What is Swing Trading? A Swing Traders Daily Grind

Swing trading is a very simple idea (from a bird's eye view) you get on the swing at the bottom, ride it up (over a week or more), and jump off when it gets near the high point.

jumping off a swing trade at a high point

What Is Swing Trading?

A Look Inside a Swing Trader’s Daily Routine

Trading can sometimes appear like a glamorous pursuit to the untrained eye.

This great quest may especially be the case in today’s market, where the ability to do online trading may conjure up images of pajama-clad people futzing around on their computer all day while they make a buck.

As any serious trader will tell you, this is a patently false image. Trading is a disciplined activity that demands attention to detail and a massive time commitment. This truism is perhaps best represented by swing trading; a strategy that is jam-packed with news reading, chart studying, stock seeking, and other decidedly non-glamorous activities.

The Mechanics of Swing Trading

Successful swing trading is built around the capacity to pick profits from modulations above and below a stock’s established baseline. It’s a strategy that can serve investors quite well during the market’s idle times. It’s also an approach that typically combines fundamental and technical analysis to catch lightning in a bottle. In this case, the “lightning” is profits captures from stocks that temporarily shoot up or tumble down from the baseline before returning to the established medium.

swing trading entries

image from: swing-trade-stocks.com

Position trading is regarded as an ideal strategy for newbies that are still trying to figure out the ins and outs of the market. However, it’s also an approach that requires a pretty huge time commitment on the part of the investor if he or she wants actually to turn a profit one day.

A Day in the Life of a Swing Trader

Presuming the swing trader is on the east coast, he or she will begin the trading day at 6:00 AM, long before the 9:30 AM opening bell. This 3 ½ hour time frame is an essential, can’t miss event because it allows investors sufficient time to gain a proper feel for how the day’s market may shake down. During this period, savvy investors will use various tools associated with technical and fundamental analysis to find potentially profitable trades, put together a daily watch list of stocks that could produce worthwhile irregularities, and take a look at their existing positions.

Usually, the first thing investors will do to get the ball rolling is to head to a trusted website or turn the TV to CNBC to catch up on the latest news and developments that may have a positive or adverse impact on the market or other stocks. Specifically, they’ll try to pick out three things:

  • Market sentiment as a whole
  • Sector sentiment
  • News on their current holdings

Once this has been taken care of, investors will scan for any potential trades that they may want to execute that day.

  • Some software like EquityFeed has real time news scanners in addition to technical information like level II.

Usually, swing traders will lean on fundamental analysis augmented with some technical analysis to craft as complete a picture as possible. During this time, investors will scour sources like SEC filings for potential opportunities like IPOs, bankruptcies, takeover, buyouts, mergers, and the like. They’ll also take this time to seek out sector plays by analyzing news or reputable websites to find out what sectors are performing well.

While the information found in this phase is somewhat tough to decode and a bit risky, savvy investors can unearth some pretty terrific opportunities here.

​Scanning For Trades

At this time, swing traders could bring in technical, analytical tools like chart breaks to drill down into the recent stock activity. Tools and software can help them readily find the breakouts and breakdowns that are the key to turning profits through the strategy.

Once this process is complete, investors will create a list of stocks to keep an eye on during the day, while also taking the time to make sure the position on their current stocks. After this is complete, they are finally prepared for the market to open.

When the market does open, swing traders will essentially do two things: watch and trade. They’ll typically look at level II quotes to find out who’s buying and selling and at what amounts. They may also look to see what market makers are making the trade.

level II info equityfeed

Example of level II information

As soon as a profitable trade has been found, investors will turn to technical analysis to locate an exit. A lot of swing traders will use Fibonacci extensions, price by volume, or simple resistance levels to locate this data. In a perfect world, this is completed before the trade has been placed, but a lot of the action will depend on the day’s trading. What’s more, adjustments to the strategy may have to be made later, depending on what happens in the future.

Generally speaking, the trades that are targeted are ones that will incur as little risk as possible, even if this inadvertently means they jump out of the trade before its apex. There is no rigid time frame to when this can happen. The natural fluctuation of the day to day market regarding the stocks typically targeted in a swing trade means every day is different.

When the market closes, swing traders will take a look at their performance and give it a studious evaluation. Performance analysis involves poring over trading activity and pinpointing things that need improvement.

It’s also critical to record all trades and ideas at this time for tax purposes. It’s also an excellent opportunity to review any open positions one final time, especially to see if any after-hours earning announcements or holding-impactful event have happened.

A Long Day Needed to Go After Potential Rewards

As you can see, swing trading is not a simple process.

If anything, investors have to get up pretty early in the morning if they are indeed serious about using the strategy to gain profits while minimizing risk. The copious amounts of study, fundamental analysis, and trade pinpointing that all happens in the hours leading up to the opening bell may be a little off-putting, especially to those that are just getting started in the market and don’t have a full grasp on how much commitment is needed.

However, for the smart investor that has no problem with putting in solid hours day in and day out, swing trading can be a very smart way to pursue potentially consistent profits.

For those that are new to trading and don't have the time to go at it full time (which is most beginners), I would suggest signing up with a stock picking service and paper trading to start. Allowing you to learn while actively trading part time.

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