Swing trading strategies could be the key to day trading
Day trading can seem so alluring. For day traders, you go to “work” every day by trading on the stock market and building up your account balance. Damn, this is not work; it’s just the good old days!
And if you can make, say, 1% profit per day on your account through day trading, think about the potential growth of the account over time.
But as anyone who has tried day trading can tell you, it is definitely not that easy. There is a difficult and expensive learning curve. For many people, just when they think they are starting to get on with it, a big loss day comes along and reminds them that they might not be good at day trading.
And if you talk to people who have tried day trading, it’s hard to find one who has really made a substantial profit for an extended period of time. It’s almost like trying to find a unicorn.
There could be a reason that day trading is so difficult. According to Eric Ferguson, owner of the Mindful Trader Stock Selection Service, âThere may not be a lot of statistically significant advantages available to day traders. “
Ferguson, a Stanford graduate, spent several years researching stock price data. He took a quantitative approach to find pricing patterns and market advantages. His research showed that there weren’t many robust statistical advantages available over an intraday period, which day traders typically focus on.
Ferguson says, âFrom a statistical perspective based on technical trading, I have not found any significant benefit for day trading through my research.
He did, however, find a few basic swing trading strategies that seem to have an exciting pre-tested advantage. Swing trades are those that last for a few days or weeks, as opposed to day trades which usually last for a few hours or minutes.
âIt was much easier to find swing trading strategies that could have generated strong net profits when back tested. If a person changes from day trading to swing trading, there might be a better chance of finding trading strategies that could generate sustained profitability over time.
Many people choose day trading in the first place because of its outrageous account growth potential. That 1% per day, with the makeup, could turn into something crazy. But if you look at your own background and don’t see anything that looks like this type of growth, or if you realize that you might not be one of those rare unicorns who are really good at day trading, perhaps moving to more realistic expectations. might help.
And after all, just because you are swing trading, it certainly doesn’t mean that your profit potential is totally destroyed. It’s not like you necessarily settle for something as modest as, say, the annual return of the S&P 500. According to Ferguson, the back-tested return of his trading strategies at Mindful Trader was north of 100. % per year. He is quick to point out that back testing has its limits, but nonetheless, it’s probably an alternative for struggling day traders to explore.
If you are starting to think that the promise of wealth from day trading might be more exaggerated than the reality, then you might want to explore the idea of ââswing trading. And as you take that route, it might be a good idea to check out Ferguson’s stock picking department, where they teach all of their pre-tested trade setups. Making trades where history shows the odds could be in your favor is like hitting the Easy button.
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