The Best Trading System is Well Thought Out and Personalized:
SwingTradeSystems.com is an educational website for traders looking to establish their own personalized trading system characterized by consistent profits. There are five main components that are covered in detail as you work your way through the site: Trading Plans, Trading Strategies, Trading Resources, Backtesting & Paper Trading, and Live Trading.
The novice trader will be given the information and tools required to create their initial trading plan and strategy, realize the trading resources necessary to succeed, and discover the importance of backtesting and paper trading. Once their trading strategy has been tested and refined, it’s time for the ultimate test: Live Trading. This is the most exciting part of the entire process, but it’s essential you don’t rush through the “foundational” steps. Jumping into the markets too early is one of the most common mistakes new traders make.
The Structure of SwingTradeSystems.com – 5 Critical Categories:
1.) Trading Plan: Your trading plan covers various topics, such as your reasons for trading in the first place. What are your profit goals? Will you be a part-time or full-time trader? What is your appetite for risk? What is your tradable universe – will you be trading U.S. stocks under $10, over $10, or taking part in something completely different? These are all questions that need to be touched on, at a minimum, within your trading plan. [Learn More About Trading Plans]
2.) Trading Strategy: Your trading strategy is an attempt to stack the odds in your favor. Using the casino analogy, “the house” always wins due to this simple fact – the risk is always better than 50/50. It may seem early on in the process to be developing your strategy as a new trader, but keep in mind that it will be refined over time as you gain experience and knowledge. To speak generally, your trading strategy will cover exactly what to trade, when to trade, and how to trade. [Learn More About Trading Strategies]
Plan + Strategy + Resources + Testing = LIVE TRADING
3.) Trading Resources: Your trading system is only as good as the resources used to build and execute it. These resources include your chosen brokerage that will be used to buy and sell shares, charting software that will be used to scan for specific trends and perform technical analysis, watch lists thats allow you to track potential future trades, and more. Even your written-down trading plan and strategy are resources that should be reviewed and polished on an ongoing basis. [Learn More About Trading Resources]
4.) Backtesting & Paper Trading: Testing your swing trading system is a crucial task that will prove the effectiveness of it. In this phase, you may find that your plan/strategy/resources need to be adjusted to better reflect the realities of the market. In the worst case scenario, you may come to the realization that your system does not work at all and have to start over – but you can take comfort in the fact that no money was lost in the markets over it since it has yet to be implemented. [Learn More About Testing]
5.) Live Trading: Live Trading is the step every trader is working so hard to reach, and to be honest, the vast majority of traders take it upon themselves to jump right into it without a plan, strategy, or accompanying resources – Big Mistake. The culmination of your hard work is here, but the temptation to jump straight into live trading without such preparations must be resisted at all costs. Without an effective system, traders simply cannot expect to be profitable in the long run. [Learn More About Live Trading]
Q&A With John Davies of SwingTradeSystems.com:
Matt Thomas: How much time does it typically take the average person to go from “developing a plan” to “live swing trading” their own system successfully?
John Davies: About a month. But this is a misleading figure if you don’t account for how much someone knows about trading before they choose to develop a complete trading system. Broadly speaking, people fall into two groups.
Those in the first group have trading experience, but have not achieved their desired level of profitability. They are likely trading at a loss before they decide to try something new. This is a large group because most new traders can’t wait to start trading and jump right into the markets with very little preparation. It takes them weeks, months – even years – before they realize what they’re doing doesn’t work and set out to find a better way.
Far fewer are those people with no trading experience, but who understand the importance of trading in a systematic fashion. Being completely new to the scene, it takes them much longer to put together a successful trading system than the former group. We’re talking weeks to months as opposed to just days and weeks the more experienced trader needs.
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Matt Thomas: How important would you consider mindset/psychology to be when it comes to trading?
John Davies: Very important. It’s often said that there are only two emotions in the markets: fear and greed. The average trader, who is not very successful, trades exactly with these two emotions at every turn: he stays in too long during upswings for fear of missing out on further gains and propels himself by greed; he sits on the sidelines during downswings afraid of losses, only to greedily buy too late after the market has already completed its rebound. These emotions can and must be kept in check. Otherwise, you’re flirting with disaster.
I liken the proper trading mindset to what Freudian psychoanalysts call ‘Ego psychology.’ Freud had this theory that our base emotions and desires, what he called the ‘Id,’ could be overridden by the ‘Ego.’ This conscious part of ourselves can be strengthened and trained to suppress the Id so that it does not interfere with our rational decision-making processes. Successful traders do this every time they refuse to allow their trading decisions to be dictated by emotions and instead follow their trading systems with utmost discipline.
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Matt Thomas: Why should traders not opt for automated trading systems (software) when emotions can have such a negative impact on an individual’s trading?
John Davies: Automated trading systems do take emotions out of trading decisions. At least in terms of the exact timing of trades. This is where many traders stumble. If they cannot otherwise control their emotions, trading software may be the way to go for them.
But unless you simply turn these systems on and go about the rest of your life without ever looking at the results, your emotions are never completely removed from the decision-making process. I know many automated traders who, when they get the chance, hover over their computers watching their systems at work. They may seem like passive observers. But they’ll frequently take their systems off-line and manually intervene on the next trade, or else make adjustments to the programming code, whenever they get results they’re unhappy with. Far too often they base these actions on the same emotions we all need to control as traders. With discretionary swing trading, you get more practice at developing this skill than with automated trading.
Trading by automated software doesn’t completely free you from responsibility for your trading. You, after all, chose or developed that particular piece of software. In other words, you are ultimately accountable for your own trading, whether it’s done by you hitting the ‘submit’ button on your broker’s order entry screen, or if you leave it to an automated script.
In my opinion, automated trading is useful in special circumstances, like when you’re away from the markets for an extended period of time yet still wish to make a few trades. But I do not think it completely solves the problem of emotion-based trading.
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Matt Thomas: Have you ever personally tried any stock trading newsletters/subscription services, and do you think they have any value?
John Davies: Every day tons of newsletters flood my email box and I am happy to receive them. Much of it is near worthless, but I don’t unsubscribe unless it’s clearly spam. I end up reading much of it because it gives me a sense of market sentiment. I don’t frequent trading chat rooms and forums, so these newsletters (and TV financial news channels) give me what I need.
I should add that what I get is all free – I’ve never paid for a subscription service. The paid ones I’ve considered in the past were more geared toward day-trading, which I do not do, so I passed. At any rate, I’m pretty disciplined with my own trading, so I’m unlikely to be swayed by what others have to say. If a trading signal doesn’t appear in my trading system, I don’t trade it. It’s as simple as that.
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Matt Thomas: Would you ever recommend traders take a “foreign” trading system and attempt to modify it to fit their risk tolerance, preference, and lifestyle?
John Davies: I would and I have, many times. I actually think this is a great idea. There is no need to re-invent the wheel. Look to what other successful traders have done. They post their strategies out there for the world to see for a variety of reasons. Examine these strategies, test them, tweak them, and make them your own.
The only thing I strenuously recommend not doing is adopting a foreign trading system wholesale, without personalizing it in some fashion. It is crucial to gain a sense of ownership. By trading with another’s system, it will always be just that: Other. When it fails to work, you’ll blame it, not yourself. You’ll then go off looking for another rather than focusing on your own best resource: yourself. You have the ability to succeed on your own terms. This comes from hard work and dedication. The type of dedication and commitment that you can only have if you are building something for yourself.
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Matt Thomas: If you had to choose the three top tools every swing trader needs, what would they be (brokerages, charting software, etc.)?
John Davies: Early on, I used a broker who had this order entry screen that was not at all intuitive. I made more than my fair share of errors just entering my orders. It cost me dearly. I’m sure things have improved immensely since then – I think it was one of the first online brokers, this was back in the late 90’s – but this should never happen. As a trader, you have enough to worry about. Entering orders should be second nature. It should be seamlessly woven into your actions without a second thought. The lesson here is to find a broker that you are totally comfortable with, not one that you struggle against.
Most swing traders are visual by nature and today’s charting software is top-notch. Even those that are freely available are fully customizable. You can specify the way prices will display, the colors you want, the exact time frames you are interested in. It used to be one size fits all. But today you can get whatever you want. I can’t imagine trading without this visual aid.
Arguably, the most important trading tool is one that every trader draws upon, but usually fails to realize. I’m talking about the trader’s personal knowledge of trading. This can be developed in order to gain a competitive advantage over other traders. You are, after all, ultimately trading against other traders. Most people neglect their trading education after they begin trading. But it’s crucial to continuously learn while you trade, since market conditions are constantly changing.
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Matt Thomas: Do you think swing trading is the best trading method? If so, why? If not, why?
John Davies: I think of swing trading more as a style rather than a method, in contrast to day-trading, momentum trading, etc. I’m tempted to say that it is the best, as evident by the fact that the majority of traders trade with a 1-4 day time horizon, which qualifies them as swing traders. There’s also evidence that swing trading is the most profitable. Certainly more so than day-trading where they say there’s a 95% failure rate in the first year.
The better argument is that swing trading is a better ‘fit’ for most traders. The time horizon is about right psychologically for most people. So is the frequency of trades. Trading dozens of times a day is just too hectic for most, while buying and selling stock once a year for your retirement account isn’t really active trading. So in a sense swing trading is the ‘best’ style out there if we’re talking big picture. Of course, everybody needs to decide for themselves what’s best for them.
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Matt Thomas: What are your thoughts on paper trading? And once a trader is ready to commit real money to trading, what’s the minimum portfolio value you think is necessary?
John Davies: I would never recommend to anyone to commit real money to trading without fully paper trading their system. It not only shakes out the technical bugs you may have missed when writing up your specific trading rules. It also operates as a much wider test. For instance, do all of your trading resources work together? It’s unlikely that your broker will have all you need, so you’re likely to have separate accounts with stock screening and charting websites. One thing I learned during paper trading was how my computer wasn’t capable of processing all the demands I was placing on it. It would crash each time I launched a new chart while having a Level II quote screen open in another window. I ended up having to learn how to coordinate my trading between two computers. Simulating this through paper trading greatly eased my transition to real trading.
As to your second question, it really depends on what the trader is hoping to achieve. Most traders I know have flirted with the idea of trading for a living. If that means $50,000 to you, and you can turn over an enviable 10% rate of return, you’ll need a half a million dollars in your trading account. Needless to say, few people have such funds available.
At the lower end, I suppose an absolute minimum portfolio value would be dictated by the commissions your broker imposes on your trades. Obviously, if you have limited funds, you’ll likely need to go with a deep discount broker. Paying $5 a trade places far less strain on a $2000 account than does paying $20.
I personally recommend holding off from trading until you have at least $5000. Much better $10,000. That way, commissions account for just a small portion of your potential position sizes.
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Matt Thomas: Do you think success can be achieved on Wall Street without developing a trade plan?
John Davies: In the short-term, certainly. Just as a gambler can get on a winning streak, a trader can get lucky and make a series of good trades. But just as the casino’s edge eventually kicks in the longer the gambler places bets, the trader who trades by whim will lose just as surely.
For long-term success, traders must trade systematically. That means developing a complete trading system, which I teach is composed of 5 parts: a trading plan, a trading strategy, trading resources, backtesting/paper trading, and live trading. This is what gives you the house edge over Wall Street. And that’s all you need, a slight edge, something greater than 50-50, to grind out consistent profits.
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Matt Thomas: Where does “technical analysis” rank in importance for swing traders? And what are the best resources to learn more about the topic?
John Davies: It’s a safe bet that of the two main types of analysis, more swing traders use technical rather than fundamental analysis. Both learning curves are steep, but technical analysis is less so. Of course, no one trades purely one way or the other. But given that you need to know something about finance and economic theory to make sense of how a company’s underlying fundamentals are likely to affect its price in today’s economy, swing traders tend to make less use of it. The rationale is that the fundamentals are already discounted in the technical data they see on their charts.
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Matt Thomas: How can readers benefit most from your site’s content? Why don’t you have anything to sell?
John Davies: The site has one objective: to help traders develop their own trading system. This includes helping them think through what should go into their trading plan and trading strategy, how and what trading resources they should gather up, how and why they should conduct backtesting and paper trading, and what they should expect when they begin to live trade. Each of these 5 components is discussed separately under its own menu item on the site, along with examples for each. Readers can move along these items from left to right, or in any way they choose since the 5 components all work together.
That was and still remains the basic layout of the site. Since then, many other pages have been added and are still being added.
SwingTradeSystems.com is purely an educational site and will remain so. It was originally written with the novice trader in mind, with the hope that he or she does not make the same mistakes so many traders make when first starting out.
The Wrap-Up on SwingTradeSystems.com:
The owners of SwingTradeSystems.com, Dr. William J. Urban and John Davies, have absolutely no products to sell – their goal is to educate new traders on the process and benefits of developing their own profitable trading systems. Everybody’s availability, preferences, and portfolio values are different, just to name a few factors, making a personalized strategy the safest, most-effective approach to success on Wall Street. In the end, newsletters can be outstanding resources for traders, but it’s of the utmost importance to make sure your system is your own and one that works for you.
|Discover the Power of a Personalized Trading System – Consistent Profits Are Possible on Wall Street|
Written by Matt Thomas
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- Stock Trading 101: Taking Profits Before They Turn Into Losses
- Why Invest in Your Own Education? Your Future Success Depends on It
- What is Finviz Elite? Powerful Real Time Charting Software
This seems confusing to me I have absolutely no experience in trading. Is this gambling or is it a mathematical equation where you will always come out on top but like matched betting? it seems really interesting but just need to know what the risks are.
Swing trading is one of the most lucrative ways to generate extra income or build a nest egg. Although you have to have a strategy to make a consistent income, getting the proper steps will ensure a level of success. I trade for the long term in my IRA account, but in my brokerage account I swing trade to make quick profits. Thanks for the information, I will give the Swing Trade Systems platform a try.
This all looks very good! The five categories are essential to beginning traders. From what I have seen, the online stock world is getting flooded with a bunch of crap nowadays. I like the part you said about it being free that is very good. Especially for this type of industry gaining trust is very important.
I completely agree with the 5 categories. I am a binary options trader, I never did any trading before that and because binary options looked pretty easy to me.. you know for an educated person .. I jumped right to it and paid the price ..just at that moment, I started to get the required knowledge and since then all is being ok … most of the time .
Anyway, but looking at the 5 categories … How can you see them applied to Binary Options Trading?
I’m afraid I know little about options trading, so I can’t directly answer your question. So I can only turn it around back to you and ask what it is you ‘completely agree with’ when it comes to these 5 categories? They must have struck a cord with you somehow.
Do they reflect what it is you are doing now that has made you mostly successful in your trading? You must be trading with a specific set of rules in mind. Is this strategy written down? You must be entering trades through your computer, or by phone, after you’ve looked a charts which you’ve screen out from others. Have you made a list of these resources and a set of possibly better alternatives to try out at a later date? You said you ‘jumped right to it and paid the price.’ Knowing this, are you planning to test any new approaches you come up with in the future?
You must also be trading within certain constraints, like how much you are willing to risk, and understand that trading options appeals to you because of X and Y. Are these formally written down in a trading plan so you can review them against your actual results, and make changes if necessary?
I’d argue that these 5 categories are characterized broadly enough so they could benefit any type of trader, not just the trader of stocks. Thinking through them is a conceptual exercise, and a crucial one to do if you want to be a success. It’s a way to conceptualize the entire trading process, from A to Z.
My advice to you is, take a brief pause in your trading and do some thinking. About what works and what doesn’t. Then write it down. This process will reveal further weaknesses, and new ways of doing things, which you should then test out before you commit real money.
Very interesting article.
I am also have a huge interest in trading and at the moment I am involved in the foreign exchange market.
Do you think that trading stocks is a lot different from trading currencies?
How can Elite Swing Trading teach me to trade stocks and how much paper trading do you think is required when starting trading?
Hi Mihai. Trading stocks and currencies can be somewhat similar, but there are some major differences. For one, the “tradable universe” is much more limited in Forex than in stocks. There are a rather limited number of currency pairs, compared to thousands of U.S. equities available to trade in the stock market. In addition, due to the high liquidity of the forex market (the largest volume market in the world), margins are low and leverage is high. The Forex market can also tend to be more accessible/flexible as it is open 24 hours per day, 5 days per week. The stock market is open from 9:30 am to 4:00pm Eastern time, which can create conflicts for working individuals. Choosing between the two depends on availability and personal preference.
To answer your second question, Elite Swing Trading provides reviews on various stock trading tools, newsletters, services, etc. that can be valuable resources for traders. Every review is based off months of personal experience. Be sure to check out the objectives of Elite Swing Trading if you have any additional questions. Paper trading is not required, but is always highly recommended – ask any successful trader and they’ll tell you the same thing. It’s best to make sure your personal trading system works before implementing it. Paper trading with a demo account provides the advantageous opportunity of risking “paper” money as opposed to your “real” money portfolio.