Ever since I started becoming active participant in the stock market over 7 years ago, I have always swing traded. But over the last 2-3 years I attempted to day trade futures, stocks and sometimes options. While I made good money in a short amount of time, I always found it hard to maintain consistency and discipline when price action was moving fast which ultimately meant giving back profits through emotional triggers.
On the other hand with swing trading, I continue to have consistent success following my gameplan while watching my equity curve steadily rise. These are the 3 reasons why I now only swing trade:
Big Picture Focus
What is that statistic: 90% of retail traders lose money. I truly believe that is because a lot of people attempt day trading stocks and options without a gameplan. A new trader might experience a few intraday losses in a row. Not being able to cope with the sudden realization that you just lost $1,000 in less than 5 minutes, you suddenly feel the urge to double up, or worse go all in on the next trade, which ultimately leads to massive losses and accounts blowing up.
New traders attempt to get rich quick risking much more than they should with no strategy, They just focus on the $$$ signs and do not treat trading like a business. I do believe there is a big psychological component too where a lot of new traders struggle.
With swing trading you focus on the Big Picture (daily, weekly and monthly charts). Price action is slowed down significantly so you can manage your risk and emotions more easily assuming you have taken the time to study the market and develop a trading strategy based on what you observe to be profitable.
When you focus on the big picture, you can gauge the overall trend of a stock better and build your patience muscle. Support and resistance levels become more significant as well providing great risk/reward opportunities. The best part is you will get stopped out less by not having your stop loss (you better use one) super tight only to get stopped out and see the stock rip higher.
Emotions are More Manageable
One of the big ones for me was the huge difference in how I am able to manage my emotions when swing trading compared to day trading. When I day traded, I tended to be disciplined for at most 3-4 days before going on tilt. The emotional mistakes I would make by trying to make losses, or profits, back either by re-entering, averaging a loser or just increasing position sizing would cause significant damage in a short amount of time. Not to mention entering trades that were never part of my gameplan. Every thing happens fast when you day trade, which requires significantly more mental capital.
Now when I swing trade, price action seems like it is happening in slow motion. I focus on the daily and weekly levels the most, while ignoring intraday actions unless a significant support level is lost. Before the market opens I know exactly which stocks I’m looking at, the entry triggers and the stop losses to control my risk to a certain percentage of my account. After that I simply just wait for price to approach my entry to see if there’s an uptick in volume, i.e. bigger buyers stepping up. If I get stopped out, I know the stop loss is most likely in the correct spot since a strong pivot low was taken out. You’re less likely to want to revenge trade after being stopped out on a daily or weekly support level.
Profits are Bigger
Most new traders are attracted to day trading since you can literally make money in seconds. But as a day trader you are only capturing a small portion of what could be a massive macro move to the upside.
Take the AMZN chart above. Back in April 2020 if you had bought the break of 2185, you would have a ~62% gain selling in September 2020 after a strong bullish trend topped out. As a day trader I’m sure there were opportunities. However what the daily chart doesn’t show you is the intraday volatility of how a stock moves. I highly doubt you would be capturing significant moves intraday compared to the macro breakout move.
If you still day trade or are a swing trader, let me know what you think in the comments below!