Stock swing trading is a trading strategy you can use on the stock market. This article will examine whether you can make a living with stock swing trading.
WHAT IS STOCK SWING TRADING?
Swing trading is a trading strategy, whereby one attempts to benefit from short- and medium-term movements in financial markets. Normally, traders hold positions for a period of several days up to several weeks.
This trading approach allows the trader to catch and profit from price “swings” or fluctuations. These swings might be created by one or more of various market dynamics such as economic news or corporate earnings reports.
KEY FEATURES OF SWING TRADING
Generally, swing traders hold on to positions longer than day traders who would close out trades the same day, and shorter than long-term investors who may hold stocks for months or years. Swing traders usually hold positions from overnight up to several weeks.
Furthermore, swing traders can trade long positions. This means buying a stock in anticipation of appreciation. They can also trade short positions which means selling a stock in anticipation of falling prices. This, therefore, gives the swing trader an upper hand since they can profit by taking profits through upward or downward market movements.
Lastly, swing traders depend primarily upon technical analysis to identify potential entry and exit points. They often use several indicators, chart patterns, and trend analysis in predicting price movements. Some of them also combine fundamental analysis to improve their decisions regarding stock trading.
CAN STOCK TRADING BE A FULL-TIME CAREER?
Many find the idea of becoming a full-time stock swing trader attractive because one can attain financial freedom and have the ability to work independently. However, it is critical to recognize the complexities and difficulties associated with making trading a primary source of income.
Here are some key considerations to have in mind before settling for full-time stock swing trading.
CAPITAL REQUIREMENTS
To trade full-time, you need a significant amount of money to stay consistent in the stock market. A standard guideline is to save enough for twelve to eighteen months of living expenses in case you suffer a prolonged losing streak.
Having a financial safety net allows traders to cope with some level of risk and uncertainty in their stock trading profits, which could otherwise fluctuate greatly from month to month.
SKILL AND EXPERIENCE
Trading successfully calls for expertise in the market, a functioning swing trading strategy, and proper risk management. Swing traders who want to go full-time are advised to trade part-time for at least six months to a year, before going full-time. Here, they get enough time to evaluate themselves, develop proper stock trading strategies, and even achieve the level of consistency that is required.
PROFITABILITY RATES
Statistics show that only 4% of traders can make a living from stock swing trading. This percentage is quite low. This statistic clearly shows the competitiveness of trading and the need to set a realistic expectation of the income you can expect to generate.
PSYCHOLOGICAL FACTORS
Stock swing trading can take its toll on the psychology of a trader. The constant profits and losses create an emotional rollercoaster that can greatly affect traders. The most common psychological challenges that a stock swing trader might face are Fear of Missing Out and revenge trading. You have to be psychologically prepared if you want to make a living with stock swing trading.
LIFESTYLE CONSIDERATIONS
Switching to full-time stock swing trading means giving up a lot of other things in most cases. You might need to spend four to eight hours per day on your computer. Such a level of commitment could hamper interpersonal relationships, as well as cause work-life imbalance. You should be prepared to sacrifice a lot of your time if you want to become a full-time stock trader.
ESSENTIAL TOOLS FOR SUCCESSFUL SWING TRADING
If you want to make stock swing trading a full-time job successfully, you will require assistance in the form of trading tools. This together with your skills will give you the best chance of making a living off of stock swing trading. Some of the stock trading tools you will need are mentioned below.
TRADING PLATFORMS
To excel in stock swing trading, you will require trading platforms with highly interactive user interfaces that are simple to use. Trading platforms can make the difference between a successful trader and one that is not. This is because they determine how you interact with the stock market.
Stock prop firms such as FTMO and Trade the Pool offer among the best trading platforms in the stock trading industry. FTMO offers platforms such as MetaTrader 4 (MT4) and MetaTrader 5 (MT5), which provide real-time stock charts and numerous technical analysis tools. Trade the pool on the other hand offers TraderEvolution.
MT5 Trading Platform
TECHNICAL INDICATORS
Stock swing trading involves the use of technical indicators. These technical indicators are at the core of a stock swing trader’s strategy. They include oscillators like the Stochastic Oscillator or MACD. They help traders detect momentum changes in the stock market, allowing them to catch reversals.
MACD
Another indicator is the Bollinger Bands that help in evaluating if a stock has been overbought or oversold. This information is also important for anticipating stock market reversals.
Stock swing traders are in luck because they can find these indicators and many more in FTMO and Trade the Pool. These stock trading prop firms have invested a great deal in technical indicators. The platforms they offer have all the popular indicators, ensuring you explore your full stock trading potential.
BACKTESTING TOOLS
Stock swing traders rely on strategies that they have tested over a long time. These strategies have been refined with each trade, increasing their success rate. Backtesting tools enable traders to test strategies over historical stock market data.
These tools allow you to test strategies within minutes over several years worth of data. They help you determine whether your strategy is profitable in the long term without having to go through countless live trades. FTMO offers these tools through its MT5 and MT4 platforms. With this stock prop firm, you can test your new strategies and determine their profitability in minutes.
MT5 Strategy Tester
EDUCATIONAL RESOURCES
It is important to keep yourself up to date with developments in the stock market and to constantly learn from experienced stock swing traders. With FTMO and Trade the Pool, traders have access to many learning opportunities. You can attend webinars and tutorials, and also discuss your experiences and challanges with other traders in social media forums. Interacting with these resources enables traders to gain skills to meet new conditions in the stock market.
Trade the Pool Educational Material
CONCLUSION
You can make a living off of stock swing trading. This is not to say it is an easy task. You need to consider things such as the capital requirements, psychological factors, skills and experience, and lifestyle.
Moreover, you need some essential tools such as proper trading platforms, technical indicators, backtesting tools, and educational resources. You can access these tools on either FTMO or Trade the Pool. Join these stock prop firms and start your journey to making a living with stock swing trading.
