Swing trading is taking advantage of the brief price swings in powerfully trending stocks in order to ride the momentum in the trend’s direction. It is also combining the best of two worlds – the growing potential gains of day trading as well as the investing slower pace. Many swing traders are holding stocks for weeks or for days, playing the general downward and upward trends. If you want to enter into this kind of market, you have to understand that it is now a high-speed day trading. Other people are calling it momentum investing, since you will also hold positions that make major moves.
If you will ask successful and profitable traders what their most lucrative trades are, you’ll probably be surprised to learn that it’s their swing trades. Although shorter terms trading will allow anyone to get the most airplay, those who are knowledgeable about the market would prefer to learn how to be good in swing trading that in any other type of trading online. If you want to become successful in your swing-trading endeavor, you should treat your trade as not just wealth building but income producing as well. What’s great about such types of plays is actually the fact that they are primarily designed to take full advantage of the bigger moves that occur in almost each liquid market.
How does Swing Trading Works?
When it comes to swing trading, the basic strategy is to jump into a powerfully trending stock after its duration of correction or consolidation is complete. The strongly trending stocks usually make an immediate move after the correction has been completed, which you can profit from. A person will then sell the stock after two to seven days for a 5 to 25 percent move. You can repeat the process over again. Also, the person can play the short side and this can be done through shorting stocks that fall through the support levels.
In conclusion, the main goal of a Swing Trader is to make money through capturing the quick moves that the stocks make in their life span, while controlling the risk by appropriate money management strategies.