About Swing Day Trading
Swing trading is a particular day trading tactic that involves following certain trades over a short period of several days, looking to capitalize on either upward or downward price trends for relatively safe and predictable short term profits. The strategy works best in a neutral market without strong bull or bear biases, but executed properly, it can function well even in extreme market conditions.
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Significance
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Swing trading is not fundamentally different from day trading - it just describes a specific trading strategy. Swing traders do not tend to take strong net long or net short positions. They pick individual stocks, determine what direction they will be moving in the next one to four days relative to the price baseline, and then go either long or short on the stock for that trading period. It's not intended to realize massive profits calling bottoms and tops in a stock price, but rather serves as a relatively low-risk method for bringing down quick gains based on reliable technical analysis.
Features
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Swing trading offers a more relaxed pace of life, as it requires less rapid decisions and a lower amount of research than ordinary day trading does. Swing trades ease into a stock position and then out of it within a few days, without the stress of needing to call the timing absolutely accurately. Swing trading, as it relies heavily on technical analysis, is a very good strategy for traders who have a hard time separating their emotions from their trades. It's more trading the system than actually trading the stock, which helps traders to view their positions dispassionately.
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Considerations
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This method is not very strong in markets with either strong bear or bull biases, as it aims to catch on to relatively minor shifts in the market. On the other hand, when the trends are clear, it becomes easier to swing trade. Conducting technical analysis quickly and finding good candidates for swing trade plays are part of the fundamental skills of this trading strategy.
Effects
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Swing trading is a method for detecting price momentum and then trading based on it. These traders can make extensive use of options along with stop-losses, but ideally they will be able to call the trends accurately enough that they will not be necessary. They look for repeating short-term patterns in the market or in a particular position and seek to profit from it. They look for commonalities rather than sudden divergences.
Benefits
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This investment strategy is good for both beginning investors and those that prefer to make extensive use of technical analysis. If you are good at spotting trends in charts instantaneously, swing trading might be a good strategy for you. The longer time frames involved in the trades make it so that you don't need to spend as much time monitoring your positions as you would with more aggressive forms of day trading. It works best in neutral markets, but does not react well to unpredictable news that tends to break trading patterns.
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Resources
- Photo Credit x-eyedblonde, Flickr
