What is swing trading?
Swing trading is a trading technique where investors buy and hold stocks and other securities for at least overnight. Traders use this method to capture gains from companies through security growth or dividends if any, during their trading period.
The trading period can be as little as a few days or weeks depending on the investor’s strategies. This is different from day trading where traders buy and sell stocks and other securities on the same trading day.
Can anyone swing trade?
Swing trading is an active trading strategy and to do it, you must have a plan. All investors and traders who swing trade use technical analysis. This is how they determine where to take positions in assets.
Also, traders predetermine exit prices and where to put stop losses from technical analysis.
It would be difficult to make successful trades without using technical analysis.
For sure anyone can swing trade. However, not everyone will make profits from their trades. The difference between winners and losers will depend on securities invested in and how well they used technical analysis.
Benefits of swing trading
- Saves time: Many investors and traders who have busy lives find swing trading a favorable strategy. You don’t have to sit in front of the computer and watch the stocks for hours.
- Automation possibilities: Automation of your trades could be something of interest. As long as you know what you want, it is easy to swing trade. Taking a position at the right time, setting up a stock loss, or putting in a limit sell could be some of the few things you need for your automation.
- A chance to get your money out fast: By swing trading, you can take out your money whenever you have profit. This way, you can adjust your portfolio and reinvest your profit.
- You don’t worry about short term fluctuations: Many people panic when the market fluctuates a lot. Swing trading protects you from these worries and keeps you focused on your target price.
The disadvantages of swing trading
- Staying in the market longer can lead to major losses due to the unpredictability of the market
- High risks of overnight news
- You could lose profits already made if you keep holding your position
- You can not reinvest your money and revenues if you stay in the market longer than you are supposed to.
