Swing trading is an excellent way to make money for savvy investors. Unfortunately, there’s a lot of confusion and misinformation around the subject. So if you’re wondering whether or not you have enough money to get started, you might be surprised by the answer.
You can generally swing trade with a small account depending on your broker. There’s no law regarding swing trading minimums, but some brokers require a minimum account balance of $1000. Additionally, small account swing traders may need to rely on specific strategies for their investments.
Below, we’ll explore how you can swing trade with a small account. We’ll also cover which brokers you should use and explain some strategies that can help you make money. So, let’s dive in!
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
Is There an Account Minimum for Swing Trading?
If you want to swing trade but are worried you don’t have the capital, rest assured:
No mandate or law states a specific minimum for engaging in swing trading. However, there are some other problems you might experience as brokers have unique rules and stipulations. Certain ones may require you to hold a minimum account balance of $100 or $1000. Others will let you start with little or nothing, but may require regular deposits.
Brokers can also put restrictions on your account in some situations unless you meet an equity minimum.
So if you want to swing trade with a small account, you need the right broker.
Furthermore, swing trading itself demands some pretty advanced strategies. And they get even trickier when you’re trying to execute them on a budget. So if you want to try it with a small account, know that you may have to adjust some tactics to work better for you.
We’ll go more into these strategies further down. But for now, let’s look at where you can swing trade on a budget.
Brokers You Can Swing Trade With at $100 or Less
As you now know, whether or not you can swing trade with $100 depends on your broker.
So, which ones are best for small account swing trading?
Preferably, you want one with no minimum balance or scheduled deposit requirements to open an account. You should also go with a broker that doesn’t charge a commission fee if you can. Since you’re starting small, commissions can pile up quickly and deplete your account.
Here’s a list of a few reputable brokers that fit the bill:
- Robinhood
- TD Ameritrade
- Fidelity
- SoFi
- Charles Schwab
- E*TRADE
- Vanguard
- J. P. Morgan
You can find other options, but these are among the most well-known. Additionally, pretty much all of them have an app you can download to make trading easier.
Swing Trading Strategies for Small Accounts
You now know where you can swing trade.
But how should you swing trade? Can a small account use the same tactics as a large one?
The answer is yes—for the most part.
Since you have less capital to work with, you’ll have to make some minor adjustments. Still, if you’re careful and do your research, the potential profits are definitely there.
Here are two popular tactics for swing trading:
Trading Channels
Once overlooked by many investors, channeling is quickly becoming more popular.
This strategy revolves around the use of “channels,” which essentially illustrate expected ranges of volatility. Since these channels typically move in somewhat predictable patterns, knowing them can help you find profits.
In this strategy, you usually short or sell shares at the higher range of the channel, also known as the resistance level. This is because the price likely won’t move above this point in the short term.
Similarly, you’d want to generally buy shares at the channel’s low points (“support level”) if it’s trending upward.
Since channels are relatively accurate at gauging short-term price movement, they’re excellent for swing trading. You can utilize them to more accurately predict when you should dive into or exit your positions.
Fibonacci Retracement
This strategy is a little complicated, but we’ll try to keep it simple.
Essentially, many things in nature are predictable via specific mathematical sequences known as Fibonacci ratios.
For reasons not fully understood, these ratios also seem to work in assessing the stock market too.
Investors utilize them by dividing the vertical distance of peaks and troughs on a stock chart by Fibonacci ratios, such as 23.6%, 38.2%, 50%, and so on.
The results are Fibonacci retracement lines indicating where possible resistance and support levels exist. Investors combine this information with other technical data to guess when stocks are most likely to reverse momentum.
And if you’re swing trading, you can use these momentum shifts to predict potentially lucrative buy-in or sell-off opportunities.
Swing Trading on Small Accounts: Factors To Consider
You now know that you can swing trade with a small account.
However, whether or not you should swing trade with less money is trickier to answer.
Swing trading is inherently risky, so small accounts can easily get wiped out after just a few bad plays. Furthermore, you can’t truly utilize many strategies efficiently without the proper capital.
To help you, here are factors you should consider before swing trading on a small account:
- Diversification: Many economists and expert investors tout diversification as crucial for mitigating risk and staying profitable. However, it’s almost impossible to diversify your swing trades while on a budget effectively.
- Commission Fees: Active swing traders with smaller accounts should beware of the drain from commission and other brokerage fees. If your broker charges them, you may quickly run out of money to invest.
- Pattern Day Trader Rules: If you’re trying to swing trade on a small account, be mindful of your day trading too. Restrictions apply to your account when you’re labeled as a pattern day trader unless you meet a $25,000 minimum equity call.
If done right, you can mature your small account into a much larger one through swing trading. But before you go all-in, make sure to take a quick inventory of the risks.
Swing Trading vs. Day Trading
Swing trading and day trading often get mentioned in the same breath. Not surprising since both are fast-paced and risky forms of investing.
However, there are some key differences worth knowing.
First of all, swing traders buy and sell stocks based on the movement of prices over days or weeks. Day traders meanwhile conduct all of their trades within a given trading day.
As a result, day trading is generally more involved than swing trading. Furthermore, the shorter turnaround on investment means that day traders also make more overall trades on average.
Finally, day trading is subject to specific rules that swing trading isn’t. Though, knowing day trading rules can help you out of hairy situations when you’re swing trading.
The Better Option for Small Accounts
For small accounts, day trading is potentially more lucrative than swing trading.
However, day traders will likely run into issues involving pattern day trader rules if they don’t have enough money. And they can also rapidly lose capital since their window to profit is much shorter.
So when it comes to which is better for a small account, we recommend swing trading.
While swing trading has its risks, it’s more approachable for new investors than day trading. Plus, the lack of a minimum equity requirement means that you are the only thing stopping you from swing trading.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
- Best Trading Courses You Can Take For Free (or at extremely low cost): I reviewed 30+ trading courses to recommend you the best resource, and found Trading Strategies in Emerging Markets Specialization on Coursera to beat every other course on the market. Plus, if you complete this course within 7 days, it will cost you nothing and will be absolutely free! Click Here To Sign Up Today! (If you don’t find this course valuable, you can cancel anytime within the 7 days trial period and pay nothing.)
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Conclusion
Many investors employ swing trading to bolster their portfolios. And you too can dive into this lucrative strategy even with only $100. But before you do so, make sure you understand the risks and challenges it poses.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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