One common objection that people have to Swing Trading is that they think that they won't get enough trades to build their account.
Of course, this is nonsense.
If you understand your options and implement the right strategies, you can make more money. But you have to be smart about it.
In this post, I'll give you five ways that you can make more money with Swing Trading.
1. Increase Your Bandwidth: Learn More Trading Systems or Trade More Currency Pairs
If you trade one system and a handful of pairs, then yes…your earning power might be limited. But what if you simply increased the number of opportunities that are available to you?
Instead of just trading 5 currency pairs, try 10…or even 27.
This will give you more trades, without having to learn a new trading method.
Already maxed out on currency pairs?
Then learn another trading strategy.
Ideally, you should find a method that is not similar to your current system. For example, if you are trading a trend following system, you might want to look for a countertrend system or a breakout system.
Regardless of what you choose to do, always be sure to backtest and forward test your new trading method and be sure that you are not doing more harm than good.
Some trading methods don't work well with some currency pairs. So don't assume that adding systems and/or currency pairs will automatically lead to increased profits.
If you don't test your new method, you could actually make things worse.
2. Trade the 4-Hour Charts
When people hear about Swing Trading, they usually assume that you are trading on the daily charts. But I have found that the 4-hour charts offer the best balance of not checking your charts too often, and providing ample opportunities to find good trades.
So if you are Swing Trading the daily and weekly charts, consider adding the 4-hour chart too.
I can usually backtest the complete history of a trading strategy on the 4-hour charts in about 2 hours. This is is pretty quick and a good use of my time.
In live trading, I can usually find about 3 to 5 good trading opportunities a week, on the H4 chart. So if you are struggling to find trades, using the 4-hour chart can be a welcomed addition to your trading.
3. Reduce Your Portfolio Risk
Focusing on making more money is great, but sometimes you can increase your profits by simply losing less. The first place to start is with your risk per trade.
I hope that you are using fixed fractional risk management. In other words, risking the same percentage of your total account on every trade.
If you are, then great! But you may need to scale back your risk per trade.
When you are just starting out, I recommend risking 0.25% per trade. With a little more experience, 1% is usually good.
Risking 2% can work, but only after you have tested it and are comfortable with the ups and downs of that much risk.
Any more than 2% risk per trade is too much, in my opinion.
Once you have your fixed fractional risk under control, it's time to look at your correlation risk. For example, if you are you trading too may pairs that contain the British Pound, you are compounding your risk if the market moves against your positions.
So you may want to create a rule that doesn't let you trade if you have more than 2% risk related to any one currency.
If you do want to trade all of the pairs, then you could also risk less per pair, so you can still fit them all into your total 2% risk…or whatever you think is best for you.
4. Optimize Your Entry
Having a great entry can make your job as a trader so much easier. That's why I believe that the entry is much more important than the exit.
For example, in this chart, would you make more money if you went short at point 1 or 2? Well, the answer is obvious.
Of course, this example is a bit exaggerated, but it illustrates an important point. If your exit was the same on both trades, then point 1 would be much more profitable.
Ask yourself, how often do you enter a trade at a less than ideal entry point? Go back to your trading journal and find out.
In order to optimize your entry, first you need to come up with some ideas on how you could possibly improve. Create a list of about 5 optimizations in the beginning.
Do not overwhelm yourself with too many ideas. Yeah, this can be easy to do.
Then backtest your entry ideas, keeping everything else about your trading system the same. Once you complete a few tests, you will start to see which ideas could work and which ones won't.
Remember to test each idea multiple times. You want to make sure that it's not a fluke 🙂
Also remember that it may not be possible to get a better entry. But it is worth an honest try.
5. Target Higher R Multiples
On the other side of the coin, you could also try to target more profit. Of course, the bigger your profit target, the less likely it is to be to be hit.
So again, your mission is to backtest your ideas, one at a time. Keep track of your results and find out if increasing your profit target might help you make more money per trade.
If you thought that you cannot make enough money swing trading, then I hope that this post has given you some ideas on things that you could possibly test. Just like with anything else in trading, there are no guarantees.
But implementing even just one of these ideas could greatly expand your opportunities.