buy stocks for the long term, cash allocation, client management etc. Therefore only a small portion of cash is allocated to Swing Trading. The team which does Swing trading is different than the team doing fundamental analysis to buy stocks for the long term. Institutional traders mostly buy stocks of good companies for the long term swing trading. Only a small portion goes into short term swing trading.
Another reason why large institutions cannot do swing trading with all the capital is that large institutions have too much cash so they are bound to trade only in stocks that are highly liquid. If there is less liquidity their trade may not be completed. Therefore they buy-hold-sell stocks for long term, only a small portion goes into derivative swing trading. Some institutional traders do not do swing trading at all.
However most retail traders whether Intraday or day traders do swing trading and suffer huge losses as they are not able to:
1. Find the support and resistance, and,
2. Do not hedge their positions.
How Long Swing Traders Hold Positions?
Day traders do not hold positions overnight. They are very short term swing traders.
Positional traders may hold positions overnight or until expiry day, but usually these traders are looking for bigger profits so they do not clear the trade the same day. Most of the positional traders try to make 5% return from every trade.
For positional swing trading the risk is more. It is therefore very important that careful position sizing is done. If you are a swing trader please allocate only a small portion of your cash in large big swing trading else a huge portion of your trading money may get wiped out in one bad trade.
How Experienced Positional Swing Traders Calculate Support & Resistance Levels Of A Stock?
Experienced positional swing traders do calculate both fundamental analysis and technical analysis to arrive at the support and resistance level of a stock or Indices before taking a trade. These may include larger time frame charts including the 15-minute, 60-minute, daily and weekly charts. This is done because positional swing traders need more holding time to capture the price move of 5% or more.
Highly experienced positional swing traders look for multi-day chart patterns like moving average crossovers, cup-and-handle patterns, head and shoulders patterns, flags, triangles, key reversal candlesticks, such as hammers for reversal bottoms and shooting stars for reversal price tops. These help them to make a strong game plan. They are willing to give the stock space to move to capture the profits therefore their stop loses are big like 8-10% of the move, however profit taking also increases to 10-12%. As a big move cannot come in a day or two, these positions are held overnight to any day until expiry if the trade was taken in options or futures. But if the trade was taken in stock cash then they may hold for months.
What Is The Problem Of Derivatives Swing Traders?
Derivatives swing traders, short or long have a huge problem – it is the stop loss. Swing options and futures traders face a huge problem in taking a stop loss. Supposing their stop loss is 5% but the next day the stock gaps down 10%, they are forced to take a stop loss at 10%. This one loss takes them down by 2 profitable trades. This is the reason my emphasis is on hedging. If they hedged their positions properly it would have saved them from this huge loss and restricted it to may be 2% or less which is half of a profitable trade. Next trade if profitable they are in profit even after taking loss in the earlier trade.
With Intraday day traders too the story is the same. It is not uncommon for a stock to suddenly fall down 5%, then the day traders take a loss. If this was properly hedged, the losses would have been significantly reduced. It is also seen that position size of day traders is much more than positional traders as Intraday traders leverage their positions heavily by getting that extra Intraday trading margin. Positional traders do not get a such big leverage, so are forced to reduce position sizing.
Taking extra leverage is greed which sucks Intraday traders into betting big and losing big.
Are you a swing trader? If yes what problems you are facing?
You Can Read More On My Site
Hi, I am Dilip Shaw, owner of this website. I am a trader like you. I have been trading since 2007, but lost a lot of money till 2010. I then stopped trading and studied options like college exams. Started trading again from 2011 and never looked back since. I did a lot of research, read books and did countless paper-trading before being profitable. You can read about me here.
My conservative trading course since 2014 is helping many retail traders just like you who have a job or business make consistent profits like this:
What Traders Say About This Course
Testimonials Year 2015
Testimonials Year 2015 Page 2
Testimonials Year 2015 & 2016
Testimonials Year 2016
Testimonials Year 2017
Testimonials Year 2018
Testimonials Year 2019
Testimonials Year 2020 to 2023
What People Say Just After Reading My Course
Emotional Testimonial by a Young Woman Trader and Her Mother
One Of My Client Is Making Rs.25k Per Week
Difference Between Other Courses And Mine
What Others Charge for Courses
You can do this course from your home. Some traders make amazing profits like Rs. 16.26 lakhs profit in 5 days though results may differ for all.
This course helps you learn to trade conservative option strategies for monthly income. Once you finish the course you can start trading immediately. You can start trading from any day. No need to wait for expiry. You will make profits consistently.
This course is good if you have a regular job or business. You DO NOT NEED to monitor your trades every second.
What You Get?
Before reading please understand that for all 5 strategies, strike selection will be taught. Strike selection while trading Options is the most essential part to succeed.
You get two conservative non-directional strategies on options, one conservative stock option strategy and two conservative directional strategies on Future & Option combination.
Non directional trades are profitable 80% of the times and make 3-5% per trade (Results may vary).
Directional strategy makes money fast. It does not matter which side the stock moves. In fact you make more when you are wrong in the Future trade. 🙂 Some amazing profits possible here.
The stock option trade makes 30,000 in one trade and if SL is hit there is a way to recover losses plus make 30k in that trade.
Technical knowledge is NOT required. No need to monitor trades every second.
In the course you will learn how to select the strike prices. You learn when to trade, which strikes to sell which to buy, how much profit target you should be looking for, the best place to take stop loss and what to do after taking stop loss – means how to get that money back. The success rate is more than 80%.
Since trades are properly hedged there is no stress in trading my strategies.
I am very confident that you will make money trading my strategies. To help you succeed I offer few months support for FREE.
11 Reasons Why You Should Do The Course:
1. TA Knowledge NOT required
2. NO Software Required
3. Regular Monitoring NOT Required
4. Continue with Your Job
5. Do Course From Your Home
6. 100% Hedged
7. Stress-Free Trading
8. Not too much money needed to trade
9. Scaling Possible
10. One Time Fee
11. FREE Support For Months
To know more Call/SMS/WhatsApp me on 9051143004 or email me now. I know English and Hindi.
Read the details of the course here.
If you want to enroll for the course you can do so here.
P.S: So many years of trading has thought me one thing - it is always better to make small profits month after month, rather than lose money month after month trying to make too much money. It never happens. But small money accumulated month after month can become very big in only a few years.
WhatsApp or Call me: 9051143004
If you have any question you can contact me.
You can read about me here and my trading mistakes here.
Dilip Shaw, Founder
Copyright Infringement: Any act of copying, reproducing or distributing any content in the site or newsletters, whether wholly or in part, for any purpose without my permission is strictly prohibited and shall be deemed to be copyright infringement.
INCOME DISCLAIMER: Any references in this site of income made by the traders are given to me by them either through Email or WhatsApp as a Thank You message. However every trade depends on the trader and his level of risk taking capability, knowledge and experience. Moreover stock market investments and trading are subject to market risks. Therefore there is no guarantee that everyone will achieve the same or similar results. My aim is to make you a better & disciplined trader with the stock trading and investing education and strategies you get from this website.
DISCLAIMER: I am NOT an Investment Adviser (IA). I am an Authorized Person (AP) of a Stock Broker. In other words I am a sub-broker. I DO NOT give tips or advisory services by SMS, Email, or WhatsApp or any other forms of social media. I strictly adhere to laws of my country. I only offer education for free on finance, risk management & investments in stock markets through the articles in this website. You must consult an authorized Investment Adviser (IA) or do thorough research before investing in any stock or derivative using any strategy given in this website. I am not responsible for any investment decision you take after reading any article in this website. Click here to read the disclaimer in full.