The day-trader vs. the time-savvy swing trader

The mindsets of a day trader and a patient swing trader are going to vary quite drastically. The day trader is almost constantly competing with time because he or she feels compelled to always be in the market. This compulsion to trade naturally means the day trader will have more losing trades eating into his profitable ones; he essentially is not using time to pick and choose his entries as discreetly as the time-savvy swing trader is. The end result of day trading is usually a full-blown trading addiction where time spent not trading literally creates a panic and intense cognitive dissonance as the trader eventually figures out that they are spending too much time in the market but cannot seem to stop trading. It’s pretty hard to consistently take high-probability trades when you’re always in the market. A trading ‘edge’ means you have some type of high-probability entry method that literally gives you an ‘edge’ over a purely random entry, but when a trader spends too much time trading they naturally negate their edge since the edge is obviously not present as often as they are trading. The very nature of a good trading edge / trading strategy is that it won’t be present very frequently…you have to become a master of learning when it is and is not present, that is how you become a skilled trader and separate yourself from the legions of losers. The skilled, time-savvy swing trader, knows that the more they trade the more their money is at risk in the market. They know that a trader’s first goal is to minimize risk and the second goal is to maximize reward, this is opposite to how losing traders behave, which is that they focus far more on potential rewards and profits than they do on managing risk properly. The successful trader essentially practices good ‘defense’ because he knows a good defense will lead to the ‘offense’ taking care of itself, so to speak. In other words, if you manage your risk capital properly and use time to your advantage by waiting patiently for high-probability trade setups, the profits will start to accumulate in your trading account. Let’s look at a hypothetical example of the equity curves of a day-trader / scalper and a low-frequency time-savvy swing trader: The day trader’s equity curve below shows an increase at first, but then slowly but surely as time goes by the curve begins to decrease. Low-probability trades (over-trading) and losing profits made on winning trades (over-trading) eventually flattens out the equity curve and ultimately causes either a fast or slow depletion of trading account funds.

The time-savvy, skilled swing trader takes a much calmer and lower-frequency trading approach. This approach is evident in the slow but consistent increase in his equity curve. Note that he still has losing trades, but because he is using time to his advantage by picking his trades very carefully, he always has another winner around the corner that makes up for his losers. He is also not giving back profits that he made on his winners, which is a huge reason his equity curve has a nice consistent upward trend to it while the day trader’s does not.

Don’t marginalize the significance of time to your trading success

As I bring today’s lesson to a close, I want to first make it clear that you should not think you can avoid having losing trades, that is not the point I am conveying in this lesson. Even a patient, time-savvy swing trader will have losing trades, and the best traders out there still lose around 50% of the time. There are two different types of losses, there are losses that are a natural part of any trading strategy and that are unavoidable, and then there are losses that are avoidable, these are the losses that result from spending too much time in trades / over-trading. Thus, if you take away only one thing from today’s lesson, let it be this: Being able to pick and choose your trade entries in a patient manner is how you can make the most out of your time in the market. If you want to know how to pick and choose your entries properly, you can start by learning the high-probability price action trading methods I teach in my Price Action Trading Course. Once you have the knowledge and skill to find high-probability trade setups in the market, you only need to remind yourself that the time you are spending being patient and waiting for the most obvious setups is literally helping you grow your trading account because you’re not giving back your profits or losing money on ‘stupid’ trades.