Successful Swing traders, how do you get past this ?

Yeah, the gap downs are part of the cost of doing business.

If you've been a daytrader, you've really got to watch out for random noise...it can really fool you. I chart heavily with candles, and the look of the candle isn't really finished forming until right before closing time. So to keep from being fooled, I try to only trade very late in the day. Less chance of being fooled and ideally, I'm right, so I get way more gap ups than gap downs.

I taper in and taper out of positions (I call it "early money" and "late money"), so using stops isn't that important to me so I set them very wide. Since I can't watch things close all the time, I do set sell orders that trigger when I get a nice percentage return.

I trade highly leveraged ETFs because I find that most of the stocks move like the markets move anyway, and I like the leverage. Fact is...if you're right about things, the leverage should get you rich quicker. If you're wrong more often than you're right, you shouldn't be doing it.

I am always on the lookout for stocks that do NOT move with a strong correlation with the overall market for those times when the market is transitioning. If you guys know of any, throw some ticker symbols my way.

SM
 
Quote from Free Thinker:

you accept them as part of doing business. you manage risk with smaller size and diversification.
More...

Bingo! Smaller lots, more pips/ticks/cents.......

Larger timeframes and stronger trend pattern set-ups
 
Serious gaps can be from earnings, so if your going to swing trade, try not to take a stock that has earnings the next day or so because you might find yourself up a creek. I do get nervous holding into earnings, but its also kind of exciting. Like others have said its just part of the business.
 
Phase 1

Daytrading

I failed as a daytrader and the reason for it was not in the following list:

money management
discipline
leverage
understanding of charts

It was actually noise. Long stopped, short stopped, long stopped, in the end even with price going nowhere. This so called chop kills, death by a thousand stops, wasted commission, wasted time, glued to screen thinking you can understand the whipsaws. In short, I had it, but not with trading with daytrading! I'm not saying daytrading is not possible, I just could not do it, period.

Phase 2

Welcome to swing trading and never look back. A world with much less noise!

First the obvious, stops are much bigger, so are targets, size is much smaller.

Typical question ?

How to avoid gaps against you? You don't, decent money management, several trades at once, eventually these gaps work in your favor and end up balancing out. Simple rule by spreading out your bets and dividing your size these gaps won't hurt you badly, similar to getting stopped repeatedly in daytrading, except less times and way less size and voila problem solved.
Remember that there is a 50% chance that the gap moves in your favor. The issue here is to survive the ones against you.

Watch out for earnings, huge gap potential, avoid if possible.

Tip, if you prefer less positions, bigger size, try indices or sector ETFs, gaps in those are in comparison way smaller than equities.

Important note not a guru but making a dime.
 
I prefer trading earnings after hours...when the results have been declared. At that time you are sure what you are diving in, if the results and guidance is not good wait to enter when the price has been battered down. Mostly I don't hold it for the next day...earnings are traded in that 1 hour only. This has worked so far....but like all risks...this isn't different.

LT
 
In general:

Day-trading is for people with intense focus who can make quick decisions and have fast reaction skills. Control freaks seem to do well.

Swing trading is for people who can let go, who can take a mental beating. Its for people who can spot a general swing but not get shaken out by random moves or noise. In swing trading its not about focus, but watching it out of the corner of your eye.

In day-trading you can say - I nailed it!

In swing trading you say - I survived it and somehow made money.
 
Quote from indexer:

In general:

Day-trading is for people with intense focus who can make quick decisions and have fast reaction skills. Control freaks seem to do well.

Swing trading is for people who can let go, who can take a mental beating. Its for people who can spot a general swing but not get shaken out by random moves or noise. In swing trading its not about focus, but watching it out of the corner of your eye.

In day-trading you can say - I nailed it!

In swing trading you say - I survived it and somehow made money.
More...

Very true.
 
To objective, someone needs to list all the disadvantages of swing trading also.


Quote from ES.Dreamer:

Phase 1

Daytrading

I failed as a daytrader and the reason for it was not in the following list:

money management
discipline
leverage
understanding of charts

It was actually noise. Long stopped, short stopped, long stopped, in the end even with price going nowhere. This so called chop kills, death by a thousand stops, wasted commission, wasted time, glued to screen thinking you can understand the whipsaws. In short, I had it, but not with trading with daytrading! I'm not saying daytrading is not possible, I just could not do it, period.

Phase 2

Welcome to swing trading and never look back. A world with much less noise!

First the obvious, stops are much bigger, so are targets, size is much smaller.

Typical question ?

How to avoid gaps against you? You don't, decent money management, several trades at once, eventually these gaps work in your favor and end up balancing out. Simple rule by spreading out your bets and dividing your size these gaps won't hurt you badly, similar to getting stopped repeatedly in daytrading, except less times and way less size and voila problem solved.
Remember that there is a 50% chance that the gap moves in your favor. The issue here is to survive the ones against you.

Watch out for earnings, huge gap potential, avoid if possible.

Tip, if you prefer less positions, bigger size, try indices or sector ETFs, gaps in those are in comparison way smaller than equities.

Important note not a guru but making a dime.
More...
 
Quote from jajuanm2:

To objective, someone needs to list all the disadvantages of swing trading also.
More...

Negatives:

Less exciting

Not as good for the ego - you don't nail it, you muddle across the finish line - half embarrassed, but glad you made it.

Too much free time on your hands to do as a full time job. The closer you watch it, the worse you do.

You carry risk over night.

You actually have to have some talent for predicting price direction. No more free lunch due to insider structural setups or having better equipment.


Positive:

Swing trader is a more respectable name than day-trader - ha.

You can easily do this while working a full time job.

High Frequency Trading (computers) seem to be destroying day-trading. I think it would be much harder for a computer to swing trade because of the increased time exposure in which anything can happen. Plus, what advantage would a computer have? Quicker entries and exits are not really an advantage.

You are in-sync with the changes in the market. HFT is your friend because it tightens the spread, increases liquidity and lowers your cost.

Lower overall transaction costs.
 
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