What is swing trading?
Swing trading is when you buy and sell stocks within a few days or a few weeks.
Is swing trading right for you?
Swing trading is what I use to trade. If you are a beginner, then you will learn all about swing trading in this blog. Swing trading is profitable and is easy to learn, you don’t need a math or finance degree to learn swing trading.
Swing Trading Strategies
1. Trend Trading – There are two ways that are profitable when you swing trade. Buy low and sell high or buy high and sell higher. If a stock bounce back from a support, it is a good time to buy. This is what swing traders consider as buying low and try to sell it near resistance. If a stock break resistance, it is a good time to buy. This is what swing traders consider as buying high and try to sell higher. You will learn about support and resistance in this blog if you don’t already know what they mean.
2. Learn to short stocks – This is same for day traders and swing traders. It is not a requirement that you need to learn to short stocks, but it helps. Do you notice that stocks go down in a faster rate than for it to go back up? The reason is people are more panic when stocks go down than when they go up. It takes much longer for people to finally decide to buy a stock when the stock is rallying, they always wanted to wait for the stock to pull back and buy at a cheaper price. On the other hand, if the stock is down 5% and the general stock market is falling, people just want to get out the market and sell as quickly as they can. For this reason, shorting stocks is profitable for swing trading.
3. Discipline - Swing traders require a stricter discipline than long term investors. You must follow your trading rules and never break it.
4. Stop Loss – Swing traders have a much smaller stop loss than long term investors. You should test it out yourself, but should limit your stop loss to less than 5%.Many swing traders have their stop loss less than 2%.
5. Risk versus Reward – Every time you enter a trade, you must analyze the risk and reward. The risk-reward ratio must be at least 1:3 for you to enter the trade.
6. Analyze Chart – You must be good at reading stock charts and have a good understanding of technical analysis. You will be analyzing stock charts to make entry and exit decisions.
7. Stay Alert – You must stay alert and listen to stock market news from CNBC or bloomberg. In addition, you must know what kind of news that will affect the stock market before the market opens for the day. For example, jobless claims are reported every Thursday at 8:30am and have huge impact on the stock market. You must have a plan before you trade on that day.
