One of the most popular trading styles is swing trading, in which you try to capture short- to medium-term price movements in financial instruments. While for most proprietary traders, swing trading is not about picking stocks, it’s about analyzing dynamics, understanding risk-reward setups, and executing disciplined strategies.
Below, we dive into how proprietary traders approach swing trading and share practical tips to adopt their mindset and techniques.
Why Swing Trading Attracts Proprietary Traders
1. Volatility in Markets
The trader feeds off the volatility in the marketplace, squeezing all the profit out of the volatility. The swing trader makes money from the long or short directions taken over days or weeks. Scale in and scale out: all opportunities abound.
2. Known Risk-Reward Ratios
Normally, swing traders would set entry and exit levels in line with technical indicators or price patterns; even support and resistance levels are widely used for decisions.
3. Versatility by Asset Class
Swing trade often between stock, ETF, cryptocurrencies, among other asset classes for proprietary traders in order to maximize their exposures while minimizing risk.
Key Elements of a Swing Trading Strategy Used by a Proprietary Trader
1. High-Probability Setups
High-probability setups identified through risk-reward profiles for proprietary traders. For instance:
- Breakouts: Watch for assets such as Bitcoin or ETFs like $IBIT to break out of consolidation zones.
- Reversals: Watch price action at key support or resistance levels for reversals.
2. Reactive Strategies
Proprietary traders do not predict market moves; they react to what the market does. For example:
- If $IBIT breaks above $30 and holds, enter with a stop-loss below $30.
- Utilize metrics such as Average True Range (ATR) to place profit targets, for example, two ATRs above the breakout.
3. Diversification Across Market Caps and Volatility
A combination of small-caps like $LUNR and large-caps provides diversification.
- Small-Caps: High volatility, low-float situations with potential to make fast moves.
- Large-Caps: Look only for profitable days and trending moves.
4. Watch for Trades off Range
On stocks trading in a range, like $SMCI, the setups involve trades off of defined support and resistance levels:
- Support Levels: $750 and $800 as bounce trades.
- Resistance Levels: $900 to $950 as a short trade.
Risk Management: The Lifeline of Proprietary Trading
Survival depends on successful risk management. Proprietary trading success requires that a trader:
- Position Sizing: Position capital on the basis of risk tolerance and trade setup.
- Trailing Stops: Adjust hourly charts as a trade develops.
- Profit-Taking Strategy: Sell part of your position at a predetermined target, like one-third in each ATR level.
Case Study: Bitcoin-Linked ETF ($IBIT)
Setup
- Consolidation range: $29 (support) to $30 (resistance).
- Strategy: Long position, when $IBIT breaks $30 with confidence.
Plan
- Put a stop-loss below the breakout day or the low at $30.
- First target: $31 (1 ATR above breakout).
- Second target: $32 (2 ATRs above breakout).
Trade Management
- Watch for Bitcoin’s price action to confirm.
- Use discretion to close if Bitcoin’s action negates the trade setup.
Why Trade with a Proprietary Trading Firm for Swing Trading?
Trading with a proprietary trading firm such as SMB Capital has its benefits:
- Access to Capital: Trade firm capital without risking personal capital.
- Advanced Training: Learn proven methods and strategies from top traders.
- Community Support: Work with high-net-worth traders generating seven to eight figures per year.
Conclusion
Swing trading as a proprietary trader requires skill, discipline, and adaptability. Focus on high-probability setups, manage risk effectively, and continue to refine strategies to unlock consistent profits.
Whether you are trading Bitcoin-linked ETFs such as $IBIT or volatile stocks like $LUNR, proprietary trading principles can elevate your game.
Are you ready to take your swing trading to the next level? Share your watchlist and insights, and let’s conquer the markets together!