Swing Trading Introduction
What Is Swing Trading?
Swing Trading is another strategy that many traders utilize to increase their portfolio. This type of trading is when one holds a stock over a few days or weeks. These particular traders tend to make use of technical analysis to capture the best trading opportunities. Furthermore, these type of traders could use fundamental analysis to predict stock price movements.
The concept of Swing Trading means that a trader holds a stock long term or short term. However, its quite rare for a trader to hold these for several months at a time. Although this definition may vary from trader to trader this is just a general time frame and understanding by most traders. Swing trading predicts a stock to move over several days and traders close out positions once the stock moves a decent amount from their entry. They look at the bigger picture over a couple of weeks to make an analysis of the stock.
Swing Trading is one of the most popular styles of trading compared to others. Most swing traders weigh out the risk vs reward of holding a certain stock and are very familiar with technical analysis. Based on the support and resistance areas they place stop losses or limit orders.
PROS VS CONS OF SWING TRADING
- Don't have to invest as much time
- Maximizes profits during drastic movements
- Fully reliant on technical analysis
- Stock hold positions are at risk overnight and market fluctuations
- Sudden market moves can lead to large losses
- Longer term gains are missed out for shorter term gains
Swing Trading Strategies
Swing Traders must look for multi-day swing set ups that are favorable for them. Popular technical analysis set ups are head and shoulder, cup-and-handle, flags, and triangles. By using these type of set ups it increasing one chances of making bigger profits and growing ones portfolio. Additional methods to look for are reversal set ups that are found using indicators.
All in all swing traders create plans that they need to stick to in order to trade comfortably and profitably. This includes looking for nice set ups that make predictable moves. Of course this isn't easy to find, but once a trader is able to master this strategy it will highly benefit them in the future. Finding trades that are favorable risk vs rewards will allow one to come out on top and overall profit.