Why I stopped swing trading

/ tagrtrades

Hi Alex, thanks for these blog entries and for the interview. Can you write more about passing from swing trading to your current style? This is something I’ve recently realized myself. I mean the retail trading world is all for following the trend and looks down on anything that’s short-term and discretionary. what made you realize swing trading hitting home runs wasn’t for you? What made you change your mind to the way you trade now? Any difficult moments?

First off thanks for the awesome question – that’s what is going to fuel this blog. I read something once that said traders typically take on the system they first found success. So if you hit your first big homerun on the short side you typically focus on shorting and if it’s a swing then you focus on swing trading. While that might not be the case for everyone it sure was for me. Because I was working full time when I started trading I knew of nothing else other than researching stocks at night, placing trades in the morning, and just letting them work for a few days til I somehow decided it was time to sell. And well… it worked. It worked so well that after not many trades I was able to hit a few big home runs and made the leap to go full time.

When I transitioned into fulltime I had absolutely zero intention of day trading. I was just going to pick amazing stocks time after time, sit back, and count my money as they ran 100%. As you know, that plan didn’t quite work out AT ALL. I was picking loser after loser and watching my account slowly dwindle. I got in the terrible habit of holding losing stocks overnight just because I was a swing trader and that’s what I thought I was supposed to do. Within a few weeks I couldn’t sleep at night and all I would do after the market closed was look at my losing positions trying to figure out how I was going to get out of them. Every once and a while I’d have a big win and start the cycle all over again.

It was either in The Daily Trading Coach (book in the resource section) or another similar to it where the author says something like “figure out what causes you the most pain in your trading and stop doing it”. For me it was clear. I was holding losing trades overnight and it was wrecking my mindset. Even holding winning trades overnight was difficult for me because I feared the worst lurking around every corner. Something wild happened when I stopped holding positions over night. I could come to the market with a clear head each day and make decisions based on what was happening right in that very moment. I wasn’t letting losses snowball because I knew at the end of the day I had to be out so it was either, deal with them now or right before the bell rang. Were there times that I could have gotten the big gap up the next day to save me on a loser or multiply a winner – sure. Many times I was heartbroken thinking of the coulda, woulda, shouldas of holding a few overnight, but I started sleeping like a baby again and learning ways that I could trade with my emotions totally in control. For me, that way just so happened to be small cap intraday trading.

So I challenge you to answer the same question I did a few years ago. Find some quiet time and think hard about where you keep taking steps back in your trading and make a plan.

Keep grinding traders

**I don’t want anyone to think that I am saying swing trading or holding positions overnight is bad –  I’m actually looking to bring it back into the mix later this year or next year. Just wasn’t right for me at the time and thought it was a great question to be shared.

11 thoughts on “Why I stopped swing trading”

  1. I really enjoyed your recent interview on Chat with Traders. I have very recently started full-time daytrading, after a year of part-time paper trading. Your comments let me know that I’m not crazy—- and I sincerely appreciate that! I’ll be following your blog too 🙂

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    • 2 reasons. I’ve had a lot more screen time than when I started so I would be much more confident in my choice of stocks to hold overnight vs throwing darts like I was previously. Also, my back is not against the wall like it was in the early years and I have an edge I can rely on to make money in the short term while I wait for longer term payouts.

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  3. If you have an edge in the short term why bother with long term instead of increasing position size in the short term and exploit the edge? What if for you there’s only edge in the short term?
    This question isn’t to challenge you. It’s one of the questions I ask myself.

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    • No these are great questions! It’s good playing devils advocate.
      The problem with my short term style in small caps is liquidity and risk management. A lot of times I am buying all the shares available at a certain level in which I feel there is a good risk/reward ratio – making it difficult to scale larger without ruining the ratio. And with small caps you have to be very sensitive to position sizing because if you get too large and sentiment changes quickly you can get stuck with a position that you cannot unwind without killing price and getting terrible slippage.
      My thought with swing trading would be to initiate a position and get up to lets say 10k shares for example purposes. My current edge is to quickly start unwinding the position for a profit. With practice I would like to hold lets say 2k looking for a much higher % win than I currently am. And IF the daily chart is strong and there is an active catalyst hold that small position overnight. That position would then give me a buffer and allow me to put on an even bigger position the next day if I get a setup to do so.
      Bascially I wouldn’t be putting on a position with the intention to swing trade it – it would happen organically. And I will NEVER hold a losing position overnight. That’s were things go wrong in my book.

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      • And if try this and it is unsuccessful – my journal will quickly pick up on it and let me know its a losing proposition and I’ll be on my merry way trading my same ol’ style just like it is.

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  4. Interesting, so it’s basically doing the same thing you’re doing now, but in more liquid stocks. Trade your core position the same way you do now but leave a small part of core position overnight if at the end of a trading day it shows a profit and a catalyst or strong chart warrants a follow-through?

    Would you be able to share which part of your trading journal helped you turn your trading around?

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