8-03 Swing Trading


chapter8-3aSwing trading Identifying “channels” or “tunnels” of price movements on a stock’s chart and then buying when the price gets to the bottom of the channel and selling when it gets to the top, usually over a few days. is identifying “channels” or “tunnels” of price movements on a stock’s chart and then buying when the price gets to the bottom of the channel and selling when it gets to the top.

Swing trading can be done with any time period: Intra-Day, Daily, Weekly or Monthly -depending on the trader’s temperament and ability to dedicate time to follow the stock’s price.

Done an intra-day basis, swing trading is like day trading The buying and selling investments (stocks, futures, stock options, commodities, currencies, etc.) within the same trading day, so that all positions are closed before the end of each day. on steroids coupled with a safety net. It considers short-term price cycles caused by daily swings in market prices.

Most swing traders, however, are holding stocks for a few days or up to a week. Their idea is that minute-by-minute or hour-by-hour price movements are too random to predict, but when smoothed out over a few days, a better picture emerges of the trends, support and resistance levels:

chapter8-3b

Apple’s ( AAPL) share price bounced inside predictable “channels” that made weekly swing trading very profitable in late 2007.Two clear advantages of swing trading are that it doesn’t suffer as much as day trading in terms of commissions paid, and it is OK to step away from your computer for a few hours if you need to.

Most swing trading strategies consider the possibility of a price move in a short (two-to-four-day) period. Popular with individual traders, swing trading is seldom used by large, institutional traders since they typically cannot react quickly enough to make this strategy work in their favor. Smaller investors and individuals, however, can enjoy some excellent profits if their swing trading strategy is sound. Yet, you must understand, that there is substantial risk like there is with day trading.

Mark's Tip
Mark

I found that the pace is too quick in day trading, and that I couldn’t always place and manage realistic stop loss orders. But with swing trading, since you have a little more time to react and establish a trading plan, you can make better use of limits and stop loss orders to manage your portfolio and reduce risk. Also, with swing trading you can easily manage 5 to 8 simultaneous positions, something you could never do as a day trader.