The question we are asked most often is, what is Swing Trading? Everyone has heard of Day Trading and Buy And Hold investing, but it seems most people do not understand what it means to be a swing trader. Essentially Swing Trading is day trading for the regular guy with a job and a real life, it is day trading without the stress of being in front of your screen all day. It can all be done in a couple of minutes in the evening after the market is closed. Trade durations are usually over a period of anywhere from a couple of days to a week or more but usually less. We place our stop buy limit orders based on the price we pre-determine, then place our stop loss orders once we are in the trade. There are different types of swing traders just like there are different types of day traders. We consider ourselves trend followers, we attempt to identify stocks that are moving in a bearish or bullish trend.
Stop Limit Buy (or Long) - A stop limit buy long order is actually two orders in one. The Stop price is the trigger price, that is the price you want the stock to move above before you are willing to buy it. The Limit price is the maximum price you are willing to pay. The limit price can be set at any amount above the stop price.
Stop Limit Sell (or short) - A stop limit shorting order is actually two orders in one. The Stop price is the trigger price, that is the price you want the stock to move below you are willing to short sell it. The Limit price is the minimum price you are willing to pay. The limit price can be set at any amount below the stop price.
Short selling is not as scary as it sounds. Regardless of what you may have heard about risk, there is no more risk in it than being long. The key is to set stops just as you do on long positions. When you sell a stock short you are:
borrowing that stock from your broker with the goal of paying it back at a lower price.
If you sell a stock short at $20.00 and the price of the stock drops to $19.00 you could place an order to "buy to cover".
That gets you out of the position and returns the stock to your broker at $19.00.
Your profit is the difference from the sell price and the buy price or $20.00 - $19.00 = $1.00 profit.
Day trading is buying (long position) or selling (short position) stocks, options, commodities, futures or currencies (FX) and then closing the trade by selling the long position or buying back the short position so all positions are closed before the market closes.
A Technical support level is a price level where the price is increasingly supported by buyers as it falls to the support level. This means that the price is more likely to bounce at this level rather than break down through it. However, once the price has passed down through this level, by a variable level of momentum, it is likely to continue dropping until the next support level.
Techncial resistance is the opposite of a support level. In this case price finds resistance above as it rises. This means that the price is more likely to bounce off this upper level rather than break up through it. However, once the price has passed up through this level, by a variable level of momentum, it is likely that it will continue rising until the next resistance level.
In technical analysis daily price movements can be viewed with a variety of indicators. We use candlestick charts - A type of bar-chart used to show price movements of a stock, commodity, exchange traded fund, currency, future, or derivative over various time frames.
Candlestick charts are basically bar-charts on steroids, in that they contain much more information about price. Each bar represents the range of price movement over a given time frame. The solid area is covers the open and close range. The bars outside of the solid area represent the days highs and lows. If the solid area of the candle is red it means the price closed below the opening price if the solid section is green it means that the price closed above the open price. Some brokers will show this from the prior days close, get familiar with how your broker does it.
Long Term Trends can be different things to different traders depending on your style of trading. A long term trend is totally different for a day trader than it is for a position trader. For us as Swing Traders a long term trend is measured in years and is analysed with monthly charts.
Mid term trends can be of different time frames depending on the trader. For us as Swing Traders a mid term trend is measured in weeks or months and is analysed with daily and weekly charts.
Short Term Trends - The time frame of a trend is different for different types of traders. For us as swing traders short term trends are measured in days or weeks at most. We analyse short term trends with daily and hourly charts.
Heath Feb 12, 2010 I have been a member of just about everyone on twitter to try and sift through for additional information to help me grow as a trader. I just wanted to let you know you guys and alpha trend are the top of my list by far. Thank you for taking time to help new traders. Parag Dec 13, 2009 I find your analysis, picks and commentary to be exemplary and very hepful and most of all very 'on the money'. Scott Newbury Nov 04, 2009 These guys really know what they are doing and I can recommend their membership to other home gamers. Thanks for the great swing trades guys :)
