How to become a swing trader

Is becoming a swing trader right for me?

The first step to choosing a career is to make sure you are actually willing to commit to pursuing the career. You don’t want to waste your time doing something you don’t want to do. If you’re new here, you should read about:

Overview
What do swing traders do?

Still unsure if becoming a swing trader is the right career path? to find out if this career is right for you. Perhaps you are well-suited to become a swing trader or another similar career!

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How to become a Swing Trader

The requirements for becoming a swing trader can vary widely, as the field is accessible to individuals with diverse backgrounds. However, here are some common educational paths and skills that can be beneficial:

High School Diploma or Equivalent
At a minimum, a high school diploma or General Education Development (GED) certificate is often required. Many traders begin their journey without any formal higher education, especially if they are self-taught.

Bachelor's Degree
While not always mandatory, having a bachelor's degree can enhance your understanding of financial markets. Degrees in finance, economics, business administration, or accounting are particularly relevant, as they provide a solid foundation in financial principles and analytical skills.

Self-Education
Many successful swing traders invest time in self-education by reading books, taking online courses, and following financial news and market analysis. Familiarizing yourself with technical analysis (chart patterns, indicators, trends), basics of fundamental analysis, trading strategies, and market psychology is crucial.

Choose a Market and Instrument
Decide whether you’ll focus on stocks, options, forex, cryptocurrencies, or commodities, as each market has its unique characteristics and requires tailored strategies.

Practise with Paper Trading
Use a simulated trading account (offered by most brokerages) to practise trading without risking real money. This allows you to test strategies, understand market dynamics, and gain confidence in your decision-making. Seek out an established swing trader to mentor you.

Develop a Trading Strategy
Create a specific swing trading plan that includes entry and exit points, risk management strategies, and rules for position sizing. Many swing traders use strategies based on technical indicators like moving averages, MACD (moving average convergence / divergence, a technical indicator to help investors identify entry points for buying or selling), RSI (relative strength index, a momentum indicator that measures the magnitude of recent price changes), or support and resistance levels.

Open a Brokerage Account
Choose a reputable brokerage with low fees, a reliable platform, and the necessary tools (like charting software and indicators) for your chosen market. Make sure it fits your needs, such as offering options or margin trading if that’s part of your strategy.

Start Small
When ready to trade with real money, start with a small amount to limit risk while you gain real trading experience. Monitor your trades closely and review outcomes to learn from mistakes.

Focus on Risk Management
Set clear rules for stop-loss and take-profit levels to protect your capital. Many swing traders limit risk on each trade to a small percentage of their account balance, usually 1-2%, to avoid large losses.

Stay Informed and Adapt
Markets change, so staying updated on economic news, earnings reports, and market sentiment is important. Adapt your strategy as needed and keep refining it based on what’s working or not.

Review and Refine
Regularly review your trades, noting successes and areas for improvement. Many traders keep a trading journal to track their strategies, decisions, and emotions, which can help them refine their approach over time.

Continuous Learning
Markets evolve, and so do trading strategies. Stay engaged in learning through advanced courses, trading communities, and by following market analysts to deepen your skills and knowledge.

Certifications
There are several voluntary certifications that can enhance a swing trader's knowledge and credibility in the field. While not specifically designed for swing trading, they cover essential concepts in technical analysis, risk management, and financial markets that are highly relevant. Here are some notable certifications:

  • Chartered Market Technician (CMT) – Offered by the CMT Association, this certification focuses on technical analysis, covering various charting techniques, indicators, and market trends. It’s valuable for swing traders who rely heavily on technical analysis to make trading decisions.
  • Financial Risk Manager (FRM) – This certification, offered by the Global Association of Risk Professionals (GARP), is geared toward risk management and covers topics such as market risk, credit risk, and operational risk. Understanding risk management is crucial for swing traders to protect their capital and manage trades effectively.
  • Certified Financial Technician (CFTe) – Similar to the CMT, the CFTe certification focuses on technical analysis and trading strategies. It provides a solid foundation for understanding market behavior and technical indicators.
  • Chartered Financial Analyst (CFA) – Although more comprehensive and focused on investment analysis and portfolio management, the CFA certification, administered by the International Federation of Technical Analysts (IFTA), includes important concepts like valuation, financial reporting, and ethical standards, which can be beneficial for swing traders.
  • Certified Financial Planner (CFP) – Though more focused on financial planning, the CFP program, administered by the Certified Financial Planner Board of Standards, provides a broad understanding of investment strategies.
  • Online Trading Courses and Certifications – Various online platforms offer trading courses that provide certificates upon completion. While these may not carry the same weight as the aforementioned certifications, they can still provide valuable knowledge and skills.

Professional Organizations
In addition to the certifying bodies referenced above in the Certifications section, there are other professional organizations and associations that cater to swing traders and traders in general. These entities provide resources, networking opportunities, education, and industry insights. Here are some prominent ones:

  • American Association of Individual Investors (AAII) – AAII is a non-profit organization that provides education, research, and tools for individual investors, including swing traders. It offers investment newsletters, seminars, and online resources.
  • Online Trading Academy – This organization provides training and education for traders, including those interested in swing trading.
  • Investors Underground – This is a trading community and education platform that focuses on various trading styles, including swing trading. Members can access educational resources, chat rooms, and mentoring.
  • Options Industry Council (OIC) – Although primarily focused on options trading, OIC offers resources and education that can be beneficial for swing traders who incorporate options into their strategies.
  • Society of Technical Analysts (STA) – Based in the UK, the STA provides support for those interested in technical analysis, which is essential for many swing traders.