From a spectator's point of view, the stock market looks exciting and highly lucrative. Every year, hundreds of people muster up the courage to enter the stock market as investors via 401ks. Still others try their hand at trading stocks for immediate income. Swing trading, for example, attracts many amateur investors looking for weekly supplemental income.
Buying and selling stocks happens on a variety of levels. Some investors take a long-term approach and watch broad trends in the market and various sectors. Other investors get in and get out with overnight and day trading. These investors spend a long time examining the market in order to take advantage of quick gains. In the middle is the swing trader. The maximum amount of time that most swing traders deal with stock is 30 days. They buy and sell stock based on consecutive daily trends, either upwards or downwards.
Swing traders watch daily and hourly stack trends to make the best of revenue gains and losses. Understanding the resistance level of a stock will help to insure the most gains. Resistance is the price where a stock tends to stick for consecutive days with no movement. Traders can move on when stocks approach resistance levels or wait for support levels. This is the high where the stock price usually rests comfortably. Resistance and support levels change throughout a stock's life. Analyzing upcoming changes will spell higher gains.
Professional swing traders have been known to consistently garner monthly gains of 5 to 10 percent on investments. It takes years to reach this level. New traders should understand the potential in the swing trade market, but not try to rush their success. Experience is the best teacher with stocks. Track possible gains and losses with paper traders for about 6 months and then begin real trading.
Swing trading is designed for monthly gains. Weekly gains come from overnight or day trading. While swing trading can provide a lower risk than other forms of trading, it is still stock market trading and is therefore subject to the volatility of the market. Don't look for gains initially above 1 to 2 percent. It's important to combine emotion and technical expertise at the right levels to avoid big losses. Investment amounts can start anywhere, but avoid having more than $30,000 to $40,000 available in a trading account as a beginner. This is a way to curb potential losses until the investor reaches expert levels.
The economic crisis of 2008 crushed investor confidence in the market. The volatility of the market will send many investors into react mode, causing even more volatility. Smart investors will ride the wave and allow objectivity to take over, making better rational decisions and using gut reactions where necessary.
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