Have you wanted to play the stock market, but were you too intimidated to try? Day trading involves plenty of numbers and high risk, while long-term investments can be boring and less profitable. Fortunately, there’s swing stock trading. Located between these two types of investments, swing trading allows you to play the market short-term while maximizing your chance for profits. Whether it’s your first time trading or you just need a refresher, here’s everything you need to know about swing stock trading.
What Is Swing Stock Trading?
Although similar to day trading in several ways, swing trading has notable differences. The most obvious difference is that swing trading involves holding stocks and options for several days or weeks. Unlike day traders, who close their positions over the course of a day, swing traders can ride out trends in the market to enhance their profits.
Swing trading also has an easier learning curve than day trading. Day traders have to make crucial decisions to change positions within intervals of 15 minutes or less, while swing traders can relax and watch the markets over longer periods of time. This creates a more relaxed trading atmosphere, which is ideal for beginners, novices, or those who already have enough stress in their lives.
Remember that one type of trading isn’t necessarily better than the other. Choose the one that fits your personality, taste, and your tolerance for risk.
The Basics of Swing Stock Trading
One of the most difficult aspects of maximizing your profits is understanding swing trading. This is not to say that you need a college education or years of experience to start. Learning involves committing yourself to identifying market trends and patterns while reducing your chance of experiencing big losses.
To minimize your risk, determine how much you’re willing to lose and weigh it against your potential for profits. Ideally, you’ll want to have a two-to-one potential earnings to profit ratio. This means that, if you’re willing to lose 2 percent of your investment, you should be looking to gain 4 percent.
Where to Invest
When you first venture into swing trading, you’ll find that one of the most-asked questions is where to invest. In general, you should start with large-cap or medium-cap stocks instead of high-risk investments, such as penny stocks. This will help you avoid huge losses while learning to trade.
After you’ve determined which stocks you want, the next step is to pick a bearish or bullish position. A bearish investor looks to earn money by selling short or by purchasing more stock at lower prices; a bullish investor earns cash when stock prices go up. You don’t have to hang your hat on a single method; however, beginning with one may teach you how to identify patterns more easily and make you feel less overwhelmed.
No matter how you invest, note that, in swing trading, there’s always a risk of losses due to market fluctuations and a higher leverage margin than day trading.
By learning the methods and patterns of successful stock trading (mixed with some trial and error), swing trading can be your ticket to a level of investment and wealth that you never thought possible.
Leave a Reply