Successful Swing traders, how do you get past this ?

Discussion in 'Risk Management' started by zanek, Jun 22, 2010.

  1. zanek


    I'm thinking of switching to Swing trading, as day trading has literally become a black hole of time sucking craziness.

    So the $64 question is, how do successful swing traders guard against drawdowns ?

    Do you just use wider stops (I would guess this is the answer) ?

    What do you do when stocks gap down the next day ? Do you just take the hit either way and close out and keep trading ? Or do you hold to see if the trend resumes ?

    Thanks in advance !
  2. you accept them as part of doing business. you manage risk with smaller size and diversification.
  3. I thought et was riddled and infested with microscalpers making 100k a month.

    ask them for help
  4. And since you don't have to watch every tick, you can take more positions.
  5. Largely wider stops, never really get overly concerned with the natural ebb and flow of the markets on a daily basis.
  6. Gaps are not a problem because in the long run they are like white noise and the P/L from just them averages to zero minus commissions.

    I switched to swing/position trading after I realized I could not compete with collocated bots. I now have 10 times the stops size and the key is to trade several equities with a small percentage of your capital allocated to each one, I use about 0.5% for each. Also, the next important thing is to have a trading method that gives you are many same bar exits as possible so that the number of overnight positions is minimized. This is the key and my trading method does exactly that. Actually, to be fair, it is not a method I have personally developed but it is based on a trading program I have bought.
  7. The 2-4 day swings in the market and equities are not as random as most people would think.

    Price, A/D numbers, TRIN, etc. and their various ratio measurements regularly over swing from the mean creating low risk entry opportunities. In addition one can check group and sector rotating and individual issue strength VS market, sector group, etc.

    All in all, it is a lot of work but one has an opportunity to enter with an edge and still trade frequently.

    Gaps and stops hit come with the territory but if one faces the market in the right direction most of the time and with some diversification the resulting losses are just part of the winning mix.

    FYI: For charting and setups, ratio charts etc I use Trade Station,
    For drilling down to Sector, Group, seasonality and PC ratios I use


  8. At this point just sell some YM and ES futures and walk away...guaranteed money maker in the next 6 months.
  9. dhpar



    rarely the first answer to question on ET is spot on - this is the case.

    also (at least in my case) it makes more sense to scale in/out rather then getting in/out of the whole position at once as with scalping (e.g. on hitting predetermined technical level).
  10. PhiliC


    Stock Day Traders always made up the biggest group of nitwits..... the markets are so choppy and disjointed - you're better off playing golf. But at least your on a better path. Good luck!
    #10     Jun 24, 2010