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 An Overview of Live Swing Trading


After having thoroughly tested your swing trading plan, strategy, and resources, you are now ready to enter the exciting world of live swing trading. Right?
the five components of a swing trading system (with live trading highlighted)
Well, yes and no. Yes, you have done all that is humanly possible to prepare for that first real trade. This is much more than the vast majority of traders have done or will ever do. You are to be congratulated. On the face of it, there really is no reason not to immediately fund your brokerage account and start buying and selling the financial instrument of your choice.

But before you do, a final warning is in order.

Live swing trading is a beast. A beast driven by the vicissitudes of a $200+ trillion global financial market. In the blink of an eye this beast can tear apart your best laid plans, render your foolproof strategy utterly useless, and mercilessly expose how grossly inadequate you and your resources are to the trading task. You may win a few battles now and again, but never a full-out war. This beast must always command your utmost respect.

Bear this is in mind while you begin trading the live markets. And know that armed with your swing trading system, you have a better than average chance of success.

There are no guarantees, of course. But what puts the odds in your favor is the fact that you have approached trading systematically. Most traders do not. They begin with only a vague idea on how they will trade, and then allow their emotions to guide them. Even if they bothered to develop a trading system in the first place, this is entirely forgotten after a winning trade or two. It is no wonder that 95% of all traders fail.

If you want to be among the 5% who do succeed, understand how live trading is just one of five components of a complete swing trading system. It is of course the raison d'être of that system, so it rightfully occupies the central hub. But a hub is not a culmination point. A trading system is not finished simply because you bought a few shares of stock. It just means your system is now truly alive.

The Hub of the Swing Trading System

More than any other component, live trading effects the whole from its unique vantage point. It is, for instance, a more efficient test than either backtesting or paper trading. This is because it conducts tests in real-time with real money. Since each trade comes with a price tag, the trader pays close attention to the man recoiling in horror, with caption "IT'S ALIVE!"results. Much closer than if fake funds were being used. If these become lessons you do not want to forget, duly note and include them in future iterations of your swing trading system.

This implies that live trading is an extremely valuable resource in and of itself. A moment's reflection confirms this to be true. Who would you rather have sitting next to you as you trade, a novice trader or someone with 30 years of trading experience? Unlike the other resources you will employ, this resource grows the more you use it. This is regardless of your actual performance, because losing trades teach you as much as (and maybe more than) winning trades. In no time you will accumulate a deep reservoir of trading knowledge from which you can effortlessly draw upon in the future.

As live trading is effectively your trading strategy in action, it creates a positive feedback loop. On the one hand, any gaps in your strategy document can be filled in by what you learn through live trading. But make it too complete and you run the risk of being paralyzed at the order entry screen. Or worse: you make your selection criteria so restrictive that it becomes virtually impossible to find a tradable trade. On the other hand, leave in too much discretion and your trading may become erratic, undisciplined, and ultimately unprofitable. In the end, you need to strike a balance between the two components. Let your actual trading results be your guide.

Live trading is also your trading plan in action. As you originally developed this plan without trading experience, much of it was written in relative ignorance. But after a few months of trading, you will be much better positioned to revisit this document and replace your speculations with informed opinion. You will have a better idea whether your financial goals are achievable and how your risk and money management style is working out. You will also be better able to assess whether trading fits into your broader goals in life. If you find it is too disruptive a force for your peace of mind, cut your losses short and move on to the next phase of your life. But if you discover what so many others have discovered – that trading can be both enjoyable and profitable – find more time for it. The good things in life should be cultivated.

A final word.

For the swing trader operating without a trading system, all we can do is wish him luck. But when you have a system in place, little luck is needed. Live trading becomes more of a test of character and resolve than a roll of the dice.

Like most new traders, your greatest test will be on the emotional front. Your emotions will rise and fall with your wins and losses, along with the ebb and flow of the markets. This is a dependence you must break. While you cannot smooth out the markets (and nor would you want to: market swings are the key to profits), you can learn to smooth out your reaction to them. It just takes time and effort. And a consistent application of your swing trading system, even if that goes against your 'better' emotional judgment.






    Paper Trading Documentation   |   Live Swing Trading Walk-through


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Last modified: September 14, 2016