Why I Stopped Swing Trading

I have been trading stocks and swing trading for almost 10 years now and to say I enjoy it would be an understatement. I may enjoy the thrill too much some days. Trading individual stocks and understanding how to balance risk and reward is exciting to me. Stock trading is a form of gambling whether you like to hear it or not. None of us have a crystal ball and because of that we never know where a stock price will go in the future.

What we can do is make educated guesses and use certain rules to limit risk. My swing trading system had all of these and it worked. I am beating the S&P 500 year to date but there is just one problem.

It takes too much time.

I have been spending roughly 10 hours per week to swing trade. To some, this may not seem like much but my mind always goes to the money (no surprise there) It begs the question, is it worth it?

The answer to that question will depend on a couple of factors such as:

What do I value my time at?
Am I making enough per hour to cover that cost?
What is the opportunity cost that I’m missing out on?
Could I be doing better by investing in something like an index fund?

These are all questions that I’ve asked myself and ones that I haven’t fully answered yet. In this article, I want to take you through my thought process as well as tell you why I have stopped swing trading (as often) and what I’m doing instead. This is an experiment that I think many of you can benefit from seeing the results.

What Is Swing Trading

The point of this article isn’t to teach you how to swing trade or describe what it is but I realize that some may not be familiar with the term. I’m not going to go too far in-depth but let me start from the beginning.

Swing trading is a form of stock trading where someone buys or sells (shorts) a stock anywhere from a couple of days to a couple of weeks. This version of trading sits in the middle of day trading and trend trading. When you day trade, you can hold a stock for a couple of minutes but never more than a day. Trend trading is usually a couple of weeks to a couple of months. For people that want to get into trading, I think that swing trading is a happy medium.

When someone swing trades, they hunt for patterns in a stock’s price. Some patterns include falling wedges, head and shoulders, and cup and handle. When a pattern is found, the trader will then try to estimate the next move of the stock and buy or short them.

If you are interested in knowing more about how I (used) to swing trade then check out my guide:

Making Money Swing Trading: A Helpful Illustrated Guide

Time. It’s something we all have a limited amount of. A nonrenewable resource if you will. The main reason I stopped swing trading was that I realized I was using too much of my time in an inefficient way. Ten hours a week is a lot of time that could be spent elsewhere doing things that I value more. For instance, another round of golf, dinner with my girlfriend, and playing with my dog could use those ten hours (these aren’t in order of importance ????).

Why was I forcing myself to use this time to make just a couple extra bucks when I have easier alternatives?

It didn’t quite make sense so I’m taking back my time.

In addition to lack of time, I also lacked interest. Don’t get me wrong, I still think it’s fun to take a gamble on a swing trade especailly if it works out. The problem is that you need to be disciplined and focused more than you would think. Unfortunately, lack of interest and discipline do not mix well.

I caught myself getting distracted. When I should have been doing chart research, I was instead working on ideas for blog posts and YouTube videos. There’s absolutely nothing wrong with having other interests, I just needed to admit that my interests had changed.

Because of these two reasons, I think it’s the best option to take my attention and time elsewhere towards other projects. This doesn’t mean I’ll stop investing and trading, but rather I plan to do it in a different way, which I’ll describe next.

What I’m Doing Instead Of Swing Trading

If you follow any of my content around investing, then you may have an idea of what I’m doing instead of swing trading. Just last week I showed you everything I’m invested in and if you read the chart at the bottom of that post then it’s a pretty dead giveaway.

In case you haven’t read that article or watched the YouTube video yet (you should after you’ve finished reading this) I’ll just post a piece of the chart I’m referring to.

I love trading stocks and swing trading in particular. Recently I've made some changes to make stock trading simple. Check them out here!

In this full chart, I tell you every single fund and stock I own. The picture above is just my brokerage account which is what I previously used to swing trade. As you can see, I own different stocks like Amazon, Twitter, and Square.

What I’m doing instead of swing trading is simple; I’m going to trend trade or what is more commonly known as ‘buy and hold‘.

Is it sexy? No

Does it still have a track record of a positive return on investment? Yes, absolutely.

Trend Trading

For those that aren’t familiar, trend trading is when you purchase a stock with intent to hold it for a longer period of time. This is usually in excess of one year which is what I’m planning on doing here. Your goal with trend trading is a couple of things:

Find a stock that is in a positive upwards trend (obviously).
Understand the trend on a weekly, monthly, and yearly basis.
Belief in the underlying business and not just the stock price.

The combination of these three things makes for a good selection for a potential trend trade. Let’s look at the Amazon chart for an example.

If you aren’t familiar with Amazon then you live under a rock. We all know Amazon and chances are high that you have bought something from them in the last 3 months. Personally, I’m a huge fan of Amazon and trading them so I re-entered into a buy and hold trend trade.

Side story: I actually swing traded Amazon’s stock a couple of years ago from $1000 a share to $1200. I collected on those gains but if I would have held on, I could have been up 100%. This story is one of the reasons that I believe in my new strategy going forward.

We know that investing is a patience game and I’m going to test my patience over the next year or so with buy and hold trend trading. Stick around to see how long my impatient self holds out.

Will This Work?

Some of you may be asking if this will continue to get me a positive return on investment or if I’ll beat the results I had swing trading. I’m asking myself the same question. That is yet to be determined, but what I do know is that statistically speaking, passive investments beat out active investing 38% of the time (2018 data Morningstar).

It’s because of this statistic that I have faith that I will still have a decent return overall. Just recently, many brokerages have changed their trading fees to $0 per trade which honestly makes it quite hard to walk away from swing trading. As attractive as that is, I know that all it is doing is allowing people to make more rash decisions and that is the last thing I want to do when it comes to my money.

Have you ever heard the stories of people who invested in a company 30 years ago and now that same company (and person) is worth millions? Or worse yet, someone who got in early and sold? While I don’t think I’ll ever be lucky enough to get in early, I want to be the person that’s there often.

Meaning, I want to get invested as fast as possible and stay there for as long as possible.

The Bottom Line

Investing is a tricky thing and definitely something that doesn’t have a cookie-cutter approach to it. I’ve tried many different things. I have had successes and I’ve also had some major failures. I still really enjoy swing trading but I also have self-awareness and understand I can’t be everywhere and do everything at once.

Is investing important? Yes. But so is enjoying life and the people and things in it.

For now, buy and hold trend trading is the answer for me to obtain a return on my money and still have balance. Who knows? Maybe my interest in swing trading will come back in the future. If this happens, I’ll pick it right back up.

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