Introduction to Swing Trading

Introduction to Swing Trading

How much capital you’ll need is dependent on the strategy you use, which then affects how much you risk per trade and your position size. This article provides various scenarios for how much cash you’ll need to swing trade stocks in a risk-controlled way, which will improve your chance of success. Swing trading is the art of capturing the short-term trend.

Resources – There is a wealth of online resources to help you become one of the success stories. You have Ebooks, video training courses, PDFs, apps, tutorial classes and a whole host of websites.

Like minded traders can exchange ideas and strategies face to face. The concept is booming in both London and New York and may make day trading for a living much more viable for those concerned about markets data, solitude and office space. The question on many aspiring traders lips is, how to start day trading for a living? Get those fundamentals right and you’ll be in the strongest position to make a generous salary.

Trading Requires Diligence

That is not to say you can’t keep compounding your returns, but as your income grows the motivation to do it becomes less and less. It also becomes harder to effectively deploy larger amounts of money. You likely now have a good idea of how win rate and reward/risk ratios play out in determining your income. Options are a “derivative” in that their value is derived from an underlying market, such as a stock or futures contract. For a strategy on trading options, and a basic rundown of what they are, see Debit Spread Options Trading Strategy.

These activities may not even be required on a nightly basis. Many swing traders use mean-reversion techniques, meaning they intend to buy at low prices and wait for a change in direction to sell at higher levels. On the other side of the spectrum, some traders look for stock prices that are going up strongly.

With technical trading, all the knowledge you learn about a company was meaningless outside of swing trading. I felt like I was filling my head with random data that wouldn’t matter a few days later. I got scared a few times and a little fundamentalist theory influenced my buying. In the beginning, part of my criteria was that I’d buy “long swing” (I don’t know if this is a term) stocks that were severely undervalued from a fundamentalist’s point of view.

and it shouldn't come as too much of a surprise that this successful Forex trader has ties to the next trader on our list. In fact, Mr. Druckenmiller worked alongside him at the Quantum Fund for more than a decade. But Druckenmiller has established a formidable reputation in his own right, successfully managing billions of dollars for his own fund, Duquesne Capital. He can easily be considered as one of the best day traders in the world. Here we see Soros' strong appreciation of risk/reward - one of the facets that helped carve his reputation as arguably, the best Forex trader in the world.

Uptrend is a term used to describe an overall upward trajectory in price. Many traders opt to trade during uptrends with specific trending strategies. What makes this stock especially good to start with is that the bottom trend line is already drawn for you. This is the bottom trend line for this particular stock at this time.

On a long-term basis, however, if the business does well, so will the stock. When trying to outperform the market in the short term, you're competing for the same piece of the pie against trading firms and professionals with far more resources than you. Even worse, the overall pie gets smaller once you factor in variables such taxes and trading costs.

• There are numerous strategies you can use to swing-trade stocks.
• In momentum trading, the trader identifies a stock that is “breaking out” and jumps on to capture as much of the momentum on the way up or down as possible.
• Strategies vary by swing trader, but the main focus is on momentum–swing traders want to capture a decent chunk of price movement in the shortest amount of time possible.
• (BTW, it’s likely to end soon.) Granted you can make money swing trading in any kind of market, the bull was on my side for sure.
• If a day trader opts to trade for more than a couple hours a day, the time investment goes up considerably and it becomes a full-time job.

With swing trading, or what’s sometimes called momentum trading, trading account positions typically last two to six days, but could last as long as two weeks. You’ll find advice from experienced traders on forums, blogs, and chatrooms. You’ll benefit from detailed strategy examples from books, PDFs and tutorial videos. A lot of the day trading for a living ebooks, epubs, and PDFs are available for free downloads too and can be accessed via Kindle. ETrading HQ offer leased desk and office space, but also day trading data and collaboration.

Swing trading is a broad term that includes a variety of short-term trading strategies in the stock market. The Internet, online trading platforms, and the information revolution have made swing trading strategies increasingly accessible to the individual investor over the past several years.

Swing trading provides for a much larger profit potential than day trading. On average you can shoot for a few percentage points all the way up to 20% and beyond.

Get Educated About Trading

So swing traders must take note of these to prevent them from eating too much into any profits they might achieve. Furthermore, because swing trading is more susceptible to market volatility, the risk of large losses beyond your initial investment is higher. In either of the two market extremes, the bear market environment or raging bull market, swing trading proves to be a rather different challenge than in a market between these two extremes. In these extremes, even the most active stocks will not exhibit the same up-and-down oscillations as when indexes are relatively stable for a few weeks or months.

hat I learned quickly is that it’s not the amount of data you collect on a company or trade. You can spend days or hours just on one trade, but it makes better sense to act on a solid trading strategy augmented by high-quality data. I also traded a few popular stocks and made thousands on them. They include NFLX (Netflix), AMZN (Amazon), ATVI, (Activision Blizzard), and MU (Micron Technology).

Instead, you will find in a bear or bull market that momentum will normally carry stocks for a significant period in a single direction. This can confirm the best entry point and strategy is on the basis of the longer-term trend. Finding the right stock picks is one of the basics of a swing strategy. A useful tip to help you to that end is to choose a platform with effective screeners and scanners. There’s simply no use having the best strategy if you’re speculating on the wrong low-priced stocks.

There is no reason to risk more than 1% of your account on a single trade. As I will show, even with keeping risk low (1% or less per trade) you can earn a solid income from swing trading.

(BTW, it’s likely to end soon.) Granted you can make money swing trading in any kind of market, the bull was on my side for sure. I lost a lot of money because I was comparing dozens of patterns for one stock in one time period. Eventually, I came to my senses and focused on just a few patterns and a few companies.

These types of plays involve the swing trader buying after a breakout and selling again shortly thereafter at the next resistance level. The retail swing trader will often begin his day at 6 am EST, well before the opening bell. The time before the opening is crucial for getting an overall feel for the day's market, finding potential trades, creating a daily watch list and, finally, checking up on existing positions. So the bigger the position size relative to your account value, the bigger the potential risk and reward.