Swing Trading - what is it?

Swing Trading allows you to take advantage of short price swings in strongly trending stocks. By riding the momentum in the direction of the trend, it is possible for a swing trader to make money with less effort than in Day Trading. However, a different mindset is required, and profit potentials are generally smaller. Swing trading involves holding stocks for a few days or perhaps a couple of weeks, attempting to capture the general upward or downward trends. Some people call it momentum trading, because you only hold positions that are making major moves.

Swing Trading - how to do it

Basically, Swing Trading involves buying or selling a strongly trending stock (or other instrument) after a period of consolidation or correction is complete. Strongly trending instruments often make a quick move after completing a correction. The goal of a trader who is swing trading is to make money by capturing the quick moves that instruments are wont to make, and at the same time controlling their risk by proper money management techniques. Sound straightforward?!

Swing Trading - Advantages

Swing Trading attempts to combine the best of two worlds - the slow pace of investing and the rapid potential gains of day trading. Swing Trading works well for part-time traders as well as the professional trader, for example people trading from their workplace. While day traders typically have to concentrate on the market, looking for the next 'in' or 'out', those who are swing trading generally use end of day strategies.Swing Trading players are looking for bigger gains than day traders, and are therefore required to have larger stops. Obviously, if you are Swing Trading you will tend to make fewer trades than a Day Trader, and this means you will also tend to have lower brokerage costs.

Swing Trading - getting started

Typically, while Swing Trading you will attempt to spot strong trends. An uptrend is a series of higher highs and higher lows i.e. a series of successive rallies that extend above the previous high point, usually interrupted by falls that end above the low point of the preceding sell-off.

A swing trading downtrend of course, is the reverse of this. Having identified the trend, Swing Trading traders will use a limit or stop order to jump in on minor pullbacks in the trend. For example, in an up trend, if price suddenly falters, a Swing Trader might slap a stoplimit order above the previous high. If prices continue to decline, no harm is done. If the pullback reverses itself and the trend continues, then the order will be triggered, and those who are Swing Trading are long, and in play.

Take a look at the few simple rules that make up the TradeStars way, and how they can help you become a swing trading master in doublequick time.