Top 10 Swing Trading Mistakes
Swing trading can be a nerve racking experience if things don't go your way
. Market momentum can shift quickly, causing even the best laid plans to go to waste. We address ten of the most common mistakes made by swing traders and the ways to avoid making them.
Trading without enough experience.
Swing trading requires a certain feel for the market. Being able to judge the mood of the market and go with the trend is a critical necessity for being a successful swing trader. Experienced swing traders must be anticipatory, as opposed to being reactionary. This is accomplished through practice trading, getting educated, and most importantly, experience.
Interpreting signals incorrectly.
Let's face facts; no one is a perfect trader. Because technical analysis involves a good deal of subjective decision making, there will be times when don't make the right call. Traders should become proficient in swing trading principles and interpreting indicators before ever enacting a single trade.
Making false assumptions.
Along the lines of interpreting signals from indicators incorrectly, oftentimes traders make false assumptions about the market. While it is impossible to always have a correct outlook for the market, swing traders should work diligently to have a pervasive and informed opinion regarding global economic conditions.
Lack of trading discipline.
Everyone should have a strategy when trading. Assume you make a plan that incorporates all of your goals and objectives, including preparation for circumstances if things aren't going your way. It is important to stick to your plan, whether that is dogmatically following your trading rules or giving yourself the flexibility to adjust on the fly. Some trades require stringent trading rules while others require a more pliable approach. Regardless, it is important to remain disciplined to your trading strategy.
Impulsive or emotional trading.
Traders may become undisciplined if they make impulsive or emotional choices. Divorcing yourself from emotion is of vital importance when making trading decisions.
Riding trends too long.
Swing trading requires a certain level of skill and discipline. This would involve taking profits at appropriate levels by not getting greedy and cutting losses when it is clear the trend has moved against you. Again, stick to your plan, assuming you created a thorough, detailed course of action.
Exiting too early.
Traders are usually creatures of habit. Many swing traders are vigilant users of stop losses, regardless of whether they are qualified to do so. Although stop losses are a valuable risk management tool, they do require a level of skill to be used correctly. A poor use of stop losses might be setting them at price targets where the trader does not want to lose any more money. While this may assuage the trader's fear regarding losses, a more appropriate setting for stop losses would be dictated by technical trading analysis. Of course, getting out early is fitting if your trading plan requires a flexible approach.
Falling to have money management rules.
Swing traders should always consider the value of their account size, their individual goals, and any other money management rules that can focus your trades. Never swing trade with a percentage of your funds greater than what you are able to accept losing.
Poor market timing.
Swing traders are sometimes sideswiped by poor timing. Consider the impact of holding positions during scheduled news like corporate earnings and other impactful macroeconomic data in your trading strategy.
Failing to evaluate your results.
Swing traders must be able to evolve with market. Maintaining a high level of proficiency mandates that traders evaluate their trading history and make adjustments as needed.
by: Matt kaldor
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