Swing Trading Strategies – Stop Micromanaging Your Swing Trades

Swing Trading Strategies – Stop Micromanaging Your Swing Trades

I am the wisest man alive, for I know one thing, and that is that I know not to micro-manage my part-time trading positions. Okay, if you are asking yourself why I would take liberty with a famous Socrates quote, it’s because of this fact:

Not micromanaging my trades is the one thing I wish I knew before I started part-time trading.

In the early stages of my trading career, the bulk of my trading focus was on the entry. Like many traders, I could recite all the swing trading strategies I knew by heart, including chart patterns, entry triggers and even the expected reward to risk for various swing trading strategies. I was good at identifying and entering setups, which lead to a false sense of trading security because I was not making any money. It baffled me that I could acquire all of this trading knowledge, yet could not translate it into profits.

What I did not understand is that winning traders make their money by properly managing the trade to the exit, not on the beauty of the entry. You don’t get any points, or in our case dollars, from entering a textbook setup if you can’t get to the finish line. This is where the micromanaging trading leak gets most traders.

Examples of Micromanaging Trades

Traders micromanage their positions in many different ways that all relate to changing up the initial trading plan on entry. Here are a few examples that I’m willing to bet have plagued you at one time or another.

1. You enter a trade and the stock moves a few points right on entry. You decide to move your stop up to entry right away to make sure you don’t take a loss. The stock pulls back, hits your stop without hitting your original stop before making its run to the target level. What would have been a winning trade turns into a scratch trade.
2. Your target is 10 points away. Once it moves up 6 points you take your profits. The stock hits your target which would have increased your profits by 40 percent.
3. Three days after your entry your stock has not moved. You get antsy and your wandering eye finds another attractive stock so you exit your trade and enter the other stock. Your stock then starts to run and hits your target.
4. After basing your trade on the daily chart, you wander over to Twitter where everybody is talking about a reversal candle on the 5 minute chart. This scared you out of the trade and of course it ends up hitting your target. On review, you realize the 5 minute candle was irrelevant to the setup on the dailies.

Why We Micromanage Trades

I could go on with tons examples of micromanaging trades. Like the above examples, all micromanaging mistakes related to these 3 things:

1. Moving stops up
2. Moving targets down
3. Mixing time-frames

Why do we make these mistakes?

Micromanaging trades is a result of our fear of volatility, which arises because we are afraid of giving up profits and taking losses.

How do we mistakingly combat this fear? By trying to control the trade. That’s why we watch every single tick. It makes us feel like we are in control of the trade. When our stock jumps halfway to our target, we can’t make it move those final few points. However, we take control by exiting the trade and booking that small profit.

Now you know that micromanaging positions is an issue for traders. However, even armed with this knowledge, not micromanaging your trades will be a challenge. Fear, greed and control are such powerful psychological forces that these emotions will overtake your rational knowledge and cause you to abandon your swing trading strategies if you do not take steps to combat them.

The Solution 

Imagine how at peace your mind would be if you entered a position with a target and stop in place, then go to sleep and not think about your trade until either your target or stop was hit. Oh the things you could do. You could get more work done, play with your kids and even eat on a full appetite!

Sound like a dream, doesn’t it? Well, it isn’t and you can have it all. It’s what part-time trading is all about. You put on your trade and . . .

Set it and forget it.

I know it’s hard to do, but remember, you’ve done the hard work before the trade. Thomas Edison said, “genius is one percent inspiration and ninety percent perspiration.” Before you even enter the trade you have built routines, analyzed the market and sectors, built a momentum watchlist, created focus lists and taken every stock within that list and identified entry, target and stop levels.  As you can see, the hard work is done. Now take some inspiration and just let it play out.

Set it and forget it.