If you’re a trader looking into gaining more passive income, you’ll want to know what options you have available to you. Many investors have an interest in swing trading, although it’s not suitable for everyone. However, fundamentally, is swing trading a passive income, or does it require one to trade actively?
Swing trading isn’t a passive form of income. With this type of trading, you need to actively participate in your trades if you want to make money. Many professionals compare swing trading to day trading since they share many similarities in terms of needed engagement.
If you want a passive income, you need a buy-and-hold strategy, which won’t work with swing trading! There are several reasons why swing trading can’t be considered passive income. I recommend that you keep reading and determine whether or not this form of trading will work for you.
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
Why Swing Trading Isn’t Passive Income?
Swing trading isn’t a passive form of income. Rather it takes a lot of management to ensure you make money with this type of trading – so much so that many people who practice swing trading consider it a second job.
If you want to see success with swing trading, you must dedicate a few days a week to trading. With passive income, you often only need to wait for dividend yields. Many swing traders won’t hold their assets for more than a few weeks, which isn’t enough time for dividends to accrue.
While swing trading isn’t as active a strategy as day trading, you’ll have to choose a different trading strategy if you’re looking for passive income.
How Active Is Swing Trading?
Swing trading is fairly active. If you don’t participate, you won’t earn money. However, it can take a few days to weeks for you to make a profit. This trading style isn’t as active as day trading, which requires daily input. If you’re coming from day trading, swing trading can feel more relaxed.
Many swing traders set aside a few hours per week to work on their investments. They check on the stock market, conduct research, and perform trades. On average, it takes a swing trader five to ten days to complete a planned transaction.
Due to these factors, you’ll need to spend time at your computer dedicating time to your swing trades every week. This differentiates it from passive earning opportunities, where the aim is to earn as much money as possible with as little input from your side as possible. While swing trading offers the potential for success, it’s definitely not passive.
Risks of Swing Trading
Swing trading requires opening and closing trades every couple of days, so it’s pretty active. However, that also means that it comes with some risks you’ll need to know about.
Investopedia warns that you can face serious losses like you would with any type of trading strategy. Swing traders tend to face more risks than day traders since they expose themselves to weekend and overnight risks.
Holding stock over the weekend can be risky – you don’t know if the stock will drop while the market’s closed. Additionally, market volatility can be especially dangerous to swing traders. Even if you’ve set a strong plan and have a strategy in motion, drastic changes in the market can easily ruin everything.
You also can experience more charges when it comes to running your portfolio. It’s essential that you find a broker who won’t charge too much money – this is especially important because many swing trading accounts are on the more expensive side of investment accounts when it comes to operational costs. The last thing you want to end up doing is spending all your gains on keeping the portfolio open and active.
Finally, if you’re focusing on short-term gains, you can miss out on long-term gains that are more lucrative. Diversifying your portfolio can help with this.
Swing Trading and Risk Management
Swing trading isn’t for everyone, but it becomes easier to manage once you know all the risks. Always start by setting stop-loss and take-profit conditions to avoid heavy losses. Then, diversify your portfolio and set up hedges. You won’t need many to start!
The best way to manage risk in swing trading is to always plan your trades thoroughly. When it comes to swing trading, you need to research the market and look for signs of upcoming changes, then plan accordingly.
Most beginner swing traders fail because they don’t know how to manage the risks. However, planning out your trades and having as much knowledge on the topic as possible will help you out drastically. Taking some time to plan before you ever make a trade is essential to ensuring that you don’t lose money.
What You Need To Swing Trade?
All you need to be a swing trader is an online broker, a device that can access the internet, and a reliable connection. Of course, you’ll want to have money to invest in your trades. Many pros recommend that you should have at least $5,000 when starting.
It doesn’t take a lot to swing trade. However, you’ll need to make sure that you have some free time each week to dedicate to researching the market and your trades. If you don’t put in the effort, you’ll have a lot of trouble turning a profit!
This informative YouTube video covers everything that you need to know about swing trading and is perfect for beginners:
3 Ways To Generate Passive Income Through Trading
There are several ways for you to earn a passive income. If you employ multiple strategies, you can enhance the odds of making gains. These are some of the best options that you can use:
Automatic Trading
There are several ways to generate passive income, although you may want every part of it to be automatic. These systems use algorithms to open and exit trades automatically. You’ll need to choose their trading conditions, but you can let the algorithm handle the rest after that. Many pros prefer it since they can work in multiple markets at the same time.
Copy Trading
Many passive traders also use the copy trading strategy. With this method, you copy other experienced traders. You won’t need to spend all your time planning your moves in the market and can still earn passive money.
There’s software out there that makes copy trading even more straightforward. All you do is select the experienced trader you want to mimic and the software does the rest for you, making the process even more passive. However, this option isn’t for everyone! If a trader has more spending power than you do, if not careful, you may clear out your accounts accidentally while trying to copy them.
Dividend Stock
Finally, dividend stocks are one of the most popular ways to make passive money. All you need to do is own a dividend stock. Then, when the company makes profits, you earn a portion of the capital. You can either take the dividends or reinvest them into your stocks, allowing you to earn more in dividends the next time the stock pays out!
In short, you have plenty of options if you want to earn passive money. You can use automated systems and more to ensure you make the best trades, even if you aren’t available to monitor them! Many people choose to buy dividend stock and use the revenue from that.
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.)
- Best Passive Investment Platform For Exponential (Potentially) Returns: By enabling passive investments into a Bitcoin ETF, Acorns gives you the best opportunity to make exponential returns on your passive investments. Plus, Acorns is currently offering a $15 bonus for simply singing up to their platform – so that is one opportunity you don’t want to miss! (assuming you are interested in this platform). Click Here To Get $15 Bonus By Signing Up For Acorns Today! (It will take you less than 5 mins to sign up, and it is totally worth it.)
Conclusion
Swing trading does require a lot of input from traders. If you’re looking for income methods that you can set and forget, this isn’t it. Swing trading requires a lot of thought and experience to make an income.
However, there are other options that you can choose to make a passive income. Dividend yields are always an excellent choice for investors! No matter how you decide to trade, make sure you research it first. I have plenty of articles on the topic for you to read.
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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