I am swing trading but shares not derivatives. I basically buy shares that r over valued - market darlings when they dip and cash out quick because that's all I know how to do
Swing trading is usually done on margin. You buy or sell an instrument and place the stop loss above the swing high or below the swing low depending on whether you re long or short, then you try to trade the swing. Thats where the name 'swing' comes from. The swing is the zig zagging or stepping of the market, and you're trying to profit from the juice of the swing, most commonly around a risk of 1 for 2 or 3 reward. This type of trading involves many losses and few winners, and its the skew of ratio between the risk reward that allows a successful trader to stay in the game and to keep their risk capital well managed. Nowadays though I do see a lot of swing traders inverting the risk reward ratio to take small profits against a larger risk. This isnt really swing trading, its scalping, but seems more common these days.
Some more home truths before I give you any advice. You mentioned shares being more accessible than starting a business because business takes time, start up capital and an idea etc. Well if you want to be successful at trading then it has to become a business. It will take time, an idea and startup capital. You have to spend a very long time finding an idea (your trade plan/strategy/edge), you will have to spend more time at the screen than you would a normal job, babysitting trades, scanning and waiting for entry price action to present itself, and you most likely will become addicted to it (I did) because it creates the same dopamine high as gambling does. However, done properly you will be in front of the screen 8-12 hours a day, researching, planning, testing and journalling trades. It will also cost a lot of money to get running. It will be a full time business IF you want to make money from it.
The only 2 traders I ever met that were successful (one of the few traders who weren't afraid to show me their equity curve) and knew what they were doing were a father and son team who I cold called one day to try and get some business, they weren't interested in becoming a client and told me they actually had high net investors on top of their own capital that they were trading. Despite being not interested they were very pleasant and i kept in contact with them to get periodical market outlooks etc. Eventually they invited me to go visit their office, (up until this point I had no idea how good they actually were because I hadn't met them or seen any proof, but I went along to network).
They traded from home but had converted an old barn on their land into an office. The office was bigger than I thought it would be, had about 6 or 7 computers for the 2 of them, printers, and phones, and as well as the usual trading monitor setup they had a huge lcd on the wall which had about 10 other markets showing, which I assume they were using to monitor correlations and babysitting day trades. I spent the day there watching what they were doing and discussing things.
Most of their day was spent not actually trading, (they were swing and day trading), but crunching numbers, back testing huge amounts of data they had collected, trying out new ideas and methods, and tweaking parameters of their trading model to see if there was anyway they could create more profit from what they were doing. They were both mathematically minded, had backgrounds in finance and clearly very intelligent. They eventually showed me their track record. They had periods where they took 10 to 15 losses in a row, and periods where they were down a month, but overall they averaged about 4% a month over 6 years, which they told me was the product of about 15,000 trades. These guys ran a tight ship and it was a breath of fresh air seeing the amount of focus and dedication they had put in pay off, compared to the jock/idiot culture of the office I worked in where it was easier for people to rip off the client and get out the office early to get drunk and do cocaine rather than figure out how the markets actually worked.
So what I am getting at is basically. Don't be naive to think you can make a living easily from this, I know I was. Its probably easier to become a doctor. There are average joes out there who are successful at trading, but that's only because they are not using a stop loss or haven't been in the market long enough to experience a black swan event. What can go wrong eventually will go wrong and when that happens they will concentrate on earning their money from pushing their bogus trading courses.
If i could go back 10 years I would have saved my capital and got into the property game. Anyhow, if you are a macro economics geek, get turned on by numbers and stats then trading might be for you.
My advice for trading is as follows and applies to trading stocks, indices, shares, commodities, forex (it doesnt apply to penny stocks and illiquid assets, those things are a crap shoot imo):
- Learn about inter market relationships. Why does money from move one asset class to another and when is this most likely to happen. I.e why does money flow out of stocks/shares and risk assets into bonds and other safe havens at certain times.
- Learn to read the order book and volume. What actually makes price move up and down.
- Learn about macro economics, and learn to read between the lines, understand how a positive outcome can mean a negative effect on the market due to context.
- Learn about the art of price action and its discretional nature. Again you have to learn to read between the lines with price action. Supply and demand is a good place to start and basic candlestick patterns. Just stick to a few like engulfing, hammer/hanging man etc. My advice is to stay away from crazy chart patterns. But be aware of the basic ones like flags, head and shoulders, double bottoms and tops. Always look for clean price action, not messy. Try not to clog your chart with indicators. A coupe moving averages will do.
- Find a way that is mechanical as possible of defining the trend.
-Don't take trading advice/calls from other traders.
-Learn about psychology. This is probably the most important part believe it or not. All the above is useless if you cant be disciplined and cant control yourself under pressure.
Thats all i can think of for now.
