#1) Swing trading requires disciplined risk management. While this is true of all trading types, it’s especially true of swing trading. That’s because without clear risk management rules you can be tempted to “wait and see” if your losing stock trade (the one you were only going to hold for a few days) is going to turn around or not. This can lead to a short term trade turning into a long term losing “investment.” Not only does this cost you money, but it also ties up your capital from investing in other opportunities. So always set stop losses with your swing trades and just as importantly, stick with them. Otherwise you’ll be left holding the bag.
But that’s not the only swing trading mistake I often see. Here’s the second…
#2) Most swing traders over trade. If you’re active on finance social media (as many swing traders are) you undoubtedly feel the urge every now and then to jump into the market as others tweet and post about their stock market success. And given the prevalence of swing trading, online brokerage firms and the ease of access, it’s almost inevitable that swing traders will get caught up in the heat of the moment and put on trades that are too big or don’t meet their strict entry criteria. This lack of trading discipline can be deadly to your bottom line.
And while I believe many traders could benefit from trading less frequently, swing traders are particularly guilty of this sin. And when combined with poor risk management, this mistake can be absolutely deadly to your capital.