Ap,
<Of course swing-trading is highly dangerous to beginners. Market swings and their nature is one of the most complicated forms of knowledge. Newbies don't understand the nature of price movement or the charts they produce without a long period of observation and commitment of their own funds. That's why I say it is "advanced".>
One big difference between scalping and swing trading is transaction costs. A much higher portion of the scalper's money goes to the house due to the high trade frequency. This is compounded by the lower average gain in a scalp vs. a swing trade. This is a very high wall for most traders to overcome. Scalpers are also limited by their holding period. Swing traders can play intraday or extend out to several weeks, depending on their disposition and the market environment. This gives them much more time to allow the experience curve to build.
One of my "truisms" is that most traders fail due to a lack of discipline rather than a lack of knowledge. Perhaps experience bridges this concept with knowledge but we both know that many participants never learn from their mistakes. The underlying truth for them is that the markets are not a good arena for their involvement.
<swing-traders must learn how to maximize their gains>
Again I think there is an inaccurate tendency to confuse swing trading with position trading. I believe that controlling losses is more important for a swing trader than maximizing gains. That realm belongs to the position or momentum trader. Swing trading is very price sensitive and carries a lower %win than scalping. Practitioners can impact the gain side more than a scalper but much less than a pure position trader or even a buy and hold investor.
I don't teach that much about "letting my winners run". That's a individual tactical style. I teach single, direct price moves, ie trading the swing. Letting winners run requires sitting through retracements, ie trading more than one swing and being right about their direction on each move. I agree that it is easier for the swing trader to keep their stop losses. The whole process keys off of finding the point that they will be proven wrong before entering the trade and then entering the trade as close as possible to that point.
<Could it be that because you teach swing-trading and understand it so intimately, and have such faith in your abilities, that you have come to believe it's less than terribly difficult to master? Especially the part about maximizing gains?>
No I just rely on the statistics. I have good relationships with the brokerage community. It's clear from those relationships and published statistics on the subject that scalpers have the highest failure rate of any trading strategy. Now why do they fail, when it sounds so simple? This goes back to the discipline aspect. How can you expect most traders to act like well-oiled machines with their trading when they don't exercise that personality in the rest of their lives. IOW they don't manage their rules through their executions. And they don't cut their losses.
<The most important thing for newbie traders to learn is: which of these styles suits their personality? That takes some experience, some actual trading and probably some painful losses, to discover.>
For most of them, the time it takes to gain this experience exceeds the burn rate of their trading accounts. Even with successful traders, it can take years to find their niche.
Alan |
