Swing trading is gaining widespread popularity among traders as well as investors because of low commissions and high-speed internet. However, many investors make costly swing trading mistakes just because they do not understand its mechanism.
What does swing trading refer to?
Swing trading is a technique that helps in identifying the short-term movements in a certain direction which lasts for a few days or weeks or months. Usually, we consider the movement of fewer than twenty days.
Most common swing trading mistakes made by swing traders
Closely monitoring the market too often
Monitoring every single movement on the computer or mobile screen the whole day can cause damage to both psychological health and financial status. By continuously analyzing the market, traders end up making wrong decisions or investing in small trades.
They take this decision impulsively or under the anxiety of future movements. Thus, keeping yourself updated about market conditions is good to some extent but continuously looking at the screen every few minutes can break your trade. It is an important thing that every swing trader should think upon.
Making small movements without pondering on them
It is a common mistake made by many novice swing traders. They enter the financial market with enthusiasm but sometimes carry this enthusiasm in the wrong direction by trading every small movement. Their decisions are completely based on their assumption rather than current market conditions or research. They turn blindfolded and do not look at the bigger side of a trade they have selected.
A successful trader does not start weak position trade. He always tries to initiate a trade when the odds are piled in his favor. It increases the net profitability. They remain on the sidelines if they do not find any obvious trend to trade in.
Getting distracted by some fundamentals
In the financial market, the price is something that ultimately gives you the profits. Hence, swing traders make trading decisions based on the current price of the trade. Never make retrogressive trades or trading decisions just because of a few events related to the stock’s fundamentals. Stock’s fundamentals are noting just the distraction to the strategy of swing trading. Some swing investors make quick decisions, and they pay for this in the long run.
Lacking discipline and patience
The words such as patience and discipline seem to be boring and outdated, but they are the primary ingredients for the swing trader to become successful. The main difference between a profitable swing trader and an amateur swing trader lies in confronting the urge to take rash or hasty decisions. All the mistakes mentioned in the entire guide can be overcome by discipline and patience. Thus, never focus on the wrong facts of swing trading to avoid falling into big trouble.
Purchasing when the prices decrease
This mistake is different from the others discussed above but leads to the same outcome which is massive losses. Traders generally have a soft corner for some specific stock, or we can say there is always a stock where the trader’s interest lies strongly.
It is the reason when they find their favorite stock prices declining the first thought that sticks to them are to buy the stock as soon as possible before its value rises. It might get you in trouble if the price of stock continues to decline and may even force you to close the trade at a considerable loss.
Here’s a tip for swing traders to avoid such swing trading mistakes. There is always the fact that leads to a decline in the price of the stock. So never think emotionally and avoid making momentum traders when you see such a huge price movement. Plan each trade beforehand to make it clear how to trade and what to trade.
If you are interested in particular falling trade, then stay calm, monitor it for a few days, and check the news headlines for it. After all these, you will indeed find out where the trade has any emerging opportunity, or it’s just a waste of time and money.
Focusing only on profits without considering the risk
Make it clear in your mind that swing trading is not about focusing only on profit, but it also requires the knowledge of risk and the risk management strategies to overcome them. Without proper management, you will eventually destroy everything in greed. So focus on becoming an excellent swing trader rather than running behind profit because it will automatically come if you work on your techniques and strategies.
Manage your risk efficiently, minimize trade losses and cut losses. Repeat the same on every trade.
Trying to choose bottoms and tops in the market
Keep aside all your predictions about the bottom and the top of the stock. The financial market is full of uncertainty; no one knows when the price of trade reverts. Undoubtedly, choosing the bottom or top of any stock can generate profit for you, but one cannot ignore the truth that it comes with immense risk. It is a piece of advice, whenever you encounter the word risk while Forex trading, you must try to refrain from that direction.
In swing trading, one should target the returns between five percent and ten percent gains. You might not see this much but this if consistently worked upon can return an impressive overall profit.
Choosing the wrong broker
Choosing the wrong broker can risk your entire account. Various fake firms are running around the financial market, trying to trap traders by offering attractive features and services. The trading rates which they tell their customers can lure anyone, but the reality is that no good services can be offered at such a low price. Always choose the authentic broker for trading.
One such trusted broker firm is InvestFW. The central regulatory authority for the firm is the International Financial Service Commission. It provides the best trading features to its users, such as:
- Spreads starting at 0.1 pips
- Maximum leverage of 400:1
- An instant trading account in three steps
- Execution speed at 0.04 sec
- Trading platforms: Web Trader and mobile app
- Zero commission on trade