By Malika Sharma
Swing Stock Trading is a style of trading that tries to attain gains from stocks, forex or commodities within one to four days. The swing trader aims to discover this extraordinary potential of stocks that move in a short time period and make gains by trading in them. The trader is not interested in the intrinsic value of the stock rather he pays more attention to their price trends and direction of market trends and studies patterns. They use technical analysis to find stocks which have a short term price momentum.
Swing trading is mainly used by individual traders or day traders. Huge institutions can not do Swing Stock Trading as they deal in big stocks and a quick trading in them is not possible. The individual trader is therefore able to swing trade easily without competition from large traders. The ultimate goal of every trader is to buy the instruments in the direction of market trends and make profits. There are certain strategies designed for the traders which help him discover such high probability trades. The first and most important strategy is to identify the trend. A trader should only place the trades in the direction of the main trend. He should refrain himself from going against the flow called counter trend trade.
Next comes is the wait for pull- back. The trader after identifying the main trend, waits for the market to drop down in price to a level which should offers better value before him entering the market. So, by pulling back he increases his odds of entering a trade which offers better value and proves profitable. This is because he wants to get into the market when the prices are good. The best policy at this stage is to follow the smart money and only do Swing Stock Trading with the trend. He can not take the chances of counter trend unless he is sure of the trade. Timing is of crucial importance here. The trader can not randomly place the trades. He makes sure that the market offers best value when he enters it.
After the trader has identified the price level that is in his favor, he can now proceed to enter the Swing Stock Trading. This is the final strategy in the swing trading process. It sounds simple but it is the most crucial strategy that all the major market movers and big banking institutions follow. They can manage to acquire the odds in their favor and struggle to survive for a longer time in the markets by making huge money. So, by learning the trading styles or strategies a trader can get an edge over the market. Swing Stock Trading can sometimes become difficult and frustrating especially if the trader is a beginner. With a whole lot of misinformation the trader feels lost and confused. But with the knowledge of the various strategies of swing trading the trader can surely make a killing year after year.
Last edited by sriranga on Tue Mar 20, 2012 9:16 pm; edited 2 times in total