How to Use Swing Trading in Day Trading
Unlike day traders who trade certain stocks every few hours, minutes or even seconds, swing traders tend to hold onto their stocks or funds for a little longer. They may hold onto their investments for several days or even several weeks. Since most market investors hold their stocks, funds and other instruments for years (if not decades), swing trading is still considered high-risk and high-maintenance.
- Difficulty:
- Moderately Challenging
Instructions
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1
Buy frequently traded stocks. It's difficult to practice swing trading with a stock or set of stocks that doesn't trade constantly and in large volumes. Without a great deal of trading, you can't capitalize on the optimism or pessimism toward the stock, catching it on the upswing and quickly selling it on the downswing.
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2
Choose large-cap, popular stocks that are traded in high volumes, such as Home Depot or General Electric.
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3
Stay on top of the financial news. Swing traders know that they have to be the first to know the news and among the first to react to the news to take advantage of large-scale buyer or seller reactions.
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4
Watch the stock as it cycles. Get to know its moods and how it reacts to market indices. Does it track Dow Jones or NASDAQ tracking funds, or does it typically defy the market by moving in reaction to (in the opposite direction of) the market? Just as a surfer watches the ocean before getting in the water to determine how many waves come into the shore before a break, so, too, does a savvy swing trader watch the cycles of one or more stocks.
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5
Use your knowledge of the market as a whole and your stock in particular to buy or sell more quickly than your competitors, thereby making a profit. The ability to know how and when to use information is what makes some swing traders rich and others too poor to continue the practice. Some traders use intuition, astrology or mathematical formulas such as Gann's Wheel (or Square of Nine) to determine when to trade.
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Tips & Warnings
Swing trading is less fast-paced than intrahour or intraminute day trading, so it can be a good way for traders to work their way into the day trading lifestyle. In the unusual world of day trading, the trader is a slave to breaking market news and even shifting world events.
As with all forms of day trading, swing trading is risky. Most day traders (the most commonly repeated statistic is 80 percent) lose money. If the market were predictable, no one would lose money on stock transactions, yet this is what happens every minute of every day.
