You may be wondering: “what is swing trading?” Quite simply, it’s short-term stock or other kinds of trading strategies designed to make a profit out of changes in price. Typically a stock is only held for a number of days before it’s sold for what will hopefully be a higher price, and it’s this “swing” from one value to another that gives this trading method its name.
It’s all about keeping a close eye on the movement in value of various kinds of stocks, so that you can get in at a level that’s appropriate to you, and get out a short time later – one to four days is fairly common – with a profit. In this way it differs vastly from the strategies employed by institutional and other investors, who hold their assets for many years, riding the ups and downs and only cashing out when company shares or other assets have reached an advanced or mature stage where the value has risen significantly.
Forex first
Because of the inherent fluctuations in many of the world’s currencies, many traders develop forex swing trading strategies to benefit from crashes. This can be due to economic or political instability in one or several countries, for instance – when traders can buy low and then sell when rises in the value of currencies occur as they recover and are perhaps supported by national central banks or international lenders.
People engaged in swing trading carefully analyse price charts and other data so they can see the movements in the value of the assets they’ve either purchased or are considering getting in to and determine between the highs and lows when to act. This is all part of their trading strategy and it’s certainly true to say that a swing trade can sometimes be an efficient way to make money from the markets, as it requires less time and effort than other kinds of trades.
Most for little
Essentially, a properly executed swing trading strategy can result in the trader getting the most out of a short period of time, and unlike day traders and others, there’s really no need to stay glued to screens and charts as you watch the data constantly change and worry about when to either get in or out of a forex or stock trade.
That’s why swing trading is one of the most popular forms in use, but that’s not to say it’s for everyone: there is an art to it, and swing traders need to have the ability to quickly scrutinise charts and data and use historical information to know exactly when to buy or sell. Retail traders might find it hard to master this skill while more seasoned, professional traders may have the expertise to profit from it but then they’re mainly dealing in large volumes of assets and generally it’s not possible to get in and out of them quickly.
However, being properly prepared before the markets open and maintaining a strict watch on the assets you’re interested in or hold – as well as keeping an eye on the financial media (TV channels and newspapers) will soon give the retail investor a feel for how the markets are going on any given day and help them to make the most out of their swing trades.
If you’re already involved in the markets, or just thinking about it, you may want to consider swing trading to try and maximise your efforts, and your returns.