What is Swing Trading
Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend.
- Swing trading combines the best of two worlds — the slower pace of investing and the increased potential gains of day trading.
- Swing traders hold stocks for days or weeks playing the general upward or downward trends.
- Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves.
- By rolling your money over rapidly through short term gains you can quickly build up your equity.
- The basic strategy of Swing Trading is to jump into a strongly trending stock after its period of consolidation or correction is complete.
- Strongly trending stocks often make a quick move after completing its correction which one can profit from.
- One then sells the stock after 2 to 7 days for a 5-25% move. This process can be repeated over and over again. One can also play the short side by shorting stocks that fall through support levels.
- In brief a Swing Trader’s goal is to make money by capturing the quick moves that stocks make in their life span, and at the same time controlling their risk by proper money management techniques.
- Swing Trading combines the best of two worlds — the slower pace of investing and the increased potential gains of day trading.
- Swing Trading works well for part-time traders — especially those doing it while at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in quotes, swing trading doesn’t require that type of focus and dedication.
- While Day Traders gamble on stocks popping or falling by fractions of points, Swing Traders try to ride “swings” in the market. Swing Traders buy fewer stocks and aim for bigger gains, they pay lower brokerage and, theoretically, have a better chance of earning larger gains.
- With day trading, the only person getting rich is the broker. “Swing traders go for the meat of the move while a day trader just gets scraps.” Furthermore, to swing trade, you don’t need sophisticated computer hook-ups or lightning quick execution services and you don’t have to play extremely volatile stocks.
- We believe that the Swing Trading method is a better way for the individual investor to attain superior investment results through short-term trading in the stock market. This trading strategy has been carefully designed for the needs of the individual investor who does not have the resources that institutions and professional money managers may have.
How does Swing Trading work?
What are the advantages of Swing Trading?
How to Swing Trade?Up Trend:
Simply put an uptrend is a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. Often the high of the last “swing” in the trend will serve as support for the next low. These areas are circled.
Simply put a downtrend is a series of lower highs and lower lows. In other words, a downtrend is a series of successive declines that extend though previous low points, interrupted by increases which terminate below the high point of the preceding rally. Often the low of the last “swing” in the stock’s trend will serve as resistance for the next high. These are circled.
Long Swing Trades:
Once an uptrend has been identified a swing trader looks for buying opportunities in that stock. This can be identified when the stock experiences a minor pullback or correction within that uptrend. The swing trader then activates a trailing buy-stop technique. If prices break out above the trailing stop loss, you will be stopped out and long in the trade. If prices decline, your buy-stop will not be touched.
Short Swing Trades:
Once an downtrend has been identified a swing trader looks for selling opportunities in that stock. This can be identified when the stock experiences a minor rally within that downtrend. The swing trader then activates a trailing sell-stop technique. If prices break down and fall below the trailing stop loss, you will be stopped out on the short side. If prices rally, your sell-stop will not be touched.
Source By: Traders Edge India