Swing Trading because we are bored and itching to make a trade is normally VERY dangerous to our trading accounts.
Our eyes should be focused on the future, and that is what swing trading is all about. Following a strategy that beats the market over time also protects capital during bad times.
In this article I want to look at the psychology of trading. I like writing about trading psychology because it will determine if we are going to be a profitable trader or not.
Why do so many investors and traders fail to achieve profits?
The Need For Immediate Winning Trades
The term “impulsive” is often used to describe people who just can’t wait for the trade to come to them. They can’t delay; they’ve got to have it now. So they are not willing to wait for a great swing trading setup that comes later in order to get something right away.
If you were offered you a choice between a smaller amount of money say $300 available immediately OR a larger amount, $1,000 that you had to wait 6 months for, which would you take?
You would be surprised at how many would take the $300, then again maybe you wouldn’t. The majority of the buying and selling in the stock market every day is by those who are looking for that quick $300. Very few traders are thinking about the $1,000 and even fewer still have any strategy at all to achieve it.
Why is it traders engage in these behaviors of which the longer-term consequences is worse for them? Why do you eat that jelly doughnut when you’re trying to lose weight, or trying to stay healthy?
One of the reasons is that being healthy or being fit is a “delayed reward.” The results of which are not felt now, but in the future.
While the desire to succeed swing trading is a good goal to have, the desire for immediate profits and winning trades is not. It clouds the real goal of making larger profits over time. A goal few investors ever achieve.
Motivated By Immediate Rewards
The market is not likely to hand “immediate profits” to you. Although swing trading is all about being profitable, it is NOT about satisfying our immediate emotional need for profits.
It is the following of a disciplined plan of learning to swing trade WELL and gradually increasing our account size. This is why it is so important at first to be mentored by a experienced swing trader.
A winning swing trader must tirelessly execute a trading strategy that will often conflict with the trader’s emotions.
Remember, the outcome of any one trade may or may not produce a profit. It’s very possible that the outcome of a series trades may not produce a profit. It is essential for a trader to understand that this is a distinct possibility.
You were probably attracted to swing trading because of the large potential profits you would make. It’s natural to want to make money for your work, but if you expect an immediate profits for your effort and they don’t come, you’re going to be frustrated and disappointed. And when it comes to swing trading, immediate profits aren’t always there.
As an example, everyone expects to get paid on their payday but have you ever noticed what happens if a paycheck is delayed for any reason? Everyone gets angry and frustrated.
Unless one has the right perspective, market timing can feel that way also. One may put in an enormous effort and receive no “immediate” reward for it.
If you are expecting immediate profits, it can be frustrating when it does not happen. That is why it is important to have proper perspective for swing trading, and the proper perspective can only be based by looking at results over a longer time frame.
The Big Picture and Laws Of Probability
It is essential for a swing trader to think in terms of the bigger picture and probabilities. You have to recognize that the outcome of any one trade is not significant. It’s the outcome over time that matters.
The more swing trades you make with a winning trading strategy, the more the law of averages will work in your favor, and across a longer series of trades, you will make money.
The market as we should know is not always conducive to our plans. The goal of the market is make as many people wrong as possible. This is a reality of trading and it’s necessary to prepare for it. If you are aware of this, you’ll be less likely to be emotional to losing trades, and more importantly, less likely to make bad decisions when the market does not cooperate.
Seeing the big picture, and sticking to the trading plan, are the keys to swing trading profits.
If you anticipate that every trade is NOT going to be profitable, you will not be disappointed when you have a series of losing trades.
Some swing traders hit the jackpot and start right at the beginning of a profitable trend. This is often the absolute worst thing that can happen to a trader. They now think they know it all and the secret to trading!
Typically, we start our swing trading during difficult market conditions, which is the majority of the time.
Having the proper perspective goes a long way in coping with the inevitable losses that the market throws at us.
Those who can stay the course will reap the profits over time.
You can make it easier on yourself by following and learning from a professional who knows how to profitably swing trade and help guide you to becoming a profitable trader.
Here are the two I use for almost all of my trades:
Regardless of which Stock Picking Service you use or if even if you choose to go it alone, please download my free eBook: “The 7 Habits of Millionaire Traders”
You can read all my reviews on stock picking services here:
If you have any questions feel free to contact me.
– Robert Walsh