When I first started trading, my initial plan was to master day trading first [insert eye rolls], and then build up a second account specifically for swing trading, followed by a third account for longer-term position trading and/or investing. However, this plan didn’t work out how I expected it to.
The problem began at phase one, trying to become profitable and successful within day trading. Personally, due to the speed of the day trading (scalping) world, I would quickly fall into bad habits. Despite doing well, one bad day could change everything. I would experience FOMO, chase trades, revenge trade, over trade, rush into things, and so on. It was too easy for me to fall into these pitfalls.
I eventually realized that I didn’t need trading to be exciting or exhilarating; I just needed it to be profitable. After a while, I welcomed the boring aspects of swing trading. With swing trading, I could do my due diligence, make my plans, and then set my orders and let it play out. Although it’s easier said than done, if properly executed and devoid of human emotion, swing trading can be straightforward and easy.
What allowed swing trading to work for me was sticking to a theory and then letting the trade play out without interference. If I messed with the trade (moving orders around, changing the original plan), I usually regretted it. I had to build up my confidence with proven results to follow through on the trade. It takes patience, whether in winning or losing positions, which is something I realized I had to work on.
The key rule or guideline that helped me was to stay in the position unless either A) the theory is proven wrong by stopping out, or B) the theory changes due to outside elements. It’s really that simple. I do my best to stick with my original theory as closely as possible, and point B can have some subjective qualities to it. To combat this, I created a simple overall market direction grade system. I assigned a value to the main indices (SPY, QQQ, BITC, IWM, etc.) that I deemed most valuable to my plays and setups.
Rationalizing getting in and out of a trade too early with potential subjective thoughts and decisions was a problem for me. To make it as close to reality as possible without bias or preference, I always do my best to remove myself from the trade decisions and the human element from trading. The better job I do at remaining truly non-biased in general, the better I am at making better trade decisions when odd situations come up. Deciding if point B still stands or if the outside factors are changing the edge that I had when I went in is easier when I can look to a black and white analysis breakdown of the market mood/direction.
If point A and point B aren’t factoring into your original theory that you have around the play, then stick with it. This specific theory can vary and is up to you to fill in as well. It could be based on technical setup patterns (like playing a bull/bear flag, reverse head and shoulders, cup and handle, etc.), major support or resistance areas, technical indicators, etc. Just write down what you are basing the trade around so you don’t lose perspective somewhere in between the trade.
This approach can work with longer-term positional trading and shorter-term day trading too. But I found this method super helpful when going from day trading to swing trading and capturing longer trends within the markets. Identify a solid theory that gives you a consistent edge, then stick with that theory until you either get stopped out or if the outside market winds really change against you. It may seem overly simplified, but if you find yourself wanting to get more into swing trading and find it hard to develop the patience/will to actually hang tough with the play, this conviction to sticking to your main theory with this method could make all the difference!
