What is a Swing Trading?

Dear Members,

Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend.

·         Swing trading combines the best of two worlds — the slower pace of investing and the increased potential gains of day trading.

·         Swing traders hold stocks for days or weeks playing the general upward or downward trends.

·         Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves.

·         By rolling your money over rapidly through short term gains you can quickly build up your equity.

 How to Swing Trade follow our Swing/Positional plan.

To fully understand what swing trading really is, you first need to understand what up/down trends are.

Up Trend: Simply put an uptrend is a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. Often the high of the last “swing” in the trend will serve as support for the next low.

Down Trend: Simply put a downtrend is a series of lower highs and lower lows. In other words, a downtrend is a series of successive declines that extend though previous low points, interrupted by increases which terminate below the high point of the preceding rally. Often the low of the last “swing” in the stock’s trend will serve as resistance for the next high. These are circled.

Long Swing Trades: Once an uptrend has been identified a swing trader looks for buying opportunities in that stock. This can be identified when the stock experiences a minor pullback or correction within that uptrend. The swing trader then activates a trailing buy-stop technique. If prices break out above the trailing stop loss, you will be stopped out and long in the trade. If prices decline, your buy-stop will not be touched.

Short Swing Trades: Once an downtrend has been identified a swing trader looks for selling opportunities in that stock. This can be identified when the stock experiences a minor rally within that downtrend. The swing trader then activates a trailing sell-stop technique. If prices break down and fall below the trailing stop loss, you will be stopped out on the short side. If prices rally, your sell-stop will not be touched.

How does Swing Trading work?

  • The basic strategy of Swing Trading is to jump into a strongly trending stock after its period of consolidation or correction is complete.
  • Strongly trending stocks often make a quick move after completing its correction which one can profit from.
  • One then sells the stock after 2 to 7 days for a 5-25% move. This process can be repeated over and over again. One can also play the short side by shorting stocks that fall through support levels.
  • In brief a Swing Trader’s goal is to make money by capturing the quick moves that stocks make in their life span, and at the same time controlling their risk by proper money management techniques.

What are the advantages of Swing Trading?

  • Swing Trading combines the best of two worlds — the slower pace of investing and the increased potential gains of day trading.
  • Swing Trading works well for part-time traders — especially those doing it while at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in quotes, swing trading doesn’t require that type of focus and dedication.
  • While Day Traders gamble on stocks popping or falling by fractions of points, Swing Traders try to ride “swings” in the market. Swing Traders buy fewer stocks and aim for bigger gains, they pay lower brokerage and, theoretically, have a better chance of earning larger gains.
  • With day trading, the only person getting rich is the broker. “Swing traders go for the meat of the move while a day trader just gets scraps.” Furthermore, to swing trade, you don’t need sophisticated computer hook-ups or lightning quick execution services and you don’t have to play extremely volatile stocks.

The Swing Trading method is a better way for the individual investor to attain superior investment results through short-term trading in the stock market. This trading strategy has been carefully designed for the needs of the individual investor who does not have the resources that institutions and professional money managers may have.

How to Swing Trade?

To fully understand what swing trading really is, you first need to understand what up/down trends are.

Up Trend: Simply put an uptrend is a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. Often the high of the last “swing” in the trend will serve as support for the next low. These areas are circled.

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What is ETFs?

DEFINITION of ‘Exchange-Traded Fund (ETF)’
An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. It is also considered safer investment option than individual stock.

Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does.

 

Why to have Stoploss values, its importance and consequnces

Dear Trader,

Stop loss values have multiple meanings and affects in trading. People who are holding a stock for long or a day trader  and want to make maximum profit with exit strategy can have the tight stop loss. The moment Stop loss hit they are out.

There is always risk of keeping tight stop loss, if market opens lower than SL values, then there will be a whipsaw.

Some traders follow 2-3% or point values rule means if price fall more than that they are out of the market. Threy are traders who keep SL values at certain days/weeks/months MA, which is considered a safer practice for long term investors.

Price below stop loss may not call off the bull cycle. It can correct soon or act according to MA values. There are multiple other indicators/technical which have to be turned negative/positive to call Bull/Bear cycle off.

Other benefit of hitting stop Loss or price correction,  People who are waiting to enter into a particular stock and waiting for price correction, they can take this opportunity to enter as price has dropped to MA 15/20. But again there is always possibility that It was not just a price correction basically downward price movement  have started and more to happen which can offer much cheaper price for a stock.

People who are Long investors, may not keep DMA SL instead they keep WMA.

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