SWOT Analysis of a Trader

Remember this concept?

During our school and college days, we came across this word “SWOT” Analysis of a company, which essentially focused on the Strength, Weakness, Opportunities and Threats which affect a company.

It is a wonderful concept as it basically studies-

All the Strengths that a company has over the competitors and how can it use it to its full potential.

All the Weakness that it has so that it can work upon it to reap the benefits.

All the Opportunities out there which are waiting to be collected and taken advantage of.

All the Threats which are there in the environment of the company, from which it has to be cautious as much as possible.  

So, recently, this question came into my mind – “Do we, as Traders, do our own SWOT analysis”??

A)  Strength – it is a very important part as we should know where we lack only then we would be able to work upon it. We should always know what’s our strength, as in, what kind of trading suits “us”? We all are unique and so is our mindset, risk taking ability, capital size, holding period etc.

So we should never try to copy any other trader’s style because what’s “terrific” for him/her can be “terrible” for you. The best way to know our strength is by looking at our trade journal and we should try to see what kind of trading has given us the most decent returns along with peace of mind. If you are just worried about the returns at the cost of your health, you will wear yourself out quickly.

B)  Weakness – We all have weaknesses and the earlier we find it out, the better it is. Like, for me, Day trading is my weakness. I have done it a lot and I still do it with very limited capital and only when the trade setup allows, but I know that I just don’t have that mindset that a day trader needs.

I have spent countless hours, glued to the screen, looking at each and every tick and trying to get a few points here and there, but, I realized it quite late that I was not trading according to my personality. I prefer swing and positional trading as it matches my attitude and laid back nature. I get to spend the time saved on other things, after all, we are in this business for the flexibility and lifestyle that it offers, so we should take benefit of it.

So check your journal and see what kind of trading suits you and please stick to it religiously. You will be amazed by the results.

C)  Opportunities – We have ample of opportunities nowadays with the realm of the Internet. We should always try to take benefit of any study material that might be online, good YouTube videos, trading and psychology books, trading conferences etc.

What we chose among all these is totally up to us, but we should always try to improve our skill and never stop attaining knowledge of this subject as it’s an ocean and we can never reach the depth of it if we are reluctant to swim.

D)  Threats – In Trading, we generally don’t have any major threat from the “outside” world, but only from the “inside” world, that Is, we ourselves. A trader can be his/her worst enemy if he/she stops following the rules that he/she laid out for himself/herself. It is generally observed that whenever we commit a mistake and make a loss, which would have been avoided, is mostly because of our lack of discipline and patience. Remember “no one can save us if we don’t save ourselves in trading”. Once on a losing streak, it is mostly observed that traders try to cover up the losses quickly by doing revenge trading which results into more losses and eventually end up into a vicious circle.

So we should always observe the trigger points which lead us to revenge trading, over trading etc. and try to avoid them as much as possible.

At Alpha Swing, it has been our endeavour to ensure that all traders play to their strengths and ensure they keep working around their weaknesses to capitalize on opportunities and fend off their strengths.

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