Our Guide To Swing Trading: Everything You Need To Know

Our Guide To Swing Trading: Everything You Need To Know
The Siliconreview
04 November, 2019

Swing trading often goes unnoticed by many as a risky way of trading, but could it be better suited to those looking for large returns on investment? In this article, we will be providing you with everything you need to know about swing trading to get you started in investing.

What Is Swing Trading?

The first question that is often asked is what is swing trading and how can it affect your business? Swing trading is a style of trading that involves capturing gains in stock using tactical analysis as well as fundamental analysis to check for market behaviour. By tracking the price trends as well as the patterns of the market itself, traders are able to get the best possible profit with minimal effort. The main objective to swing trading is to hold onto a position for more than one trading session with a maximum length of a month or two. By capturing a potential price move you can then identify where the assets price will move next and capture the profit that moves.

What Is The Difference Between Swing Trading And Day Trading?

The main difference between swing trading and day trading is the strategy. With day trading proving far more volatile in a number of markets, the strategy requires decisiveness, discipline and diligence to achieve outstanding results.

Alternatively, swing trading is entirely based on identifying swings in stocks as well as commodities and currencies over a prolonged period.  Due to the time frame surrounding this style of trading, there is far more flexibility meaning that traders do not have to be glued to the computer all day, therefore swing traders can maintain jobs as well as go about everyday activities checking on the market as and when they can.

Swing High And Swing Low

Swing Low – This is when the price of the stock hits an all-time low and is immediately followed by two consecutive low points. This is signs that the stock is changing, and investment should potentially be reconsidered or held onto until the market makes another turn in a more positive direction. Though this could take anywhere between two weeks to two months, holding onto investments and cashing in for the best amount of profit is the perfect way to go.

Swing High – A Swing high is when a peak in the price of a stock is then followed by two consecutive lower highs. During this time, it is important to look at stock prices and see where you can trade in for the best possible return of investment.

3 Key Rules for Beginners

Following The Trend Of The Market - One of the first rules to follow when conducting trading of any kind is following the trend of the market. This can not only help you to pre-empt any drops in stock price that may occur later on in the year, but it will also allow you to maintain the best possible investment price at all times when trading.

The Top-Down Approach – When looking into the top-down approach it is important to consider the state of the market to ensure that focuses are aligned with the strongest stocks. When following this approach, the drops typically match up with the highs allowing you to monitor the state of the market and look at when the stocks will begin to rise.

Money Management – Money management is key to the sustainability in markets over the long terms and should, therefore, be of a top priority. Though it can take time to get this right money management will help to better your prospects and help to boost the end sum of your return of investment.

With this in mind, there are a number of benefits to swing trading that often goes unnoticed on the market meaning that the return of investment could be being missed out on. Will you be trying your hand at swing trading moving forward?