What is Swing Trading?Swing Trading refers to buying and selling of stocks that show an upward or downward trend over short term, like days, hours, minutes or even split seconds. To put in plainly, Swing Traders attempt to capitalize on quick price fluctuations. Swing Trading is such a speculative trading technique that is developed to entail advantageous risk-reward ratio. |
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Though as a short-term investment Swing Trading is often classified as a form of Day Trading, compared to that when Swing Trading is used, it implies a position which is usually held longer than just one trading day, but shorter than mid- or long-term investment strategies that are held for weeks, months or years. Swing Traders generally open long or short position to capture quick price upward or downward movements (swings) or between technical levels of support and resistance. | |||||||||||||||||||||||||||||
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While a lot of Swing Traders use fundamental analysis to identify appropriate stock candidates or spot strategial entry points for a particular stock, most will use stock technical analysis tactically. Momentum signals such as 52-week high and low, have been proved to be used by financial analysts as the most efficient tool when it comes to buy and sell recommendations on which Swing Traders' buying and selling decisions often rely. | |||||||||||||||||||||||||||||
Because Swing Trading's primary goal is to capitalize on the upward and downward stock price swings, traders open positions in a hope of benefiting from small moves within a broader overall stock trend. As opposed to investors with longer time horizon, Swing Traders intend to accumulate a lot of small gains that add up to high proceeds. As the part of their trading strategy the majority of Swing Traders study daily stock charts to stumble across the optimal entry and exit point. In some cases even shorter time frame charts can be deployed like hourly charts, as hourly 4-hour 12 hour charts.
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Swing Trading, by nature carries high levels of risk that demands tight risk management beside to an array of psychological factors Swing trader has to witness, such as discipline and arrestment of emotional influence on trading decisions. Unless closed within one trading day, since they are opened, swing trades are vulnerable to the unpredictability of overnight volatility that involves the exposure to considerable stock price movements during extended hours. To alleviate the risk factor, unlike buy-and-sell investors, Swing Traders typically have a glance at their portfolio frequently and act when needed. In contrast to Day Trading, swing Trading does not assume steady attention because the trades last longer.
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Though they rarely use stock forecast, in Swing Traders' trading technique, the following strategies are used commonly to find potential trading opportunities:
» Fibonacci retracement » Japanese candlesticks » T-line trading - Did you know? - Stock screeners, stock catalysts, and market news offer a wealth of benefits for a Swing Trader. |
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