Can You Make Money Swing Trading?

10/16/2012 6:00 am EST

Focus: TRADING

While day trading can be a tough road to many, swing trading is accessible and doable for most, writes CoachShane of NetPicks.com.

I guess the many stories (mostly phony) that people read in the emails that advertise the newest and greatest trading system, still has them convinced that day trading is the only means to make money trading.

I want to tell you again that it is not accurate.

Yes, there are advantages to day trading and one is the ability to bounce back after a loss. Another is you can end almost everyday in the positive if you adhere to successful trading habits. That feeling of looking at your P/L at the end of the week and seeing an income above the average day job, is addicting. Addicting and dangerous, but that is another story.

There are also drawbacks to day trading. Commissions (spread in forex) and the easy access to overtrading can take your winning day and turn it into a loser very quickly. You must have a handle on the various psychological factors that make up a positive trading experience. There are some books out there that can assist you in understanding where your psychological makeup falls flat. Look for any book by Van Tharp, Mark Douglas or Curtis Faith (yes, the Curtis Faith who made millions as a Turtle).

I will be the last one to knock day trading. I do it in the YM and the NQ. That is not all though. As a well rounded trading business, I also incorporate swing trading into my routine.

Big fish stories or talking about $$ is not something I have an interest in. The results of another trader has no bearing on your ability to succeed or fail in trading. Even trading the exact strategy, you can expect different results. I want to show something today only to prove a point.

Now, I have shown charts and accounts before but have always taken out the non-important details. Those details are money made. For people reading these posts, that is not as important as the concepts behind the trades. It is not as important as the thoughts and lessons behind what occurred. This time, and probably the only time, I will show the unimportant.

NEXT PAGE: Example of a Profitable Forex Swing Trade |pagebreak|

chart
Click to Enlarge

This trade (the red vertical line) was a swing trade that occurred in late August. There are others, including a $217 loss in the EURJPY (Thank You BOJ $128 billion intervention!!) but this one was a shorter swing trade with plenty of lower time frame opportunities to cut it short.

The trade was live for about 29 hours before hitting profit target. While the sell limit order was obviously set up while awake, it triggered when I was asleep. It was a small risk and almost a 4:1 reward-risk ratio. Now, I stuck to a higher time frame to monitor the trade, twice, while it was live. If I was thinking with a more day trade mentality, I would have zeroed in to a 15-30 minute time frame and there were many objective reasons to ratchet the stop or simply exit. In reality, on lower time frames the trade triggered, went into profit, and then reversed back to the open price! On the monitoring time frame…there was no reason to adjust. The profit speaks for itself.

Now, swing trading can test you. You may see profit disappearing during a retrace. You may see big profits and want to cash out. You may take a loss and then itch to make it back leading you to take a non-planned trade. Then again, spread costs are virtually meaningless due to the profit targets and if you commit to not tinker, it is a more relaxed of trading. At the end of the day, you can make some serious income with very little work…although with much experience and understanding mechanics.

Make no mistake…there are profits in swing trading. There are benefits to swing trading that make it not just about the money. The stress level is much lower and if I miss a day of day trading, I don’t worry too much about the lost income. Actually, swing trading profits are used, in part, for the day trade account. Reinvesting in the business!

Day trading is a tough road to many. Swing trading is accessible and doable for most. Commit to three months to hone in on a swing trading strategy and start putting this method of trading to work for you. You CAN make money swing trading.

By CoachShane, contributor, NetPicks.com.

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