What is swing trading?
Swing trading is a trading style that aims to profit from the volatility in stock (or any financial instrument) over a few days to several weeks. Swing traders rely on technical analysis to look for trading opportunities.
The first step to making swing trading profitable is to learn about the basics of technical analysis
The Win Investing 3 day investment training course provides a complete overview of technical analysis and how it can be used to identify trading opportunities.
“The first step to making swing trading profitable is to learn about the basics of technical analysis”
The next step, apply your knowledge of swing trading by opening a demo account with a broker
Most brokers offer this service for free. A demo account is a great way to practice swing trading with real-time prices without the fear of losing your money should the trades work against you.
The recommended amount for funding a swing trading broker account is between $5,000 to $10,000 to swing trade stocks effectively.
We recommend that you deposit more than the minimum because if you deposit the bare minimum a few losing trades will put you below the recommended account limit.
“A demo account is a great way to practice swing trading with real-time prices without the fear of losing your money should the trades work against you”
Darren Winters, WIN INVESTING
How does swing trading work?
Darren Winters, from Win Investing explains how a swing trading strategy aims to capitalize on the upward and downward “swings” in the price of a security. Traders are trying to capture small moves within a larger overall trend. Profitable swing traders aim to make a lot of small wins that add up to sizeable profits.
What are the main swing trading strategies?
Breakout is the most common swing trading strategy. A breakout strategy is an approach where a trader takes a position on the early side of the uptrend.
In a breakout scenario, the trader monitors price action and when it breaks a key point of support or resistance (i.e. it falls within a defined price range), the trader executes a position.
Technical analysis, which entails determining support, resistance price levels and volume are key to a breakout swing trading strategy.
“a breakdown is the opposite of a breakout, but the trader monitors the same technical indicators” – Win Investing
Breakdowns are another swing trading strategy
A breakdown occurs when the price of a security moves below a defined support level.
In other words, a breakdown is the opposite of a breakout, but the trader monitors the same technical indicators.
Options are also another popular swing trading strategy, particularly for those investors who want to leverage their trading position
When a trader exercises trading options he is given the option to either buy or sell later when a certain criteria is met within a predetermined period. A trader buys a call option or a put option depending on whether he/she is buying or selling.
If the trader doesn’t exercise his/her option within the time window specified, they will lose the initial payment. But it is less of a loss than if he/she made the full investment.
So swing trading is one of a few trading strategies, it differs from day trading where traders move in and out of a trade within the same day.