The Ultimate Swing-Trading Guide! (Step-by-Step Breakdown)

Forget everything you've heard about swing trading so far. Today I'm going to show you in great detail why most traders lose money with swing trading, even though their strategy isn't wrong. Secondly, I'll show you exactly what the difference is between swing trading and day trading, and how you can use the advantages of swing trading for yourself. Also, it's very important how you can generate consistent returns with it. And last but not least, thirdly, I'll show you exactly the difference between swing trading and investment approaches. Which approach fits your personality profile? Because that's exactly where the wheat is separated from the chaff. Many people who want to do swing trading don't fit it at all based on their personality type. And that's exactly what we're going to differentiate today, and I'm looking forward to it. What is it all about for swing traders? It's so eminently important to understand how to build swing trading approaches. One way is to do it through so-called multi-time frame approaches. The second way is to map it out in the short term using fundamentals, meaning fundamental news, geopolitical events, or even macroeconomic approaches. The third building block we like to use at Trade2Traders is the approach using the Four Quadrant Model, where we then look at which strategy is currently being fueled by institutional money flow. And that's exactly what I want to show you today, so you get an idea of how I combine a swing trading approach from exactly these 3 perspectives to gain the greatest possible advantage. Let's assume, for example, that we're currently in a phase like recovery where economic growth is currently stable, inflation might be slowly going down, or we're already in overheat and there too inflation is starting to rise, but economic growth still has a certain stability. So what do we do now? Now we can look at which sectors the institutions are currently investing in, and that's exactly what's crucial to know first. For us, for example, it's relatively clear that a lot of capital is currently flowing into so-called energies. A lot of capital is also still flowing into technology right now. How do we know that? Well, because we can see very clearly from this four-quadrant model that there's a high probability that the relevant global players are currently putting their liquidity into exactly these assets. That means the first thing we do is look at which sector is currently interesting for me. The second thing I do now is I no longer just look at which sector is interesting, but I use technical tools, which is very easy to do nowadays, and scan for which stocks or which ETFs are currently technically really stable. And if I now, for example, go ahead and say, okay, I have an idea, let's take Tesla as an example, then I've made a selection. And now it's all about being able to implement this idea for myself. Whether Tesla is a stock that's interesting for us or not, we'll find that out in a moment. What's much more important for us is how I build the whole thing structurally so that I have an advantage. Let's start with Tesla. Here, the very first thing we have to do is make the big distinction between investment approaches and swing trading approaches. What is that? Investment means, for example, I've had the idea for, I don't know, a very long time that, for instance, Tesla stock will rise because, say, fundamental events have led us to be able to say Tesla is a company I want to have in my portfolio long term. Now, in a swing trading approach, I can say, well, currently Tesla is a company that has a certain stability. And now, for example, I'll take the corresponding profiling here and start doing a technical analysis for the first time and see, okay, here and here are so-called volume clusters where major market participants feel comfortable. That means, first of all, I have an idea of where the market is either in equilibrium or where it's very trend stable. And here I already see, yes, that's an equilibrium level. And now I also know the probability that the market will run to its so-called point of control. That means the point where the largest volume was traded is there for now. That means I have a plan that could look like this, for example. That would be my idea for now. And now the swing trader says, all right, I want to use this building block here between 410 and 433 as a trade for myself. And that's a swing trade. Why is that a swing trade? The reason for this is very simple. I have a distance that I can plan, and this distance is simply this one here for now. And now, and this is something that's crucially important, I'll go into a smaller timeframe and note the levels 407 and 435. I'm now transferring them exactly there. 407 and 435. So that's my distance that I can plan. And anyone who's a bit more familiar with volume-related matters can already see here, yes, there's a lot of volume happening here. But what do I need now? Now, first of all, for this trade that we're planning here, I need the corresponding path planning and the corresponding structure that I'll base the whole thing on in order to build a smart trade. That means first of all I need an entry idea. That was right here. From there to there I'm planning my trade. Now for this entry idea I need a so-called risk level where I say I'm giving up on my idea now. Now I can either base the whole thing on the corresponding volume profile. I can say that from here on there's no more volume. Then I would say, 'All right, this is where my stop loss would be.' So I'd have a stop loss at 394 and my entry at 406. That's okay for now. Then I'll note down these two numbers and look further. Where would my take profit be made? And I'll do that in exactly the same way. This one is at 435. So now I have a crystal clear trading idea and I have the corresponding key figures. So I can see immediately, my stop loss for my current idea is as follows at $12. My profit target is accordingly set at $29, which I chose after considering the current market situation and my trading plan. So what happens next after setting this target? Let me explain the usual process that follows this decision. Why do I absolutely need these numbers? These numbers show me immediately what risk-reward ratio is my trading idea based on. That means nothing other than the reward is this price range of 29, and believe me, don't be bored, this is so, so important. Many people don't do this. And my risk is accordingly this magnitude of 12. So, what happens next? Yes, now I get, if I divide 29 by 12 accordingly, a so-called RRR, risk-reward ratio. Watch out, it's about to get even more exciting. I'll show you in a moment how you can shorten the whole thing even better. My result is therefore, I have a risk-reward ratio of 2.41. What does that mean for me? For me, it means that I don't need a high win rate at all. That means even with a win rate, if I make 100 such trades of less than 35%, I would already be making money with this kind of trading approach. In fact, even though the win rate is below 35%, I would still be profitable using this particular method. For many, it's naturally quite hard to endure working with such low hit rates, although I'm not even saying that this hit rate is actually that low. Low, but it's just an assumption for now so that you can understand that being right in trading isn't what's decisive, but rather using the correct key figures for your strategies. That means if you've simply made 200 or 300 such trades and you know your honest hit rate, you also know exactly at what risk-reward ratio you're even allowed to enter trades. But now let's take a look at how we can improve the whole thing significantly. And now we'll base the whole thing on a different concept with our predefined route planning, which works exceptionally well in swing trading. This is our route planning. And now let's take a moment to use the concept of the PBD models. And as we can already see here, okay, I have a P here and I have another P here as well. That means if you use this P model conceptually for your own risk assessment, you have the possibility, for example, to choose a much smaller, more conservative risk limit during a breakout. This gives you more flexibility and control over your risk management decisions. Let's assume here, yeah, so that means I have a— the proof that the market is accepting my large zone again, check. So there's a high probability that we can trade through it. I have the opportunity to really understand through this concept right here what is happening. Okay, so the market is genuinely accepting this price range once again, and as a setup, I have the structure in place, which means that I can clearly see that there is now truly a probability that the market will then also give me this trade. By recognizing this, I am able to see that the conditions are aligning and the likelihood of the market offering me this trade is becoming more apparent. And what do I have now? Last but not least, and this is the most crucial part, I can now with more certainty and thus with high probability and also with a higher hit rate increase my corresponding risk-reward ratio many times over. And that for me is smart swing trading. In summary, that means multi-timeframe on the daily, for example, looking for the technical approach Looking at, for example, a 30-minute or even a 1-hour chart for a corresponding model that works logically and sensibly in terms of the setup. And then— and now comes the decisive part— having the patience to truly let this trade run accordingly once it's entered, and to say with confidence, 'The market will do the rest.' That means if you are familiar with your technical indicators, such as your average win rate and your risk reward ratio, which in this context is calculated based on my own win rate, then you already have a very clear and well-defined mathematical structure that you can use for yourself. And now the great thing is, and I definitely want to give you this last but not least, you can use such approaches for balanced trades like this one here, but you can also use such approaches for dynamic trend following paths. You just have to define the markets for yourself accordingly. Where is trend following appropriate? Where is more of an equilibrium game like here appropriate? And what concepts do I base the whole thing on? And then you have a monster edge that you can adapt to your personality, to what feels good to you, whether it has to be fast or can be patient. It can run for 1, 2, 3 days, or even 2 weeks. You can then decide that very clearly for yourself. And I can only tell you one thing: if you use swing trading with such prerequisites, whether in commodities, in stocks, or also in index futures, whether you can simply choose this whole approach in ETFs because you have the depth and foresight to select it well, you only need one more thing: the right strategy for your personality type. And then swing trading is really easy. I enjoyed presenting this to you. I hope you did too. And yes, I would say have a lot of fun with this approach.