A swing trader is, like any business or profession, about making money. But they have to be able to predict a huge market cycle, and be willing to invest a fair amount of their own money to see it through, which is harder to do than investing in a startup, and more difficult even than a start-up. The more money you have, the more important it becomes – do you want to be a hedge fund, or in charge?

There are many ways to measure how well someone’s trading portfolio is doing. Some are quantitative, and the other are qualitative such as subjective assessments such as “How much of my profits is coming in?” And while quantitative approaches get better over time, the qualitative approach will be the best in the long-term. That’s why it’s important when someone is hiring a trader to be able to tell if the person is able to put together a portfolio with a certain probability for profit, or if they are simply making a lot of mistakes.

A swing trader’s most important asset is their ability to pick market corrections when no reasonable person should. For instance, imagine you are trading futures (futures contracts). Someone says the price of the US stock index will rise by one point in ten days, or in one day. You sell the futures contract and watch the price skyrocket into the hundreds of dollars per share. You don’t want to buy this position for only a few hundred dollars, so you sell it for $1 and get back $20,000. This is a very different scenario than the situation when the future market is stable, with everyone expecting a flat market. The difference is that you are not so much being “stopped out” of profit, but rather being “stopped out of making money,” which is how most experienced traders define it.

The most important asset to a trader is their ability to be able to predict the long-term price cycle. If a swing trader’s stock is up 80% from the last day the price is up, and he can predict that the price will be up 40% the following day, the swing trader is already making too much money.

There is a trade-off between being able to make money (making a little bit for yourself) and being able to predict short-term market cycles. To do both is the definition of a winning trader. Most people don’t even need to be able to make money. The key is the ability to tell when market patterns are going to start happening again

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