Investment Style: What Is Swing Trading
Investors are always looking to build or advance their fortunes. While most investors hold stocks long-term, more and more are discovering swing trading. If done correctly, this method of investing can exponentially increase profits on a yearly basis. In this article, I will help investors understand what is swing trading? In addition, I will help investors understand how it can be a much more profitable method of investing?
Swing trading has to do with the time frame (how long) an investor plans to hold the stock. While long term investing means you hold for years, swing trading means you are holding for days, weeks or months. In general, swing trading profits would be a short term capital gain while long term investing profits would be a long term capital gain.
The beauty of swing trading is that investors can buy and sell stocks nimbly. This is done by buying support and selling resistance. A good swing trader can buy support and then sell resistance for a quick 10% gain in days. Once sold (in cash), they can either wait to buy the same stock again when it pulls back or find another opportunity, banking another 10% within days. This allows for incredible gains of 10% + 10% + 10%.. etc. In contrasts, a long term investor is lucky to make 10%+ per year on their portfolio. In many instances, long term investors buy high and then get scared when the stock falls during a bear market and sell for a loss. Swing trading can often avoid those pitfalls.
In understanding what is swing trading, investors should realize you do need to know technical support and resistance levels. This is fancy talk for understanding how to read a stock chart. Most investors will not have the knowledge to do this so following a good pro trader is key. If you swing trade correctly, it is not unheard of to make gains north of 50% a year on a portfolio.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com