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Expert Answers to Biz Questions

Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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Swing Trading Strategy Explained

 

What is swing trading and how will it affect the way you invest and how successful your investment is likely to be? Put in simple terms; a good swing trading strategy involved holding on to your stocks and options for what may be two to six days or a full two weeks. On the other hand, day trading means buying and selling on the same day.

The goal of developing a successful swing trading strategy is to follow the trends of the stock(s) you are interested and then make use of swing trading to maximize your return on investment (ROI). In some instances, traders will make use of technical analysis to help them successfully use the latest trends in the hopes of further improving their trades. Both day trading and swing trading come with their own set of unique risks and have different commission costs that tend to be higher than the average investment strategy.

Going with the Trends

One of the most common investment strategies in use today is to look at the main trends on the chart. Then if the security the investor is interested in is increasing in value or "trending up," they will invest in the hopes the security's value will continue to rise, allowing them to sell at a profit further down the road. At the same time, if an investor sees the securities begin to lose value or trend down, they can short shares or futures or buy put options.

More often than not, the market is neither "bullish" or "bearish yet the investment you are interested in is following a fairly predictable pattern. The pattern will move between what are referred to as parallel resistance and support areas on the charts. As the market trends up, and just before the stock starts to drop in value, this point is referred to as the resistance point. When the market has swung all the way down and is on the verge of going back up in value, this is referred to as the support. You can use this information to help you take a short position when the stock is in the resistance zone and a long-term position when it is the support zone. Data and analytics drive most decisions these days, whether it’s investing in stocks or building up a new business.

Using a Bullish Swing Marketing Strategy

It is a proven fact that most stocks do not trend in a straight line up or down. Rather instead, they tend to move in small increments or steps. For example, a particular stock might trend upwards for several days and then drop back for the next several days before it starts showing an increase in value. After reviewing the charts over the long term as part of your swing trading strategy, you see a series of these steps but find that overall the stock has been moving upwards in value, this is referred to as an uptrend.

If you are going to be a major player, being bullish should be a part of your active swing trading strategy. Watch the security very closely, look for an uptrend followed by a slight pull back or "counter-trend" that is then followed by an uptrend. These types of swing trading strategy offer you one of the best chances of becoming a successful trader and putting enough money in your retirement fund to help you reach your goals.

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