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Recently, I received several questions, why an ATS trader should also spend time developing swing strategies (and not only day trading strategies). In this article, I would like to sum up the most important points why I consider it important to have swing strategies in a portfolio as well.

1. Swing strategies are a great way how to diversify a portfolio

Fighting with a high correlation of strategies is quite challenging - every at least little bit advanced ATS trader knows that it is not so easy to find out low-correlated strategies to existing portfolio. I have also struggled with this issue for a long time until I have added swing strategies to my portfolio.

It makes sense - swing strategies stay in the market longer (mostly several days), so the profit distribution can be dramatically different from intraday strategies and, therefore, we can achieve lower correlation. And only the combination of intraday and swing strategies I consider to be sufficient diversification. Having only intraday strategies in a portfolio is, in a certain way limiting, as we are losing several benefits that are coming from holding positions longer.If you are still struggling with correlation, it is time to start working on swing strategies.

2. Swing strategies have bigger drawdown, but, as a matter of fact, they help you to reduce the drawdown

Beginning traders are often scared of bigger drawdowns that swing strategies often have. This is, however, just a groundless fear coming from the inability to see the bigger picture. Once you start seeing it from the broader perspective, you will find out that drawdowns of individual strategies don’t matter - what matters is the drawdown of the whole portfolio, and that can be reduced by adding low-correlated systems to your portfolio (it also makes the equity smoother). This brings us back to the first point - low correlation is important for many reasons and the more colorful portfolio you have, with low-correlated systems, the more stable equity and the lower drawdowns you will experience.Personally, I know a trader who is willing to start trading live a losing system, as long as it is low-correlated to other systems and it smoothens the equity and reduces the drawdown of the whole portfolio (yes, this is how it really works!). This is just another confirmation that focusing on a drawdown of a single strategy is just too shortsighted and you need to take the things into perspective.You should definitely experiment with swing strategies also for this reason - working on correlation and on a portfolio is something what moves us ahead and swing trading is part of it.

3. It is impossible to create a system in some markets (except for the swing strategies)

Another sound reason why to add swing strategies to your portfolio is that in some markets you won’t be able to build a daytrading strategy. This is how it is and if you won’ t add swing strategies to your portfolio, you are limiting yourself and your trading business is running just on 50%, instead of 100%.

Trading as many different markets as possible is another great way how to diversify your portfolio and another solution how to fight high-correlated systems. You need also to consider the time investment - why spending hundreds of hours in a certain market, trying to find an intraday strategy, when you can create a swing strategy for a market that is not suitable for intraday systems, in the fraction of time? From my point of view, it is really pragmatic and necessary to add swing strategies to your portfolio. In our database, we have over 400 trading systems, and over 60% of them are the swing ones.

For really high quality automated portfolio you simply need swing strategies as well - this is a fact that has been repeatedly confirmed by our findings.

4. Swing strategies increase considerably your average trade

Sometimes you can experience unpleasant slippage (especially when markets get really wild) and if your strategies have a low average trade, it can have rather negative impact.

With swing strategies, this is not a problem any more. In most cases, you will have really high average trade and you will rarely bother with transaction costs - and that will give you more inner peace and an option to breath freely and stop worrying about things like slippage.

Here is an example of one of my systems for Natural Gas:



Style=Swing Long/Short







170 USD average trade is simply so big that it can really withstand a lot and the strategy will still be profitable. One more reason why I consider important to include swing strategies to your portfolio.

5. Swing strategies open lots of new possibilities

The last reason for including swing trading is basically summary of all previous ones:

Without swing strategies, you are leaving too many possibilities behind you. You are not using the world of automated trading as much as you could and you are leaving too much money on the table. The world of swing trading is worth exploring and you should dedicate some time to it. Just because you don’t need to learn much new - just a couple of small, but very important things - and the impact can be really huge.

So much for the reasons, why I consider the idea of extending your trading horizon to swing strategies not only to be good but in many cases really essential.

Happy Trading!


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What others are saying

"Tomas is one of the most creative traders I know. He is able to generate unique trading ideas and elegant solutions to system development challenges."

Andrew Swanscott,

"Tomas has been a professional trader for more than a decade and I have had the privilege of monitoring his accounts in action since 2006. His systems are performing as some of the best I have ever monitored and executed. I have been in the trading industry since 2002 and worked with many developers from all over the world. Tomas is definitely the one to consider."

Martin Lembak,

Systems Trading Expert,


"Tomas is a professional trader, who for the last 10 years has specialized in developing trading systems. We have been tracking his trading systems for about 5 years and they generally show very robust, stable and above average performance. Striker is pleased to work with someone like him - a real professional with enthusiasm and deep knowledge of trading."

William Galwas, President Of Striker Securities, Inc 

"Personal consultation with Tom helped me to re-evaluate the complexity of my robustness testing and optimization processes. Plus, it has helped me with a specific plan on how to take things forward. It has given me some great ideas on how to avoid overfitting and make my testing more robust and provided tips on low hanging fruit in terms of the best markets to trade for intraday/short-term breakouts."

Craig Peters,

semi-advanced trader,

United Kingdom 

"Tom's approach to Automated Trading Strategies design, tests of robustness and portfolio diversification is really unique. He has been a professional trader for many years and the depth of his understanding of Breakout strategies and Market Internals is hard to find elsewhere."

Antonin Fisher,

Hedge Fund Manager,

Czech Republic 

"Tom´s systems and trading approach do really work and can bring good, stable and reasonable returns. I can highly recommend him as a teacher."

David Hruby,

Trader, Czech Republic 

Author: Tom Nesnidal (more about me
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