What Swing Trading is:
Swing trading is a short-term trading strategy with a typical hold time of about 1-15 days for a goal of 5-30% profit (these values can certainly change depending on the source).
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As a general rule, swing traders do not put much emphasis on fundamental analysis or the intrinsic value of stocks. Their main concerns are price trends and patterns through technical analysis. One strong indicator often used by swing traders is unusually high volume, which signals an increase in both liquidity and price momentum.
How to Learn Swing Trading:
Learning how to swing trade is a task that can seem daunting, but can be rewarding for individuals with a desire to learn, discipline, and a solid strategy. The bad news is that there are a ton of subpar stock trading newsletters out there jockeying for your attention – offering “picks of the month” or simply telling you to “buy now before the price jumps 500%!” Don’t trust self-proclaimed “gurus” that are just trying to pump stocks for their own benefit.
Components of great stock trading newsletters include educational content, typically in the form of video lessons, watch lists, live trading sessions, special reports, webinars, chat rooms, and real-time alerts. Be cautious of newsletters that only provide alerts. In addition to the emphasis on education, they should also be trading with a real money portfolio and be completely transparent with their results. The good news is that these types of newsletters do exist – they’re just not always easy to find.
Advantages of Swing Trading:
Swing trading is an advantageous approach for the type of trader that wants to actively manage their portfolio, but doesn’t necessarily want to be chained to a computer all day. Whereas day traders monitor their positions tick-by-tick, entering and exiting their positions within the same day, swing traders focus on a slightly longer time span, which allows them the freedom to apply a part-time focus to their trades.
On the opposite end of the spectrum, you have long-term value investing. This is your classic “buy-and-hold” strategy that aims to acquire fundamentally sound companies at a discount and hold them for years. Keep in mind that the nearsightedness of swing trading can be favorable in the case of a major market downturn or collapse. Since positions are monitored on a daily basis, it offers the freedom to “move to cash” in a bear market, or even follow the trend by opening short positions.
Retail traders also hold an advantage over large institutions when it comes to short-term approaches like swing trading. These institutions are moving in and out of large positions, making them lack the “quickness” that you have as a retail trader. They’re essentially forced to look at trades from a longer time horizon, and as a result, swing trading is a space where individual traders can exploit high-potential opportunities in the market without having to compete with major institutional traders.
What is the Best Swing Trading Strategy?
The best swing trading strategy is one that fits into your lifestyle, and is also profitable. Not everyone has the same availability during market hours, risk tolerance, portfolio size, etc. You must educate yourself on the basic concepts of swing trading and explore your options for learning.
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Never forget the power of paper trading – without risking a penny, you can gain experience, test strategies, and most importantly, avoid losing your real money before you’re ready. Just as important as making money trading is protecting those profits by avoiding costly mistakes. Educate yourself, exercise discipline, and trade green.
Written by Matt Thomas
I had never heard the term swing trading before and found this article to be very interesting and informative. So really it is buying stock for a short term and hoping to sell at a profit. I tend to hold on to my stock, but this is got me thinking. I may have to do some more research and try this method out.
This is a great site, I had no idea about swing trading. And this market we need all the information and strategies we can get. thanks for the great info.
No problem, Cavan. The market has certainly been volatile to start 2016, which can be scary for those implementing a long-term “buy-and-hold” strategy. The advantage of a short-term approach like swing trading is the flexibility it allows for entering and exiting positions as you please.
In this type of environment, it’s sometimes best to simply sit on the sidelines and not overtrade. Or use the extreme volatility to your advantage, but it’s important to make sure you have the availability to monitor your positions and take the necessary steps to protect your portfolio. I hope the newsletters reviewed on this site provide you with detailed information to make you a successful trader. Take care!