The swing trader is not looking to turn a profit in a day. He will hold a stock anywhere from three days to three or four weeks.
This trading technique is most suitable for people who do not have the time to dedicate to sitting in front of a computer to monitor the markets when they are open. Many traders who are novices find swing trading to be the style that they are best suited for.
Swing traders tend to pick stocks that are traded on the big three exchanges which are the NYSE, AMEX and NASDAQ. The reason that they stick with stocks traded on these markets is because they are the most actively traded markets so these stocks have the greatest chance of going very high or low in a given day. This means that the swing traders won’t have to hold onto stocks too long before making a profit.
Swing traders prefer to trade when the market is not in full bull market or in full bear market. Swing traders are poised to make the most profits when the market is relatively static. The swing traders will make money with short-term movements in the market.
As a swing trader, you will not make a lot of money with one trade. The profits will be aggregated from making multiple trades over a period of time. Swing traders will only buy and sell once the stock has reached its baseline, so that they could make their trade at the best possible moment to get the most bang for their buck.
A swing trader will attempt to earn a 10-15% gain on his investment, which makes it a viable strategy for beginners, but would also have enough profit potential to interest intermediate traders too. To make the most gains, swing traders try to sell their stocks as close to the upper or lower margins without jeopardizing their chance at missing the large gains. If a swing trader waits too long he runs the risk of the market turning around and he’ll wind up losing money instead of gaining.
With practice, a swing trader can learn to read the market indicators and avoid this from happening often.
The great thing about swing trading is that beginners find out pretty quickly whether their decisions to buy or sell have paid off, which can be an enormous incentive to continue. Swing trading isn’t as quick as day trading to see a return on your investment, but it also doesn’t require the attention to market conditions and details that is necessary for day trading to be successful.
formulating trading plan
