How to Make Money Part Time Swing Trading
Swing trading involves buying and selling stocks based on short-term trading patterns. Many stocks trade up for a short period of time and then trade down for a short period of time. In other words, their price swings up and down, much like the swing on a swing set. Such price patterns are also known as rolling stocks (a term made popular by the trader, Wade Cook) or channel trading.
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Instructions
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1
Identify a number of stocks that fall within the price range you can afford to trade. Many traders find that lower-priced stocks, those trading under $20 per share, offer the largest percentage gains for swing traders. Find stocks within your price range using stock screeners available on such sites as AOL.
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2
Review 1 year daily stock charts on the stocks from the list you created in Step 1. You can find free charts at sites such as Big Charts (see Resources). Find one or more stocks trading within a sideways channel. You are looking for charts of stocks that have frequent highs and lows, with the highs approximately the same price and the lows approximately the same price. For example, a stock whose price keeps swinging back and forth between $20 and $15.
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3
Buy stock when it is at the low end of its price swing and sell it just before it reaches the high point of its price swing. Sell stock short when it is at the high point of its price swing and then buy it back just before it reaches the low end of its swing. Selling short refers to selling shares that you do not own (which are lent to you by a broker) and then buying those shares back at a lower price than you sold them for. In this way you make money when a stock drops in price. Short selling is just as easy as purchasing stock and should not be shied away from.
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4
Use stop losses. These are automatic sell orders that are triggered if your stock trades outside the channel it has been trading in. A stop loss sells your position at a small loss in order to prevent you from having an even larger loss.
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5
Continue identifying stocks that qualify for swing trading since your universe of eligible stocks will continually be changing.
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Tips & Warnings
Swing trading is not right for everyone. Stocks can break out of their swing trading patterns at any time, potentially causing you to lose money. Past performance is no guarantee of future results. Swing trading, like any other stock trading, can result in substantial losses--including losses greater than the amount of your trading account if you purchase stocks on margin.
Always use stop losses.
Always liquidate your positions just before you think they are going to reach their tops or bottoms.
