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What is Swing 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.
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.
What are the advantages of the Swing
Trading
While Day
Traders gamble on stocks popping or falling by fractions of points, Swing
Traders try to ride "swings" in the market.
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, with
the Swing Trading Picks Newsletter, 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.
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.
How does Swing Trading work?
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.
What are the advantages of Swing Trading?
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 to Swing Trade?
To fully understand what swing trading really is, you first need to understand
what up/down trends are.
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.
Down Trend: 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.
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