More and more people choose to earn their money by trading stocks. Getting into the stock market is really exciting and it is really interesting, but also, it is a field in which you really need to get all the information in due time. In recent years, swing trading has been proven to work well for people and here is how you make the most of it.
Types of Trading
In order to accurately and fully understand the term of swing trading, one must be acquainted with the terms of day trading and trend trading. These two terms are actually the describing terms of the two completely opposite ways of stock trading. While a day trader purchases the stocks, he never holds on to them more than a day. In these terms, a day is the maximum of time the stock is hold on to. In reality, that period is everywhere from several seconds to several hours. In contrast with that, a trend trader is a person who holds on to the stocks for longer periods of time and the, examining the trends of the stock. This means that they hold on to the stocks for months. With this in mind, it is easy to define a swing trader as somebody who holds on to the stocks for several weeks, months tops. In order to be successful as a swing trader, you need to take care of several things.
Choosing the Stocks
The right choice of stocks is of essential value for a swing trader. Some of the stocks, due to their nature require faster and more unpredictable movements, while some of them are quite predictable and they can be easily monitored. Since the stock trade is based on human needs and their satisfying, the trend of stocks is quite predictable in general terms. This means that some of the stocks will start moving one way, while, after a time, it will start moving the other way. With this in mind, you need to know that a good swing trader will use stock charts and all the knowledge about business to be on the right side of the stock movement at all times. That is why they will have to switch from one side to the other to make the profit, which again is a skill you can learn from veteran traders. They can be a great source of inspiration and knowledge for anyone planning to get serious about this field.
Choosing the Market
The best market for the swing traders is the market that doesn’t move a lot and doesn’t have any drastic changes. To understand more about that, you will need to be acquainted with the types of market, including the bear and the raging bull markets. The best situation is a market with no big changes in the long term and with the stocks that gradually jump for a couple of days and then fall for the next period, repeating those cycles.
First of all, beginners in trading need to make sure that they have enough capital, that they understand the market, read the charts easily and that they can live with the ups and downs of swing trading. Since the swing trading is not exact science and it is relies of the intuition and insight as well, it is hard to anticipate the issues that one would have in this line of work. However, practice, right market and right stocks are all that one needs before taking that leap of faith and start trading with real money, as opposed to paper trading.
Trends are the basis of every strategy when it comes to swing trading. One of the most commonly used strategies are going in the direction of a trend, going in the opposite direction of a trend, using T-line strategy or using candlestick strategy. As for the T-line strategy, it all comes down to the closing of the stock. The probable trend the following day will be on the side of the T-line where the stock closed. It will rise if the stock closed above the T-line and fall if it closed under the T-line. As for the candlestick approach, it is important to use Japanese candlestick charts to determine the intensity and the points of pressure within the chart. This is usually the most recommended strategy for the beginners.
Swing trading is challenging and lucrative if done right. However, it is also very shifty and very unpredictable. Swing traders range from those that earn exceptionally large amounts of money to those that can hardly cover their expenses. Therefore, you can never know if your hunches and your ideas about trading are healthy unless you give in and try the whole think for yourself. Arm yourself with knowledge, funds and responsibility and try to ride the waves of the stock fluctuations, closely following the charts and thinking the trends through. That is the only recipe there is.