Unlike traders who invest in shares to
get capital gains over long periods of time, swing trading
focuses on quick trades that bring in a lot of small wins — adding
up to big returns over time.
trading involves identifying stocks involved in a definitive
trend and making numerous short-term trades in that market. The
aim is to enter and exit the trends at their most profitable points
in order to maximize profits. In most cases, a swing trader works
with price moves lasting 10 days or less.
Swing traders buy when the price is on
a downward trend, hold the stock for a few days, and sell when the
price is on its next upward swing. They try to sell as close to the
top of the swing as possible. Once the price falls, they repeat
However, there are instances when
swing traders should not trade. These include instances when the
market is too volatile or moving sideways.
Relatively Easy to
The techniques needed to be successful
at swing trading are straightforward and easily demonstrated. You
don't have to spend time learning complicated techniques or using
complex formulas to predict market trends. Unlike other investors
who buy and hold stock long term, swing traders are only concerned
with the stock chart. They do not concern themselves with company
fundamentals such as quarterly earnings.
The Possibility of
Making Bigger Profits
swing trading focuses on bringing in small gains in short time
frames, there is a high possibility of making huge gains on
individual trades. If stocks exhibit a strong enough growth, swing
traders can still hold on to them in the hopes of making bigger
gains. In some cases, they sell some of the shares to take in
partial profits and allow the remaining positions to continue
High Likelihood of
One of the advantages of swing trading
is that it is easy to be successful. Since swing traders aim to make
5 - 10 percent profit on trades, they have a much higher chance of
consistently achieving their goals.
A note of caution to potential swing
understanding swing trading and becoming successful at it takes
time and dedication. You must take the time to study, practice and
become adept at reading the movements of the markets. You must also
be disciplined and practice strict money management.
Discipline enables you to make trades
based on facts, not emotions. You must be willing to cut your losses
and sell unprofitable stock instead of holding on and hoping that
its share price will rise.
Most individuals who lose money on
swing trading often invest too heavily in the outcome of individual
trades and are unable to take small loses. As a result, they keep
bad trades and eventually lose more money than they should have.
If you are just starting out and want
to try out swing trading, it's best to seek the advice and guidance
of expert swing traders.