Swing Trading: Wisdom, Foolishness, or Middle Ground?

•    The amount of work is also betwixt and between.   No need to glue your eyes to your computer screen, like a day trader, but you should be following the markets closely nonetheless.   You may not need to learn the sophisticated skills day traders use to follow the market minute by minute, but you could run into some pretty esoteric and challenging trading algorithms in use by swing traders.

•    These first two properties make swing trading a potential solution if you want to earn a living by trading, but not give up your day job.   You can earn monthly income with a time investment of two to five hours a week, evenings (market research) and mornings (placing new trades).   In contrast, many day traders spend ten to twelve hours a day watching and moving their money.  

•    If the hectic pace that energizes day traders makes you grab for your chest and request an ambulance, swing trading will be less stressful.

•    Swing traders know how difficult it is to hit the absolute high and absolute low, so they work the nearby territory.   In other words, you won’t get stressed out by trying to have perfect timing (like position traders), but you still need to pay attention. 

•    Swing trading relies on discipline—your entries and exits should be carefully planned in advance—but it doesn’t require the superhuman long-term patience and discipline that buy-and-hold investors should have (but often don’t). 

•    Your money won’t work quite as hard for you as in day trading, because of overnight margin requirements.  

•    However, you can handle multiple positions at a time, more easily and effectively than a day trader.  

So, getting back to the question of whether swing trading is a sweet idea or a sour one, it depends…on the type of market you’re in.   In markets that are trending strongly in a vertical direction (bull or bear), the most active properties tend to experience less oscillation than in markets trending sideways.   In bull or bear markets, you’re better off following the predominant trend.   However, in flatter markets, when buy-and-hold investors are trying to exercise that superhuman patience we spoke about, a swing trader can make good money off ups and downs driven by the morning news or the emotional swings of a market reacting to its own movements.   

That’s why swing trading in the commodities markets, which dance less to the long-term tunes of the equities market and more to the short-term sharps and flats of supply and demand, attracts both beginners—who can benefit from near-term feedback—and experts with the experience to modulate their risks and pursue steady profits.   

Note that this type of investing is considered to involve substantial risk.   You should discuss this risk, and the appropriateness of swing investing or commodities investing for your portfolio, with your broker or advisor before proceeding.