“You can define a swing trader as anyone who buys or sells securities more than 5% of all time—usually between 8%-19%. That means they usually buy and sell based on a combination of price action, market sentiment, momentum and fundamental buying/selling power. Swing traders usually take advantage of the fact that the value of the stocks they trade is often heavily impacted by major events and market conditions. For example, if they buy a stock at $100, there’s usually a good chance that it will appreciate over time, causing other stocks to move up to reflect that appreciation, and vice-versa. On the flip side, if they sell a firm at $80, they’ll have to get in on any gains, or risk further losses. If the stock has fallen substantially from this point for a period of time (for example, 2-3 weeks), they can profit on it, while selling it back at its current price.
“However, that makes it incredibly difficult to trade stocks in the short-term. We tend to like stocks that trade within 10% of their current value, but if there’s major news about the markets, it’s very difficult to keep our eyes on the horizon.”
The value of a stock can often be influenced by so called Fundamental Trading Strategies. This is where a trader identifies a key catalyst, and buys or sells the stock based on it. For example, if the catalyst is that China will soon begin devaluing its currency, the market will rally against the dollar as a result. If that catalyst isn’t detected at the time of buying or sell, the stock goes into a downtrend and is bought back at a higher price. Similarly, a Fundamental Trading Strategy also relies on fundamental factors, which are market conditions or fundamental buying or selling power. The more buying or selling power a particular stock has (and the more time between its decline and recovery) the more impact it will have.
“We use these strategies to help identify the most profitable stocks for our own investors. The more time investors pay attention to them and the more positive the news is, the better the trading results will be.”
How do you choose the best stocks to trade?
With the advent of ETFs, there’s a lot more opportunities for investors to trade their own portfolio, and for those who want to put their funds where their mouth is. For those who are interested in ETFs, a lot of them have very high leverage (see here for a full explanation).
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