Swing trading is a method of trading the market with a time frame of typically a few days to a few weeks. A swing trader will use technical analysis to determine precise entry points to buy(or sell short) a stock or any other security.
Swing traders are not interested in any kind of company specific fundamentals or “intrinsic” value of a company. It is strictly technical based on either a chart pattern or using some type of technical indicators such as moving averages or trend lines.
Swing trading is a bit of a hybrid between day trading and buy and hold investing that is suitable for most anyone. All successful stock picking services use some method of swing trading. Being that you do not need to be in front of your computer all day anyone with an online broker will be able to use this method of trading.
The first rule is the most obvious, and that is to swing trading the right stocks, no penny stocks allowed. A suitable stock will typically be a medium to large cap stock with a large daily volume. This will give the wide ranges or swings between lows and highs that swing traders need to make a profit.
The second key to successful swing trading is mastering technical analysis to time you entry into the stock. If your entry is wrong, you have a very limited chance of success.
The third key to swing trading is knowing where to exit a trade and take profits or take his loss. No method is perfect, there will be losses with any method of trading. This is probably where more traders fail than anything else. It is more important to know when to exit than it is to enter. This is where profits are made and lost.
Swing trading is probably the best trading style for the beginning trader to get his or her feet wet, but it still offers significant profit potential for intermediate and advanced traders.
If you are not familiar with this method than using a good swing trading stock service will be invaluable to getting started and learn the ropes.
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– Robert Walsh