An Introduction to Swing Trading

Many people think that becoming a Swing Trader will bring them overnight riches and that after a few smart trades that they will be able to easily double or triple their money. These people are going to be very disappointed when their accounts are cleaned out. It’s also a common myth that there are many systems out there that show you how to beat the market. It’s as easy as following directions and timing your trades right. This is also not the case. Sometimes a system may help you make a tremendous profit, but it will be inconsistent and most likely lose all of your money on a later trade.

Swing trading will not lead to fast paced wealth and if anyone tells you this, they are probably trying to sell you something and you should ignore them entirely. You can go to Las Vegas and bet $1,000 on red and have about the same chance of winning as buying random stocks and hoping for a winner. This is definitely not a good plan and it’s the same when it comes to Swing Trading.

If you are a good swing trader you should be able to get returns that are equal to the market or slightly above. If you are really making a killing, it may be because you are taking more risk then you should be and eventually you will wipe out your entire account. Even if you become an amazing trader and do everything correctly, you should only expect a 20% to 30% return every year. If you are more interested in quick profits, then perhaps look into being a day trader.

Day trading involves buying and selling stocks within a day’s time frame. This is different than swing trading because with swing trading you hold positions for several days or even weeks. The thing that swing trading has in common with day trading are the way they buy into positions. They both rely heavily on char patterns and signals, along with technical indicators to decide when to buy or sell. The goal with swing trading is to make money from shorter moves in the market, that when timed correctly are very powerful and profitable.

With swing trading, you are not buying and holding a position for very long. With long term investing, you may buy a security during a period of weakness that could last months or longer, figuring that the price will eventually go back up and you can sell for a profit. Swing traders do not want to buy during a period of weakness. If a security shows a sign of decline, swing traders exit right away. You have to be very nimble as a swing trader. You need to have very particular entry and exit prices set to protect yourself. Since you will be working with fast moving, sometimes volatile stocks, you need to be very careful not to risk too much of your bank roll in one place.

Swing trading isn’t for everyone, but it’s definitely a fast paced and fun job that can be very rewarding for someone who is patient and has self control. Make sure you only start out with what you can afford to lose, while you are learning the ropes.