Swing traders have to combine trading fundamentals with technical analysis to make the most of significant changes in stock prices while trying to avoid idle times. Most people feel that swing trading has some benefits over average retail trading, like better returns and more profitable use of capital. However, there are certain downsides as well, such as higher volatility and expensive commissions.
Most traders find swing trading to be significantly more complex than retail trading, especially if they are already involved in the latter. Regular traders are used to consistent information, which gives them leverage. Plus, they have to pay lower commissions.
They also use a limited number of tools and take lower risks because they have to maintain a large capital. However, retail traders with adequate knowledge can utilize the tools and technical analysis to make considerable profits with the right swing trading strategies. So let us see what should be an ideal daily routine for swing traders.
Before the Market Opens
Swing traders should ideally start at 6 AM EST so they can prepare for the day’s market. These are some of the essential activities they should accomplish before the trading market opens.
The first job for swing traders should be to check the current news and look for any new developments that might affect the market. They can watch the NEWS on TV channels like CNBC or visit reputable financial news websites like MarketWatch. There are three things that they need to observe from these sources:
- The overall sentiment for the market, including crucial economic reports, inflation percentage, currency values, and international trading results.
- Sectors that are presently trending and growing
- Details of current holdings, such as news, value increase, and SEC filing
Find Potential Trades
The next thing traders should do is to scan for potential trades for the day. Swing traders usually use a fundamental catalyst to enter a position, and then they rely on technical analysis to manage it or exit. There are two ways to carry out a fundamental analysis.
Traders should look for special opportunities in SEC filings as well as the news headlines. Some of these opportunities can include an Initial Public Offering (IPO), buyouts, and acquisitions or business mergers.
Traders can also make use of bankruptcies or company restructuring to find potential grades. Since risks are as high as rewards, traders need to find information from additional resources and analyze the situation before taking a step.
Swing traders should then make a watchlist containing all the potential stocks that can influence trading options for any. This list should be categorized based on opportunities, target trading prices, and stop-loss limits. Traders should also include categories for entry prices along with other possible opportunities that they can use to the trading day.
The next step for traders should be to check the news and other information sources for details on the existing positions. They would have to ensure that there is minimal effect on the stock prices from the previous day.
Traders usually input the stock symbol for their existing positions in the news or service provider websites. It will allow them to find the information necessary to carry out the analysis for their trading plan. Traders might have to adjust their stop-loss levels along with the profit points.
During the Market Hours
The trading market hours are usually between 9:30 AM to 4 PM EST. Traders usually check the level II quotes that show who all are trading and the amounts at which they are buying or selling. Once the traders have found viable trades, they have to start looking for an exit using technical analysis.
Most swing traders prefer Fibonacci extensions or monitor the price by volume before the trade has taken place. People who love day trading should check out the market maker, but they should also avoid head-fake bids placed to confuse them.
Traders rarely trade in the after-hours market because it is usually illiquid, and the spread is quite high. Therefore, it is better if traders utilize this time to evaluate their performance. They can record all the valuable information they have found during the day, including trades and ideas.
They should also note all information necessary to evaluate taxes and their monetary performance. It enables them to explore the areas and opportunities for improvement for future trades. They can also review their open positions during this time to pay more attention to their earning announcements.
Swing traders should ideally have the same qualities as other stock traders, such as discipline, consistency, confidence, and research skills. They have to make sure that they wake up early every day so they can prepare for daily trading by reading the news, analyzing the information, and following the guidelines. Adopting a routine like this can help traders improve their capabilities and beat the market returns.