What
is Swing Trading?
|
|
Swing Trading
allows you to take advantage of short price swings in strongly
trending stocks. By riding the momentum in the direction of
the trend, it is possible to make money with less effort than
in Day Trading. However, a different mindset is required, and
profit potentials are generally smaller, not to mention that
any day trading tool you use may be useless in a longer timescale.
Swing trading involves holding stocks for a few days or perhaps
a couple of weeks, attempting to capture the general upward
or downward trends. Some people call it momentum trading, because
you only hold positions that are making major moves.
|
How does
Swing Trading work?
|
|
Basically,
Swing Trading involves buying or selling a strongly trending
stock (or other instrument) after a period of consolidation
or correction is complete. Strongly trending instruments often
make a quick move after completing a correction. The goal of
a trader who is swing trading is to make money by capturing
the quick moves that instruments are wont to make, and at the
same time controlling their risk by proper money management
techniques. Sound familiar? That's right, swing trading is Day
Trading but on a slightly longer scale.
|
What
are the advantages of Swing Trading?
|
|
| Swing Trading
attempts to combine the best of two worlds - the slow pace of
investing and the rapid potential gains of day trading. Swing
Trading works well for part-time traders, for example people
trading from their workplace. While day traders typically have
to concentrate on the market, looking for the next 'in' or 'out',
those who are swing trading generally use end of day strategies.Swing
Trading players are looking for bigger gains than day traders,
and are therefore required to have larger stops. Obviously,
if you are Swing Trading you will tend to make fewer trades
than a Day Trader, and this means you will also tend to have
lower brokerage costs. |
| |
|
|
Disadvantages
of Swing Trading include the necessity to watch your position
spend potentially long periods of time underwater, and the increased
margin requirements that entails.
|
How do
I go about Swing Trading?
|
|
|
Typically,
while Swing Trading you will attempt to spot strong trends.
An uptrend is a series of higher highs and higher lows i.e.
a series of successive rallies that extend above the previous
high point, usually interrupted by falls that end above the
low point of the preceding sell-off.
A swing
trading downtrend of course, is the reverse of this. Having
identified the trend, Swing Trading traders will use a limit
or stop order to jump in on minor pullbacks in the trend.
For example, in an up trend, if price suddenly falters, a
Swing Trader might slap a stoplimit order above the previous
high. If prices continue to decline, no harm is done. If the
pullback reverses itself and the trend continues, then the
order will be triggered, and those who are Swing Trading are
long, and in play.
|
Can the SureFireThing Camarilla Equation help me in my Swing Trading?
|
|
|
The short
answer is 'yes'. The SureFireThing Camarilla Equation gives you fairly low
risk entry points - places to jump in where in theory you
should have the entire weight of the market behind you. If
you manage to open a position and want to make it a swing
trading position, your task is then to 'shepherd' it to a
breakeven state (i.e. monitor the trade until it improves
enough so you can move your stop loss to breakeven point,
or perhaps a small profit).
Then you
can treat the position as a 'swing trading' position, i.e.
monitor it once a day, or perhaps a few times a day. As the
position continues to profit, keep moving the stop to lock
in the profits. Eventually, the market will reverse and you
will be stopped out, hopefully with a decent profit!
Points
to note - almost half the time, a SureFireThing Camarilla Equation breakout
will reverse before the end of day, so 50% or more of your
swing trading entries will close the same day (although hopefully
you will have escorted the trade to breakeven at least). Those
that DON'T close the same day have large profit potential,
and the cost to you is simple daily monitoring.
The subject
of stop losses while swing trading is beyond the scope of
this article.
|
| |
| |
| |
|
|
|
