7 Common Mistakes in Swing Trading.

 7 Common Mistakes in Swing Trading.

1.      Using too many tools

One of the major problems of a novice trader is that using too many indicators on the chart. indicators are secondary or supportive tool for the experienced trader while indicators are the primary tool for the beginner, this is the main problem, novice traders always trust blindly on the indicators and they pay less attention to the risk management, money management and stock selection.

Novice traders enters the market when their indicator gives buy signal, they don’t consider the momentum and they fail to determine the key levels for they entry. Professional traders focus on their strategy which has proper money management, risk management, proper stock selection method, and proper indicators.

As a beginner you must be aware that using too much tools leads you in a confusing state of mind. A simple strategy is enough to make money from the market. Here we will discuss about they proper strategy and indicator set ups in the upcoming blogs, I’m sure which will help you to make good amount of money from the market.

 

2.      Trading in wrong timeframe

Choosing time frame is another mistake, as a swing trader your analysis must be based on the higher time frames. You can use weekly chart or daily chart based on your strategy. Never use small time frames to predict the direction of the market, smaller time frames are for intraday players and scalpers. As a swing trader your intention is capture the particular trend, in order to this you may have to hold the trade for couple of weeks so you must be clear about the direction of the trend. So, the analysis, entry point and stoploss must be based on the higher time frame.

3.      Holding if the stock goes down

There is no 100% winning strategy in the market, the market may turn against you at any time, but you have to be willing to accept the loss, if the trade is against you exit as early as possible.

Don’t enter the trade without proper stoploss, if the trade is against you don’t try to adjust your stoploss because it will affect your risk management system. If the trade is in favor of your direction, then try to trail your stoploss to the key levels. As long as you hold the losing trade you may not see another golden opportunity in other stocks, if you are an intraday player or swing trader you must follow this rule “cut your loss and run your profit”. 

 

4.      Trading on news or event

There is a common saying in the Stock market buy at rumour sell at the news. Retailers are trapped in the news or event-based trading because insider trading is a common fact  Stock market.

What is insider trading?

If there is any news, retailers like you and me knowing only when they release the news on media or company websites. But the higher officials of the companies and institutions get the news before they release it on media, if the news is positive, they will accumulate on that particular stock before the news comes on media.

when the positive news releases on media, retailers start to buy the stock, the stock will go up, but those who are accumulated on the stock earlier will book their profit, we know that smart money buys larger quantities, so if they start to book their profit, the stock will go downwards, the retailers who bought the stock after the news release will get trapped. So, try to avoid news or event-based trading.

 

 

5.      Random trading

Don’t trade randomly on any stock, you must have valid reasons to enter the stock, you must have proper trading set ups before enter to the trade, you must be aware of the entry points and exit points. Select the stocks which has momentum. Don’t trade randomly because you have to hold the trade couple of days to get good amount of money so try to select the stocks which has good momentum.

 

 

6.      No backtested strategy

As I said above you must have a good strategy before enter in to the market. You have to back test the strategy in different market cycles, then you will be aware of the winning percentage of your trading strategy. Every strategy has its own strengths and weaknesses.

 

7.      Risking more than they can afford

Trading is a probability game so; you need proper money management otherwise you can not survive in the market. Don’t put your full capital in a single trade, deploy only 30% of your capital in a single trade, and follow proper risk management. Enter the trade with strict stoploss. If the trade is in your favor trail the stoploss towards the key levels.